ARTICLE IN PRESS

Int. J. Production Economics 106 (2007) 275–287

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The cost minimization and manpower deployment to SPC

in a multistage manufacturing system
Zhang Wua,, M. Shamsuzzamana, Qinan Wangb
a
School of Mechanical and Aerospace Engineering, Nanyang Technological University, Singapore 639798, Singapore
b
Nanyang Business School, Nanyang Technological University, Singapore 639798, Singapore
Received 16 March 2004; accepted 29 June 2006
Available online 22 August 2006

Abstract

This article proposes an algorithm for deploying manpower to a statistical process control (SPC) system that monitors a
multistage manufacturing system. The algorithm minimizes the expected total cost by optimizing the amount of allocated
manpower in the SPC system (referred to as an M-SPC system), as well as the sample sizes, sampling intervals and control
limits of the control charts. It also takes into account the probability distribution of the random process shifts at each
process stage. Numerical studies show that the M-SPC system can reduce the total cost by about 75 percent, on average,
compared to the traditional SPC system. It is also found that, in most of the traditional SPC systems, the allocated amount
of manpower is far less than needed. This implies that the total cost can be significantly reduced with more manpower.
Furthermore, the M-SPC system can be utilized and understood as easily as the traditional SPC system by shop floor
operators. Some useful guidelines are provided to aid users in allocating the appropriate amount of manpower to different
systems.
r 2006 Elsevier B.V. All rights reserved.

Keywords: Quality control; Control chart; Statistical process control; Multistage manufacturing system; Manpower deployment; Loss
function

1. Introduction 1986; Lorenzen and Vance, 1986; Castillo and

The design algorithms of the control charts have
been developed from two perspectives in the last
several decades, namely, the statistical designs
(Page, 1954; Keats et al., 1995; Prabhu et al.,
1997; Costa, 1999; Wu and Spedding, 2000;
Magalhães et al., 2006; Liu et al., 2006) and the
economic designs (Duncan, 1956; Montgomery,
Corresponding author. Tel.: +65 67904445;
fax: +65 67911859.
E-mail address: mzwu@ntu.edu.sg (Z. Wu).
Montgomery, 1996; Rahim and Costa, 2000; Al-
Oraini and Rahim, 2002; Ohta et al., 2002; Yang
and Rahim, 2005). A statistical design minimizes the
out-of-control average time to signal (ATS) (i.e. the
average time required to signal a process shift after
it has occurred). For example, Costa (1999) devel-
oped the X̄ and R charts with variable sample sizes
and sampling intervals for speeding the detection of
mean and variance shifts. However, the statistical
designs do not directly measure the cost associated
with the statistical process control (SPC) system. In
contrast, an economic design aims to minimize the

0925-5273/$ - see front matter r 2006 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2006.06.007
 ARTICLE IN PRESS
276 Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287
cost associated with the implementation of SPC.
Duncan (1956) first proposed the economic design
of the X̄ control chart. Montgomery (1980)
presented a literature survey for the early works in
economic chart designs. Lorenzen and Vance (1986)
developed a unified approach for the economic
designs of the control charts. Rahim and Costa
(2000) dealt with the economic design of the joint X̄
and R charts in which the occurrence times of
assignable causes follow a Weibull distribution with
increasing failure rate. Ohta et al. (2002) proposed a
similar economic model for the selection of para-
meters of time-varying charts.
A main objective of implementing SPC is to
minimize the total cost (Ctotal), including quality
cost (Cquality) due to poor quality (Besterfield et al.,
1995) and manpower cost (Cman) for implementing
the SPC system. Manpower (M) is a vital factor to
the total cost. If M is small, manpower cost Cman is
small; but manpower shortage may result in a large
out-of-control ATS and, hence, a large quality cost
Cquality. Conversely, if M is large, Cman is large; but
Cquality may be substantially reduced as increased
manpower allows the use of large sample size and/or
frequent sampling, resulting in the prompt signal of
out-of-control cases. Since these two components
(Cman and Cquality) of Ctotal change in opposite
directions with the change of manpower M,
logically, there is an optimal value of M that
minimizes Ctotal. Despite the importance of man-
power to the total cost, little research has been done
on its deployment to an SPC system. Only recently,
Wu et al. (2006) studied the deployment of man-
power to a single X̄ chart.
The fabrication of a product usually goes through
several stages in series. In this article, it is assumed
that each stage has either a single stream or a few
identical streams in parallel. The integration of all
the stages constitutes a manufacturing system. For
example, in the manufacturing of a mechanical part,
each stage usually pertains to the machining of a
dimension. Some of the dimensions are critical to
the overall quality of the product and, therefore,
control charts are required to monitor the corre-
sponding process stages.
The literature on the design of the SPC systems
that monitor multistage manufacturing systems is
still limited. Woodall and Ncube (1985) investigated
the multivariate CUSUM procedures and defined
the out-of-control condition for a system compris-
ing several charts. If each variable is considered as
the quality characteristic in a stage, the method may
be used to monitor the multistage system. Peters
and Williams (1987) developed a control scheme for
a three-stage manufacturing system based on a lost-
cost model. Williams and Peters (1989) presented an
np-control scheme integrated within a multistage
production process. Hawkins (1993) discussed
multivariate quality control based on regression-
adjusted variables to make controls more effective
than those based on variables individually. Wade
and Woodall (1993) and Ding et al. (2002)
published several papers studying the multistage
processes and the diagnosis problems. Zantek et al.
(2002) used quality linkages between the process
stages to measure the effect of each stage on the
output quality of subsequent stages of a multistage
system and presented an economic model to aid the
decision-making on the amount of investment in
process quality improvement. Recently, Wu et al.
(2004) and Lam et al. (2005) developed two
statistical design algorithms for optimizing control
limits and/or sample sizes and sampling intervals of
the charts in a multistage SPC system in order to
minimize the system ATS. However, these methods
neither optimize the allocated manpower nor mini-
mize the SPC cost. The manpower is fixed as a
specification.
This article proposes an economic M-SPC system
that optimizes the amount of manpower for the
operation of the multistage SPC systems. The
objective is to minimize the total SPC cost in the
whole system. The M-SPC system consists of
multiple control charts, each monitoring a critical
stage in a multistage manufacturing system.
In this study, a process means the only stream in a
single-stream stage or one stream in a multi-stream
stage. Let s be the number of stages in series and gi
be the number of parallel streams in the ith stage
(gi X1). The total number G of processes that are
monitored by the SPC system is then equal to
X
s
G¼ gi . (1)
i¼1
The gi parallel streams in the ith stage are
assumed to have the same mean, standard deviation
and target value (Runger et al., 1996), and each of
the gi streams will be monitored by a separate but
identical control charts (with the same sample size,
sampling interval and control limits). This scenario
helps to detect and diagnose the out-of-control
stream (Montgomery, 2001). Consequently, there
are only s different charts in the M-SPC system.
 ARTICLE IN PRESS
Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287 277

