The use of minor setups within production cycles to improve product quality and yield

Inventory models linking lot size and product quality assume that the proportion of defectives per lot increases as the lot size increases. Such models give optimal lot sizes smaller than those obtained when quality is ignored. These models do not consider the possibility of adjusting the process within a production cycle. This adjustment does not involve performing all activities of a full setup and incurs only a fraction of a full setup cost and time. In this paper, we reformulate some inventory models which take into account the negative relationship between lot size and quality and the possibility of performing minor setups, which may or may not require stopping the process, during a production cycle. We derive closed-form expressions for the optimal lot sizes and number of minor setups within each cycle. The analysis is performed for both zero operating time cost and non-zero operating time cost. The models show that using minor setups to improve yield leads to larger lot sizes between major setups. We illustrate the models with numerical examples.