A variation reduction allocation model for quality improvement to minimize investment and quality costs by considering suppliers' learning curve

Abstract

Quality improvement must be performed in a company to maintain its product competitiveness in the market. The goal of such improvement is to increase the customer satisfaction and the profitability of the company. In current practice, a company needs several suppliers to provide the components in assembly process of a final product. Hence quality improvement of the final product must involve the suppliers. In this paper, an optimization model to allocate the variance reduction is developed. Variation reduction is an important term in quality improvement for both manufacturer and suppliers. To improve suppliers' components quality, the manufacturer must invest an amount of their financial resources in learning process of the suppliers. The objective function of the model is to minimize the total cost consists of investment cost, and quality costs for both internal and external quality costs. The Learning curve will determine how the employee of the suppliers will respond to the learning processes in reducing the variance of the component.