The manpower M is measured by the equivalent
number of full time inspectors (equipped with
adequate measuring instrument) engaged with the
SPC activities. It is a fraction if an operator spends
only part of his time in SPC, and it is larger than
one if more than one inspector is deployed to the
SPC system. The M-SPC system is, therefore, useful
for Quality Assurance (QA) practitioners to decide
on the number of inspectors and their working time
in implementing SPC.
In order to focus on the objective of the M-SPC
system, only the X̄ chart is studied in this article.
The X̄ chart is used most widely in SPC to monitor
the process mean. Traditionally, each individual X̄
chart in an SPC system is designed in isolation. The
sample size n of the X̄ chart is small, often either 4, 5
or 6 (Montgomery, 2001). The sampling interval h is
usually decided based on the concept of rational
subgroups. However, as on-line measurement and
distributed computing systems are becoming the
norm in today’s SPC applications (Woodall and
Montgomery, 1999), the sampling interval could be
much smaller than the working shift so that rational
subgrouping is not enforced. The 3s control limits
LCL and UCL are often used for the traditional X̄
charts, but they can be adjusted to satisfy different
requirements on false alarm rate (or type I error).
2. Design of the M-SPC system
Consider the example in Fig. 1(a). Four critical
dimensions xi (i ¼ 1; 2; 3; 4) are machined in four
stages in a manufacturing system. Dimension x1 is
formed by facing surface 1 using surface 0 as the
datum. Dimension x2 is also machined with reference
to surface 0. Then, using surface 2 as the datum, hole

1
2
4
x1 3 x2
x4 x3
0 0

x1 = 16±0.09; x2 = 13±0.07; x3 = 8±0.13; x4 = 11±0.08

(a)

Stage 1 Stage 2 Stage 3 Stage 4

(x1) (x2) (x3) (x4)

Input Output

(b)

1 2
4

(c)

