This paper presents a model for designing a production system with inspection. This production system has N stages, where each stage performs manufacturing operations that are followed by a potential inspection location. The proposed model integrates the issues of inspection location, inspection capacity, and production capacity. To design an economical system, a system design problem is defined that consists of finding the inspection location, the number of testers at each inspection location and the number of machines at each production stage. By exploring the special structure of a subproblem, the system design problem is formulated as an ‘integrated’ dynamic program that can be solved in pseudo-polynomial time. An illustrative example is presented.
