An Investment Allocation Model for Quality Improvement to Reduce Component Variances at Manufacturer and Supplier Side to Maximize the Return on Investment

Today's Challenge for many manufacturing companies is how to improve product quality and reduce the production cost of the products offered in the market. Quality improvement must be performed by a company to maintain its product's competitiveness in the market. Quality improvement and cost reduction can be performed by allocating investments to reduce the value of the variance in the component of a product. The company will provide a target variance of assembled products that must be achieved with a minimum allocation of investment. The allocation also considers the ability of the machine and selected suppliers to reduce the variance. In this paper, we develop an optimization model to allocate investment provided by manufacturer to reduce component variances at the manufacturer and suppliers side. The objective function of the model is to maximize The Return on Investment (ROI).