Fig. 1. (a) The dimension of the part; (b) the process stages; and (c) the quality linkages.
 ARTICLE IN PRESS
278 Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287
3 and surface 4 are drilled and milled, respectively,
and dimensions x3 and x4 are determined. It is
noteworthy that, both x3 and x4 are affected by x2.
Four control charts as an SPC system are used to
carry out the on-line monitoring of the processes of
the four stages machining x1–x4. Since two identical
machines are used side by side to mill dimension x4,
control chart four has two duplicates, each control-
ling one of the two parallel machines. A block
diagram of this SPC system is displayed in Fig. 1(b).
Since the production rate in each stage may not be
exactly the same, buffers or other measures may be
used to synchronize the stages of the manufacturing
system. It is assumed that the quality requirements
on non-functional dimensions can be met without
on-line monitoring and, therefore, they are not
included in the M-SPC system.
2.1. Assumptions and specifications
The following conventional assumptions are made:
(1) The processes often operate in the in-control
condition for most of the time (or relatively long
periods) (Montgomery, 2001) and, at most, one
process is out of control at any moment in an
SPC system.
(2) The quality characteristic x (e.g. the dimension
of a mechanical part) in each process is normally
distributed with a constant standard deviation.
(3) Only the mean shift dm (or just d for simplicity) is
considered in the design of the M-SPC system.
The mean shift d of each x is a random variable
and may have different probability distribution.
(4) When several operators are engaged in the
inspection activities in a manufacturing system,
their inspection time can be shared in all the
stages.
(5) The time that is required to inspect a unit is
substantially smaller than the sampling interval.
The design of an M-SPC system requires the
following specifications.
s the number of stages in series connection
in the manufacturing system
gi the number of parallel streams in the ith
stage
LSLi the lower specification limit in the ith
stage
USLi the upper specification limit in the ith
stage
s0,i the standard deviation of the process in
the ith stage (assumed constant)
ti the time required to inspect a unit in the
ith stage
Q the number of units produced per unit
time, or the production rate of the
manufacturing system
md,i the mean value of the mean shifts in the
ith stage
MTBOi the mean time between out-of-control
cases in the ith stage
t the minimum allowable in-control ATS0
of the entire M-SPC system
Cm the manpower cost for an inspector per
unit time. It includes the depreciation
cost of the measuring instrument used by
the inspector
Ck,i the cost required to fix an out-of-
specification unit from the ith stage in
the workshop
Vi a vector [v1, v2, y]T indicating the cause
stage (upstream influencing stage)
numbers. The dimension xi produced in
the ith stage is directly dependent on the
dimensions produced in all of its cause
stages
Di the induced mean shift. It is the mean
shift undergone by the ith stage due to
(or incurred by) the mean shifts of the
cause stages. Di is expressed as a function
f i ðdv1 ; dv2 ; . . .Þ of the output mean shifts
of the cause stages
Most of the above specifications can be decided
easily. In fact, many of them are required by the
conventional chart designs. The numbers s and gi can
be determined from the block diagram (e.g. Fig. 1(b)).
The values of LSLi and USLi can be found from the
engineering drawings (e.g. Fig. 1(a)). The standard
deviation s0,i is usually estimated from the data
observed in the pilot runs or the process capability
studies. The values of ti and Q can be easily
determined from the results of field tests. The
estimation of md,i and MTBOi will be explained in
the section of Example. The value of t is specified by
the user based on the trade-off between the false alarm
rate and the detection power. The information of the
cost components Cm and Ck,i can be acquired from
the financial department. Finally, the vectors Vi and
the formulae for Di can be determined by means of the
quality linkages. For example, the quality linkages in
 ARTICLE IN PRESS
Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287
Fig. 1(c) indicate that both x3 and x4 are directly
affected by x2 and, consequently,
V 3 ¼ ½2T ; V 4 ¼ ½2T :
The formulae for Di can take any forms and may be
determined by many different methods. For part
machining, they may be determined based on the
information of design dimensioning and process
planning. In Fig. 1, it is easy to find
D3 ¼ f 3 ðd2 Þ ¼ d2 ; D4 ¼ f 4 ðd2 Þ ¼ d2 .
In addition to the above specifications, the in-
control mean m0,i is assumed to be equal to the
central value between the specification limits LSLi
and USLi, i.e.,
m0;i ¼ 0:5ðLSLi þ USLi Þ:
2.2. Design model
Based on the above specifications, the design of
the M-SPC system can be conducted by using the
following nonlinear optimization model:
Minimize : C total ¼ C quality þ C man ,
Subject to : ATS0 ¼ t
with respect to M, ni, hi, LCLi, UCLi (i ¼ 1; 2; . . . ; s).
The optimization design of the M-SPC system does
not only optimize the deployed manpower M, but
also determines ni, hi, LCLi and UCLi in each stage
in an integrated and optimal manner. The calculation
of the in-control ATS0 and the total cost Ctotal are
described in Appendices 1 and 3, respectively. It is
noted that some other fixed costs such as overhead
costs and costs related to the loss function when the
system is in control (depending on s0,i) are omitted
from the objective function for model simplicity. In a
system with multiple stages and streams, the out-of-
control ATS is defined as the average of Time to
Signal (TS) that is the interval between time t1 when
a process shift happens in any process and time t2
when a signal is produced by any control chart in the
system. Whereas, the in-control ATS0 is the average
time of TS0 that is the time interval from the
commence of the system operation to the time when
a false alarm is produced by any chart (Woodall and
Ncube, 1985).
2.3. Design procedure
The optimal values of M, ni, hi, LCLi and UCLi
are sought in a three-level optimization search.
279
The high-level optimization is a single-variable
search for the optimal value of M using the
successive quadratic estimation method (Powell,
(2)
1964). Then, for a value of M determined in the
high level, a mid-level search (Lam et al., 2005) is
employed to find the optimal values of ni and hi
(i ¼ 1; 2; . . . ; s). Finally, a dynamic low-level search
(Wu et al., 2004) is invoked to find the optimal LCLi
and UCLi (i ¼ 1; 2; . . . ; s) which jointly make the
(3) resultant ATS0 exactly equal to the specified value t
and, in the mean time, minimize the total cost Ctotal
for a set of values of (M, ni, hi, i ¼ 1; 2; . . . ; s) that are
determined in the high and middle levels. While the
high-level optimization makes a trade-off between
the quality cost Cquality and the manpower cost Cman,
(4) the mid-level optimization trades off between the
sample size ni and the sampling interval hi, and the
low-level optimization tightens the control limits of
some charts and loosens that of others. Ultimately,
all the three levels aim at minimizing the total cost
Ctotal. The high and low level optimization searches
are straightforward and can be implemented by any
conventional non-linear programming. Therefore,
(5) more detailed description is given (in Appendix 4)
only for the middle level search. The overall design
(6) procedures are outlined below:
(1) Initialize Cmin as a very large number, say 107
(Cmin is used to store the minimum value of
Ctotal).
(2) At the high level, the optimal value of M is
searched.
(3) At the mid-level, for a value of M that
is determined in step (2), the optimal values
of ni and hi (i ¼ 1; 2; . . . ; s) are searched
(Appendix 4).
(4) The low-level search optimizes LCLi and UCLi
(i ¼ 1; 2; . . . ; s) so that ATS0 is equal to t and
Ctotal is minimized (Wu et al., 2004). For each
given set of (M, ni, hi, LCLi, UCLi,
i ¼ 1; 2; . . . ; s),
(4.1) Calculate the total cost Ctotal by Eqs. (5),
(A.6) and (A.8).
(4.2) If the calculated Ctotal is smaller than the
current Cmin, replace the latter by the
former. And the current values of M, ni, hi,
LCLi and UCLi are stored as the tempor-
ary optimal solution.
(5) When the entire three-level search is completed,
the final Cmin is the minimum Ctotal and the
corresponding optimal M, ni, hi, LCLi and UCLi
are also finalized.
 ARTICLE IN PRESS
280 Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287

