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A real options design for quality control charts
Conference proceeding

A real options design for quality control charts

Harriet Nembhard, Leyuan Shi and Mehmet Aktan
Proceedings of the 32nd conference on winter simulation, pp.597-603
WSC '00
12/10/2000

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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.

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