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and control charts to minimize Type I errors [22], determine the economic design of the
control
charts with a realistic embedded error monitoring model [23], design a multivariate control scheme consisting of two
or three
charts to optimize the charts parameters [24], optimize the performance of attribute control charts using
genetic algorithm [25]. However, these studies are neither conducted within the Six Sigma methodological
frameworks, nor are 6 levels of process control considered during the optimization process.
Although recent studies integrate diverse statistical techniques to improve the quality of solutions of the Six Sigma
methodology, there is limited work that addresses the use of multiobjective optimization techniques that maintain
process quality at 6 levels. Furthermore, existing work that integrates multiobjective optimization with Six Sigma
scalarizes the set of multiple objectives into a single objective using a vector of user-specified weights.
2.1. Multiobjective Optimization and Six Sigma Framework for Online Inventory Control
In this research, an algorithm is proposed to optimize online process performance (see Figure 1). The proposed study
implements the first three phases of DMAIC as in traditional Six Sigma implementations. It starts with the Define
phase by defining the existing process sigma level and the critical-to-quality characteristics (CTQs) from the
customers. Then, during the Measure phase, evaluation of the current status of the process is performed.
After performing root cause analysis in the Analyze phase and implementing the improvement plan, input data such
as the relevant objective functions, constraints, and design variables and associated values are used for online
process monitoring. After the online monitoring starts, it detects any unwanted process behavior such as unnatural
patterns and mean shifts. When a mean shift is detected, it triggers an optimization procedure and provides the
decision-maker with a set of Pareto optima that include new values for the set of the decision variables at the
Improve phase. After the Improve phase is updated with the new decision variable values, online monitoring starts
again until unwanted process behavior is encountered. Then, it re-optimizes the objective functions subject to all
relevant constraints. This cycle continues until significant changes to the process are desired and the set of objective
functions, constraints, and design variables are changed. The subsequent sections provide the details of the proposed
procedure and components therein.
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Figure 1. Multiobjective optimization and Six Sigma framework for online process control.
3. Computational Study
3.1. Inventory Problem Case Description
In inventory management, there is a need to provide decision-makers with a mechanism for dynamically adapting to
the differences between customer demand and on-hand inventory. In this study, two conflicting inventory
management objectives are considered minimizing holding cost and minimizing ordering cost [2, 26]. The
objective functions represent the desired CTQs that need to be monitored during the process. Previous studies show
that the Economic Order Quantity (EOQ) model and variations thereof considers this tradeoff between holding cost
and ordering cost when choosing the quantity Q to use to replenish items in inventory. A larger order quantity Q to
meet random demand D results in holding a large amount of inventory, which increases holding cost. On the other
hand, a smaller order quantity Q to meet random demand D eventually reduces the average amount of inventory
thereby increasing ordering cost in order to meet demand. The value of the decision variable Q is varied to find
multiple tradeoff solutions for the objectives given a random demand D. Managing this tradeoff between holding
cost and ordering cost makes the model useful for management decision-making even if the decision variable Q is
known to be within a range of possible values [27, 28].
Specifically, the two objective functions considered for this investigation are:
1. Minimize average annual holding cost H. This cost is an important consideration for inventory management,
and it refers to the cost of storing inventory over a period of time. For this study, the definition of the annual
average holding cost is based on the total annual cost of the EOQ model [27]:
=
2
(1)
where c
h
is the unit holding cost when available inventory exceeds demand D which varies over time and Q is
the order quantity to meet demand D.
2. Minimize ordering cost. Ordering cost (O) refers to the cost of ordering units of inventory.
=
(2)
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Abualsauod and Geiger
where c
o
is the fixed ordering cost no matter the size of Q.
3.2. Description of the Decision Variables
In this research investigation, Q is the critical decision variable that influences the values of the objective functions.
The initial range of D is identified from empirical results published in the existing research literature. The range of
demand, and the holding and ordering unit cost values are listed in Table 1 and Table 2, respectively. Specifically,
the ranges are approximated based on experimental results based on a previous study [28].
Table 1. Customer demand for the inventory problem.
Parameter Lower Bound Upper Bound
Demand D (units) 70 160
Table 2. Costs for the inventory problem.
Parameter Value
Holding Cost
$10
Ordering Cost
$70
3.3. Implementation
3.3.1 Online Control Settings for the Inventory Case Study
There are two types of variation that affect the quality of a process. The first type is called a special cause variation,
which is also called assignable cause variation. This type of variation is a result of causes that are not normally
present in the process but they can be traced, identified, and eliminated. The second type of variation is called the
common cause variation this is the result of numerous, ever-present differences in the process. Control charts, which
are commonly used for process monitoring, help in identifying these two types of variation while monitoring the
behavior of the process. Specifically, 3-based control charts are commonly used to perform the online monitoring
of processes, and control charts are integral in the proposed methodology. Control charts are used to detect
simultaneously assignable causes of variations and if shifts in the mean performance values occur. Two control
charts are used, one for each of the two inventory cost functions. Table 3 lists the control chart parameters, which
are determined based on a previous study [28].
Table 3. Initial control chart parameters values for inventory cost problem.
Control Chart Parameter Holding Cost (H) Ordering Cost (O)
Center Line (CL) $85.00 $10.57
Upper Control Limit (UCL) $231.21 $30.10
Lower Control Limit (LCL) $0.00 $0.00
During process monitoring, change-point tests are used to determine whether a change in the mean or standard
deviation has occurred. Since the ordering and holding cost functions averages are likely to shift over the long run,
the Six Sigma DMAIC framework accounts for this mean shift by assuming 1.5 shift. Therefore, detecting shifts in
the inventory management process is important not only for monitoring changes but also to ensure that the cost
functions operate at or close to the desired sigma level. For proof-of-concept, in solving the inventory problem, the
bootstrap method is used to maintain objective functions within 3 level by detecting shifts in mean over time for
both the H and O inventory cost objectives. The theoretical formulation of the bootstrap method is as follows:
CL% = 100
%
(3)
(4)
+ (
) for = 0, . (5)
where CL% represents the percentage of mean shifts occurrence in the observed objective function values, is the
number of bootstrap samples performed, x is the number of bootstrap for which
<
where,
is the
difference of the reorder order for the observed objective function values,
where,
is the cumulative
sums of the straps,