3. Comprehensive study stream systems, the number gi of streams in each

stage is fixed as one.
3.1. Study one: single-stream systems The dependence between the stages (i.e. the
vectors Vi and the induced mean shift functions
We first study the performance (measured by the Di) is also randomly decided. Each stage may have
total cost Ctotal) of the M-SPC system monitoring up to two dependent stages and Di is equal to either
the manufacturing stages with single stream. The (+dni) or (dni).
performance of the M-SPC system is compared with Without the loss of generality, the in-control m0,i
that of a traditional X̄ chart system as well as a sub- is fixed at zero. Consequently, LSLi ¼ USLi. It is
optimal X̄ chart system. Like the M-SPC system, also assumed that the mean shift d at each stage
the sub-optimal X̄ chart system is designed to follows a Rayleigh distribution with a mean value of
minimize the total cost Ctotal, but it only has its md,i.
charting parameters ni, hi, LCLi and UCLi opti- The fixed amount of manpower M0 used by both
mized (namely, only the middle and low level the traditional and sub-optimal X̄ chart systems is
optimization searches are conducted) and uses a determined by
fixed amount of manpower M0 as used by the
traditional X̄ chart system (i.e. the high-level X
s
ni g t i
i
M0 ¼ , (7)
optimization is omitted). It is also assumed that i¼1
hi
each chart in the traditional X̄ chart system uses a
sample size of five, an identical sampling interval where (ni  5) is the sample size used by each chart
and the 3s control limits. of the traditional X̄ chart system. The identical
The performance of the chart systems is examined sampling interval can be determined from Eq. (A.2)
over 100 runs (or cases). For each of the 100 runs,
the values of the four system parameters s, t, Q and a
hi ¼ , (8)
Cm are first decided randomly between the lower 1  ð1  1=tÞ1=G
and upper bounds as follows:
where a ¼ 2 Fð3Þ is the type I error probability for
the 3s control limits (G is the total number of
Parameter Lower bound Upper bound processes defined in Eq. (1)). This value of hi ensures
that the in-control ATS0 of the traditional X̄ chart
s 2 10 system is equal to t.
t 50 300 For each of the 100 runs, the traditional X̄ chart
Q 50 300 system, the sub-optimal X̄ chart system and the
Cm 5 20 M-SPC system are designed. All of them always
generate the same in-control ATS0 (equal to t). The
Then, the values of other six parameters, s0,i md,i, following three responses are investigated for each
USLi, ti, MTBOi and Ck,i, at each of the s stages are run:
generated, also randomly, within the following RMC the ratio between the total cost of the
ranges: M-SPC system and that of the traditional
X̄ chart system.
Parameter Lower bound Upper bound RSC the ratio between the total cost of the
sub-optimal X̄ chart system and that of
s0,i 1 3 the traditional X̄ chart system.
md,i 0.5 1.5 RM the ratio between the optimal manpower
USLi 2.5s0,i 6s0,i M of the M-SPC system and the
ti 1/(3Q) 1/(0.3Q) manpower M0 for the traditional X̄ chart
MTBOi 0.25t t system.
Ck,i 0.05Cm Cm

Obviously, if the value of RMC (or RSC) is less

Note worthily, some parameters are expressed as than one, the M-SPC system (or the sub-optimal X̄
a function of another parameter. For the single- chart system) outperforms the traditional X̄ chart
 ARTICLE IN PRESS
Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287 281

