A DESIGN OF OPTIMUM SCREENING PROCEDURE USING SURROGATE VARIABLE

Abstract

In this article, a new profit function based on a surrogate variable of its performance variable is provided to develop an optimum screening procedure for manufacturing. The optimum screening procedure helps producers set up the mean level of manufacturing and the screening limits of a surrogate variable to reach a maximum expected profit per unit. The proposed method is useful when the products in the manufacturing process are classified into different grades and sold in two alternate markets. A cement-packing example is used to illustrate the proposed method, and a numerical study is conducted to evaluate the effects of cost components and distribution parameters on the expected profit per unit. The proposed screening procedure provides a significant improvement over existing methods in term of higher expected profit per unit.