Quality issues impacting production planning

Among the various problems affecting production processes, the unpredictability of quality factors is one of the main issues which concern manufacturing enterprises. In make-to-order or in perishable good production systems, the gap between expected and real output quality increases product cost mainly in two different ways: through the costs of extra production or reworks due to the presence of non-compliant items and through the costs originating from inefficient planning and the need of unscheduled machine changeovers. While the first are relatively easy to compute, even ex-ante, the latter are much more difficult to estimate because they depend on several planning variables such as lot size, sequencing, deliveries due dates, etc. This paper specifically addresses this problem in a make-to-order multi-product customized production system; here, the enterprise diversifies each production lot due to the fact that each order is based on the customer specific requirements and it is unique (in example, packaging or textiles and apparel industry). In these contexts, using a rule-of-thumb in overestimating the input size may cause high costs because all the excess production will generate little or no revenues on top of contributing to increasing wastes in general. On the other hand, the underestimation of the lots size is associated to the eventual need of launching a new, typically very small production order, thus a single product will bear twice the changeover costs. With little markups, it may happen that these extra costs can reduce profit to zero. Aim of this paper is to provide a critical analysis of the literature state-of-art while introducing some elements that can help the definition of lot-sizing policies considering poor quality costs.