system in a particular run in terms of the total cost,
and vise versa.
The grand averages, RSC , RMC and RM , of the
three responses over the 100 runs are 0.743, 0.244
and 34.36, respectively. The value of RSC indicates
that, from an overall viewpoint (considering differ-
ent combinations of s, t, Q, Cm, s0,i md,i, USLi, ti,
MTBOi and Ck,i), the sub-optimal X̄ chart system
reduces the total cost Ctotal by about 26% compared
to the traditional X̄ chart system. This improvement
is achieved by the optimization of the charting
parameters ni, hi, LCLi and UCLi. The value of
RMC shows that the M-SPC system can further
reduces Ctotal (the total cost Ctotal of the M-SPC
system is, on average, equal to about one-quarter of
that of the traditional X̄ chart system). This further
reduction in Ctotal is completely attributable to the
optimal deployment of manpower to the M-SPC
system, suggesting that the optimal deployment of
manpower is an effective method to achieve better
economic results in SPC.
Next, the value of the grand average RM
( ¼ 34.36) of the third response shows that the
traditional X̄ chart system usually uses far less
amount of manpower than needed for the
minimization of the total cost. The deployment of
more manpower leads to a significant reduction in
quality cost that outweighs the increase in man-
power cost. As a result, the total cost (Ctotal) is
substantially reduced. However, the optimal
amount of the manpower M for a particular
M-SPC scheme has to be determined based on the
system specifications.
3.2. Study two: multi-stream systems
This study is similar to study one, except that
each stage may have more than one parallel streams.
For each of the 100 runs, like other parameters, the
value of gi in the ith stage (i ¼ 1; 2; . . . ; s) is also
generated randomly within a range bounded by one
and four.
For the multi-stream systems investigated in this
study, the grand averages RSC , RMC and RM of
the three responses over the 100 runs are equal to
0.745, 0.246 and 37.35, respectively. They are quite
close to the corresponding values obtained in study
one for the single-stream systems. It indicates that
the M-SPC system works almost equally well for
both single- and multi-stream systems.
In this study, the effects of all the 11 parameters
(s, t, Q, Cm, gi, s0,i md,i, USLi, ti, MTBOi, Ck,i) on
the two responses RMC and RM are also calculated
and listed in Table 1. The effect of a parameter on a
response is defined as the difference between Ru and
Rl, which are the average values of the response
when the parameter takes its upper and lower
bound values, respectively. A positive effect on
RMC means that the M-SPC system will achieve a
more significant cost reduction when the corre-
sponding parameter is smaller and vise versa. For
example, parameter md,i has a significant positive
impact (0.2514) on RMC. Thus, when md,i is
smaller, the M-SPC system will reduce the total
cost to a greater degree. The effects of the
parameters on RMC indicate that, the superiority
of the M-SPC system over the traditional X̄ chart

Table 1
Effects of 11 factors

No. Factors Effect

On RMC On RM

1 t Minimum allowable in-control ATS0 0.1213 19.01

2 Q Number of units produced per unit time 0.3407 63.31
3 Cm Manpower cost per inspector per unit time 0.0580 6.52
4 s Number of stages in a manufacturing system 0.3087 50.28
5 gi Number of streams in the ith stage 0.0657 11.49
6 s0,i In-control process standard deviation in the ith stage 0.0286 8.22
7 md,i Mean value of the mean shifts di in the ith stage 0.2514 8.70
8 USLi Upper specification limit in the ith stage 0.0482 15.64
9 ti Time required to inspect a unit in the ith stage 0.1975 24.70
10 MTBOi Mean time between out-of-control cases in the ith stage 0.0030 2.33
11 Ck,i Cost required to fix an out-of-specification unit in the ith stage -0.0926 15.34

Note: (1) RMC the ratio between the total cost of the M-SPC system and that of the traditional X̄ chart system.(2) RM the ratio between
the manpower M of the M-SPC system and the manpower M0 for the traditional X̄ chart system.
 ARTICLE IN PRESS
282 Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287

system is more notable when t, Q, Cm, s, gi, s0,i, that are formed at the above four stages are
MTBOi, Ck,i are high and/or md,i, USLi, ti are low. monitored by the X̄ charts. The block diagram of
The actual reduction in Ctotal would differ for the SPC system is displayed in Fig. 1(b) and the
different systems and circumstances. However, it is quality linkages in Fig. 1(c). The specifications of
believed that the M-SPC system is generally more the system are listed below:
effective and beneficial to many real systems.
Number of stages: s¼4
On the other hand, a positive effect on RM means
Number of streams: g1 ¼ g2 ¼ g3 ¼ 1,
that the amount of manpower should be increased
g4 ¼ 2
more when the corresponding parameter is large
Lower specification LSL1 ¼ 15.91,
and vise versa. For example, the production rate Q
limit (mm): LSL2 ¼ 12.93,
has the most positive effect (63.31) on RM. There-
LSL3 ¼ 7.87,
fore, more manpower should be allocated in order
LSL4 ¼ 10.92
to increase the sample size and/or reduce the
Upper specification USL1 ¼ 16.09,
sampling interval when the production rate is high.
limit (mm): USL2 ¼ 13.07,
In sum, a relatively large amount of manpower M
USL3 ¼ 8.13,
should be deployed if (the parameters are listed in a
USL4 ¼ 11.08
descending order according to their effects on RM):
Standard deviation s0;1 ¼ 0:025,
(mm): s0;2 ¼ 0:022,
(1) the production rate (Q) is high; and/or
s0;3 ¼ 0:049,
(2) the number of stages of the manufacturing
s0;4 ¼ 0:028
system (s) is high; and/or
Number of units Q ¼ 120
(3) the time required to inspect a unit (ti) is small;
produced per hour:
and/or
Fixing cost ($): C k;1 ¼ 4:2, C k;2 ¼ 5:3,
(4) the required in-control ATS0 (t) is high; and/or
C k;3 ¼ 6:0, C k;4 ¼ 1:5
(5) the upper specification limit (USLi) is small;
Manpower cost ($): C m ¼ 10:0
and/or
Inspection time (min): t1 ¼ 0:30, t2 ¼ 0:50,
(6) the cost for fixing an out-of-specification
t3 ¼ 0:60, t4 ¼ 0:45
product (Ck,i) is high; and/or
(7) the number of streams (gi) is high; and/or
(8) the mean value (md,i) of the mean shifts is low; The dependent relationship vectors Vi and the
and/or formulae for Di can be determined by simply
(9) the in-control process standard deviation (s0,i) checking the drawing and quality linkages in Fig. 1
is high; and/or
(10) the manpower cost (Cm) is low; and/or V 3 ¼ ½2T ; V 4 ¼ ½2T ,
(11) the mean time between out-of-control cases
D3 ¼ d2 ; D4 ¼ d2 .
(MTBOi) is low.
Originally, the system uses the traditional 3s X̄
With these guidelines in mind, users can deploy charts for all the processes. Operators take a sample
manpower to different SPC system rationally and of size five for every 2 h for each chart. The amount
effectively, even when more complicated computa- of manpower M0 that is used for the system is equal
tion has not been carried out. to 0.096 (Eq. (7)). That is, on average, about 6 min
are spent on SPC inspection per hour. The in-
4. An example control ATS0 of the traditional 3s X̄ chart system
is equal to 149 h (Eq. (A.1)).
Consider the mechanical part that is shown in After running the traditional X̄ chart system for
Fig. 1(a). Stages 1 and 2 turn surfaces 1 and 2 1000 h (excluding the shutdown time), 10 out-of-
(datum: surface zero), respectively; stage 3 drills the control cases have been observed at stage 1. From
hole (datum: surface 2); and stage 4 mills the slot each out-of-control case, a sample value d^ of the
(datum: surface 2). The dimensions and tolerances mean shift can be obtained (Wu et al., 2004). The
are shown on the drawing. Since the process in stage average of the 10 sample values d^ is equal to 1.45
4 is much more time consuming, two streams are and is used as the estimate of the mean value md,1 of
used in parallel. The four dimensions (x1, x2, x3, x4) the mean shifts in stage 1. Meanwhile, the mean
 ARTICLE IN PRESS
Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287 283

