Today's severe competition in domestic and global markets forces manufacturing companies to pursue higher product quality and lower product cost for their quality and price competitiveness. This study performed an empirical analysis on the relationshi...
Today's severe competition in domestic and global markets forces manufacturing companies to pursue higher product quality and lower product cost for their quality and price competitiveness. This study performed an empirical analysis on the relationship between the manufacturing lot size and the product quality and quality cost to see if the reduction of lot size makes an effective means to achieving higher quality and lower cost.
T-tests and regression analyses were preformed to test the two hypotheses (1) Smaller lot size lowers defect rates and (2) Smaller lot size reduces rework costs. The data used were monthly data on average lot size, defect rate, and normalized rework cost collected from a manufacturing process of TV Division of G Company which is a leading company in our country's electronics industry. The period covered ranges from January 1992 to December 1994. Thus the three-year period makes 36 observations for each item.
The hypotheses were not rejected in the empirical test, which implies that keeping a lot size smaller makes an effective means to achieving lower defect rates and rework costs. This implication, however, cannot be extended to all the firms and industries since the result came from a specfic division of a company we examined.
Considering that many manufacturers in our country, who are nowadays producing a variety of products in small batches, are concerned with keeping their manufacturing lot size small, it is recommendable to conduct, in the future, the studies of this type with various firms and industries as subjects in the sense that this type of studies can help those companies raise their quality and price competitiveness.