Process adjustment, also known as process targeting, is one of the classical problems in the field of quality control and production economics. In the process adjustment problem, it is assumed that process parameters are variables and the aim is to determine these parameters such that certain economic criteria are optimally satisfied. The aim of this paper is to determine the optimal process adjustment in a two-stage production system with rework loops. An absorbing Markov chain model is developed in which all items are inspected for conformance with their specification limits. The cycle time of production process is included in the model for optimizing total profit of the system. Also, effects of inspection errors are investigated.