time between two consecutive out-of-control cases
at stage 1 can be estimated by
1000
^
MTBO 1  ¼ 100.
10
Similarly, md,i and MTBOi are determined for
other stages.
md;2 ¼ 0:93; md;3 ¼ 1:35; md;4 ¼ 1:51,
MTBO2 ¼ 122 h; MTBO3 ¼ 87 h; MTBO4 ¼ 94 h:
More accurate estimates of md,i and MTBOi can
be acquired subsequently when more out-of-control
cases are detected and dissected.
Now, the QA engineer decides to design a sub-
optimal X̄ chart system and an M-SPC system in
order to reduce the total cost Ctotal. A computer
program written in C language completes the design
of the M-SPC system in 6.093 s of CPU time in a PII
400 personal computer.
While the sub-optimal X̄ chart system is designed
by using the same manpower (M 0 ¼ 0:096) as the
traditional chart system, the design of the M-SPC
system searches for an optimal amount of man-
power that minimizes the total cost. The charting
parameters and the resultant costs of the three chart
systems are listed in Table 2. The control limits of
the charts are determined so that all three chart
systems generate the same in-control ATS0 ( ¼ 149).
As shown in Table 2, the total cost Ctotal of the
traditional X̄ chart system is high. This is because
that the manpower deployed to the traditional
system is inadequate and the resultant quality cost
is very high. The sub-optimal X̄ chart system has
reduced the total cost to some degree even though it
employs the same amount of manpower as the
traditional X̄ chart system. The improvement is
attributable to the optimization of the sample size
ni, the sampling interval hi, and the control limits
LCLi and UCLi. Finally, the M-SPC system has
further cut down the total cost to a significant
degree. The design of the M-SPC system includes
not only the optimization of ni, hi, LCLi and UCLi,
but also the search for the optimal amount of
manpower M. The optimal value of M in this
example is 1.266, about 13 times as large as the
manpower used by the traditional or sub-optimal X̄
chart system. In order to implement the M-SPC
system, some managerial arrangement must be
made to increase the manpower to be spent on
SPC. Even though the increase of manpower raises
the manpower cost Cman, it allows the M-SPC
system to use large sample sizes and small sampling
intervals. As a result, the M-SPC system is very
effective for detecting out-of-control cases and
significantly reduces the quality cost Cquality as well
as the total cost Ctotal. In this example, the total cost
Ctotal of the M-SPC system is equal to only 0.281 of
that of the traditional X̄ chart system and 0.369 of
that of the sub-optimal X̄ chart system.
5. Conclusions
This article proposes an M-SPC system that
optimizes the deployment of manpower so as to
minimize the expected total cost associated with the
monitoring of a multistage manufacturing system.

