Lot-splitting for inspection in a synchronised two-stage manufacturing process with finite production rates and random out-of-control shifts in the first stage

We consider a non-repetitive manufacturing environment where the first stage will successively process different types of items that require different set up modes. Optimal sublot sizes are determined by studying the trade-off between the cost and time spent in restoration and rework. In addition, we discuss the resulting economical batch sizes, number of sublots, and processing rates. Finally, we provide recommendations on how to design the material handling flow system to implement our suggested inspection policies. Some of the managerial implications we found is that quality improves significantly when Stage 2 is more responsive (has faster processing times) than Stage 1 and when large batch sizes are divided into more sublots. Depending on the relative magnitude of poor quality and rework costs, we show that there is a threshold for the batch size under which sublot formation becomes inefficient. ]Received 17 July 2007; Revised 30 September 2007; Accepted 12 October 2007]