Table 1
The influence of contamination rate on the supplier's return per lot and buyer's cost per lot.
Contamination rate Probability that a lot passes inspection Probability that a contaminated lot passes inspection Production cost/lot ($) Supplier's return/lot ($)a Buyer's cost/lot ($)b
0.00 0.99 0.000000 1.000 0.0046 1.0300
0.02 0.97 0.000206 0.942 0.0043 1.0403
0.04 0.95 0.000421 0.887 0.0020 1.0510
0.06 0.93 0.000644 0.835 -0.0024 1.0622
0.08 0.91 0.000878 0.787 -0.0090 1.0739
0.10 0.89 0.001121 0.741 -0.0177 1.0861
a Supplier's return per lot is net of inspection failure costs and the allocated portion of safety failure costs.
b Buyer's cost per lot includes the portion of safety failure costs that could not be allocated to the supplier.