Table 2
The three control charts in the example

System Stage Sample size, n Sampling interval (h), h Control limits (mm) Manpower, M Cost ($)

LCL UCL Cman Cquality Ctotal

Traditional 1 5 2.00 15.967 16.033 0.096 0.96 147.83 148.79

2 5 2.00 12.969 13.031
3 5 2.00 7.937 8.063
4 5 2.00 10.962 11.038
Sub-optimal 1 9 1.82 15.974 16.026 0.096 0.96 112.43 113.39
2 3 3.19 12.957 13.043
3 7 2.67 7.949 8.051
4 9 3.65 10.974 11.026

M-SPC 1 67 1.96 15.991 16.009 1.266 12.66 29.20 41.86

2 65 2.02 12.990 13.010
3 67 2.02 7.983 8.017
4 67 2.02 10.990 11.010
 ARTICLE IN PRESS
284 Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287

The sample sizes, sampling intervals and control derivation can be found in Wu et al. (2004)).
limits of the charts in the M-SPC system are also
ATS0 ¼ 1=P0 , (A.1)
optimized. The numerical studies show that the
M-SPC system is able to reduce the total cost Ctotal Ys Ygi  
by nearly 75% on average, and the optimal P0 ¼ 1  i¼1 j¼1
1  ai =hi
Ys  g
deployment of manpower alone may reduce Ctotal ¼ 1  i¼1 1  ai =hi i , ðA:2Þ
by about 50%. With such significant improvement,
the M-SPC system is obviously a useful and !
LCLi  m0;i
effective tool for manufacturers to achieve better ai ¼ 2F pffiffiffiffi , (A.3)
quality. s0;i ni
The value of the grand average RM ( ¼ 34.36) of
where P0 is the probability that the SPC system
the third response shows that much more manpower
generates a false alarm in a unit time and ai is the
should be deployed to most traditional X̄ chart
type I probability of a chart in the ith stage. When
systems (or general SPC systems) from the view-
the system is in control, the mean shifts di and,
point of total cost reduction. The deployment of
consequently, the induced shifts Di are all equal to
more manpower leads to a significant reduction in
zero. Therefore, the quality characteristics x in
quality cost that outweighs the increase in man-
different processes (i.e., the only streams in the
power cost (or sampling cost). As a result, the total
single-stream stages and the parallel streams in the
cost (Ctotal) is substantially reduced. If the man-
multi-stream stages) are independent of each other.
power M0 of a traditional X̄ chart system has been
Each of them varies following its in-control prob-
increased to a level close to the optimal value M of
ability distribution.
the corresponding M-SPC system, the total cost of
the traditional X̄ chart system must be nearly
minimized. Appendix 2. Calculation of the out-of-control
Most of the specifications that are used in the ATSi(di)
design of an M-SPC system are also required by
the traditional system or can be obtained from the When one of the gi parallel streams in the ith
design and manufacturing information and records. stage (1pips) is out of control (i.e. its mean shift
The design algorithm of the M-SPC system can be is equal to di), the out-of-control ATSi(di) of the
easily computerized. More importantly, the use of M-SPC system is calculated by

the M-SPC system does not present any additional 1
difficulty for operators to run and understand the ATSi ðdi Þ ¼  1 hi þ 0:5hi , (A.4)
qi
SPC system. Some general guidelines have been
Ys
provided for the deployment of manpower in an qi ¼ 1  ðwd jstage i is out of controlÞ, (A.5)
d¼1
SPC system.
Finally, it is believed that the M-SPC system can where qi is the probability that an out-of-control
be extended and then applied to the designs of case (di) happens in stage i and is signaled by the
M-SPC systems that employ other types of control M-SPC system during a time period of hi, and wd
charts (e.g. the CUSUM and EWMA charts) or that (d ¼ 1; 2; . . . ; s) is the probability that stage d
use the joint charts to monitor simultaneous mean does not signal di during a same time period
and variance shifts (e.g. the X̄ &R charts). (the calculation of wd is detailed in the paper by
Lam et al. (2005)).
Acknowledgments
Appendix 3. Calculation of the total cost Ctotal
We are thankful to the referees, whose valuable
remarks and advice have contributed to the Both cost components, Cquality and Cman, are
significant improvements in the paper. implicit or explicit functions of manpower M. The
manpower cost Cman per unit time is calculated by
Appendix 1. Calculation of the in-control ATS0
C man ¼ C m M. (A.6)
The in-control ATS0 of a SPC system is The quality cost Cquality per unit time is the sum
calculated by the following formulae (the detailed of the costs incurred by the out-of-control cases
 ARTICLE IN PRESS
Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287 285

occurring at each stage of the M-SPC system Dd. It is also noted that, in stage i, only one out of the
X
s gi streams goes out of control. Therefore, the
C quality ¼ C q;i , (A.7) equivalent mean shift of the entire stage i is equal
i¼1 to (di/gi). If stage d is independent of stage i, dd ¼ 0.
where Cq,i is the quality cost per unit time due to a Finally, the random mean shifts di in stage i may
mean shift di at the ith stage. It depends on the be modeled by the Rayleigh distribution (Wu et al.,
probability distribution of di 2002). Its probability density function is given by
Z 1 !
1

