A real options design for quality control charts

Authors:
Harriet Black Nembhard;Leyuan Shi;Mehmet Aktan
Affiliations:
University of Wisconsin-Madison, Madison, WI;University of Wisconsin-Madison, Madison, WI;University of Wisconsin-Madison, Madison, WI
Venue:
Proceedings of the 32nd conference on Winter simulation
Year:
2000

Citing 2
Cited 0

Multinomial approximating models for options with &kgr; state variables

Management Science
Simulation Modeling and Analysis

Simulation Modeling and Analysis

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Abstract

We develop a financial model for a manufacturing process where quality can be affected by an assignable cause. We evaluate the options associated with applying a statistical process control chart using pentanomial lattice and Monte Carlo simulation methods. By connecting the aspects of market dynamics with the manufacturing operational aspects, we now have a way to help decision makers address the bottom-line profitability associated with the quality control decision.