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An appliance maker in Ohio: more inspectors, or fewer defects?
The prompt
A maker of kitchen appliances in Ohio, United States, builds 200,000 units a year. 4 percent are defective. Its 6 inspectors (USD 50,000 a year each) catch 75 percent of defects, which cost USD 30 each to rework. The rest reach customers and cost USD 250 each in warranty repairs, shipping and replacements. The cost breakdown is in the table with this case. Option A: hire 3 more inspectors to catch 90 percent. Option B: spend USD 400,000 once on better moulds and fixtures that cannot be assembled wrongly, plus USD 100,000 a year on training, which cuts defects to 1 percent. Which is better? (Fictional company, illustrative figures.)
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