C q;i ¼ N i ðdi ÞLi ðdi Þf d ðdi Þ ddi pdi pd2i
MTBOi 0 f d ðdi Þ ¼ 2 exp  2 . (A.12)
Z 1 2md;i 4md;i
1
¼ ½Q  ATSi ðdi ÞLi ðdi Þf d ðdi Þ ddi ,
MTBOi 0 which is characterized by a single parameter md,i,
ðA:8Þ i.e., the mean value of the mean shifts di.
Integration (A.8) takes into account of various
where (1/MTBOi) indicates the occurrence fre- mean shifts di with different sizes and probabilities
quency, or the number of mean shifts occurring in and, therefore, provides a more comprehensive
the ith stage in a unit time. Ni(di) is the average measure of Cq,i as well as Cquality, consequently, of
number of units produced after the mean shift di the total cost Ctotal. It is noted that only positive
and Li(di) is the expected loss function per unit. The mean shifts need to be considered because of the
product of Ni(di) and Li(di) indicates the total loss symmetry of the normal distribution of the quality
during an out-of-control case incurred by di. The characteristics x.
number Ni(di) is calculated by Q ATSi ðdi Þ, i.e., the The formulae for calculating Ctotal has been
product of the number (Q) of units produced per verified by 300 different cases using Monte Carlo
unit time and the average time duration (ATSi) of simulation. The average relative error is 3.16 percent.
the out-of-control case. The out-of-control ATSi(di)
is calculated by using Eq. (A.4) in Appendix 2. The
Appendix 4. Search algorithm for the mid-level
expected loss function Li(di) is the sum of the loss
optimization
incurred in each stage and can be calculated by
using Taguchi’s loss function (Ross, 1989)
The objective of the mid-level optimization is, for
X
s
Li ðdi Þ ¼ l i;d , (A.9) a given manpower M, to determine an optimum set
d¼1 of (ni, hi, i ¼ 1; 2; . . . ; s) that will minimize total cost
8 h i Ctotal. A gradient-based search algorithm is em-
>
> K s 2
þ d 2
d ; dai; ployed to approach the optimal set of ni and hi step
< d 0;d
l i;d ¼   
(A.10) by step, with the step size Dni and Dhi, until the
2
>
> K s 2
þ di
; d ¼ i; reduction in Ctotal is negligible.
: i 0;i g i
The minimum increment of sample size ni is one.
Therefore, the step size (Dni) of ni for all stages is
where li,d is the contribution from the dth stage
taken as one. It is rational to make the step size Dhi
when a mean shift di occurs in stage i. The loss
of hi proportional to hi itself, i.e.
function coefficient Kd (d ¼ 1; 2; . . . ; s) can be
determined from the cost component Ck,d associated Dhi ¼ bhi ; (A.13)
with the specification limits (Ross, 1989) or where b (b40) is a proportionality constant
C k;d !, !
Kd ¼ . (A.11) X s Xs
ðUSLd  m0;d Þ2 gi t i ni gi t i
b¼ . (A.14)
i¼1
hi i¼1
hi
It is noted that, when an out-of-control case occurs
in stage i, mean shifts will be incurred not only in Generally, this b value makes the increment of the
stage i, but also in some other stages that are directly manpower M due to a decrease of hi by one Dhi
or indirectly affected by stage i. In Eq. (A.10), dd similar to the increment of M because of an increase
(when dai) is the mean shift in the dth stage induced of ni by one Dni.
by mean shift di in stage i. It is determined by a It is well known that, increasing ni results in the
recursive procedure based on the dependent relation- decrease of out-of-control ATS which in turn
ship vector Vd and the induced mean shift function decreases Ctotal (or having an economic gain), and
 ARTICLE IN PRESS
286 Z. Wu et al. / Int. J. Production Economics 106 (2007) 275–287
decreasing ni results in the increase of Ctotal (losing
economically). Conversely, decreasing hi means
moving hi in the gaining direction (decreasing Ctotal)
and increasing hi means moving hi in the losing
direction (increasing Ctotal).
If all ni and hi are substituted by the general
variable Xj (j ¼ 1; 2; . . . ; 2s) (i.e. an Xj may be a
sample size or a sampling interval), the gaining
factor Gj pertaining to an Xj for an increment of
manpower M is given by
jDC total;j j DC total;j
Gj ¼ ¼ , (A.15)
DM j ðqM=qX j ÞDX j
where DCtotal,j is the change in the total cost when
an Xj moves one step in the gaining direction (i.e., 1
for ni, or Dhi for hi) and all other Xj’s are kept
unchanged. DCtotal, j is always smaller than zero.
If the gaining factor Gj of an Xj is larger, then,
when this Xj moves in the gaining direction, greater
reduction in Ctotal will be obtained with relatively
smaller increase in manpower M. Conversely, a
lower Gj means that if the corresponding Xj moves
in the losing direction, greater reduction in M will
be obtained with relatively smaller increase in Ctotal.
Therefore, the general variables Xj are first ranked
according to the descending order of Gj. Then, at
each design point, N general variables Xj with the
largest Gj values will be moved one step in their
gaining directions (i.e., if an Xj is a sample size,
increase it by Dni; if an Xj is a sampling interval,
decrease it by Dhi). This will usually lead to a
substantial reduction in Ctotal with an insignificant
increase of M. In order to balance out the increase
in manpower M, the rest (2s–N) general variables Xj
with smaller Gj will be moved one step in their
losing directions. This second movement may
adversely increase Ctotal, but this increase in Ctotal
must be smaller than the decrease of Ctotal in the
first movement. A searching mechanism is employed
to identify the maximum possible value for N, which
ensures that, in each search step, the maximum
reduction in Ctotal be achieved and, meanwhile, the
manpower M be kept within the given value. For
more detailed description of the mid-level optimiza-
tion search, the readers are referred to the paper by
Lam et al. (2005).
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