After reviewing your inspection plan to your supervisor, she asks you to join her in a discussion with the purchasing agent to determine which of the 3 companies is the best option as a supplier for the new component. (Note the cost of inspection is absorbed by your company but you may assume that all suppliers will replace any defective parts found during inspection for free). The purchasing agent has the following quoted prices for the 3 suppliers; A-$9/part, B-$7/part, C-$5/Part. Additionally, internally the quality department has estimated a $3/part inspection cost, and while the Marketing Department has estimated a $20 loss per defective product sold due to warranty claims, lost sales, etc. (Note each product uses one of the new components and there is no final product inspection in the factory). Which supplier would you recommend and what is their total net cost per Lot?
Given:
3 suppliers, A,B,C, with the following defect rates; 1%, 3%, and 6% respectively
The required lot size will be shipments of 5000 parts and a n=130, c=4 plan is used.
A P(A) = .990867741
B P(A) = .649032659
C P(A) = .10131708
AOQ A = .0096512
AOQ B = .0189647
AOQ C = .00592097
ATI A = 174.4741
ATI B = 1839.21095
ATI C = 4506.5858
After reviewing your inspection plan to your supervisor, she asks you to join her in a discussion with the purchasing agent to determine which of the 3 companies is the best option as a supplier for the new component. (Note the cost of inspection is absorbed by your company but you may assume that all suppliers will replace any defective parts found during inspection for free).
The purchasing agent has the following quoted prices for the 3 suppliers; A-$9/part, B-$7/part, C-$5/Part. Additionally, internally the quality department has estimated a $3/part inspection cost, and while the Marketing Department has estimated a $20 loss per defective product sold due to warranty claims, lost sales, etc. (Note each product uses one of the new components and there is no final product inspection in the factory).
Which supplier would you recommend and what is their total net cost per Lot?
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