Question

Explain the following terms – what they mean, when you would use them, and why they’re important, in plain English.

1. Producer’s Risk
2. Consumer’s Risk
3. Acceptable Quality Level

Answer 1

When a product is manufactured and sold, there is a producer of the product and there is a consumer of the product.

While accepting a product lot, both the producer and consumer want to avoid mistakes during the inspection of the product. When the product is inspected there may be 2 kinds of mistakes which can happen:

1. A good quality lot is rejected

2. A bad quality lot is accepted.

Producer's risk is the risk associated with the mistake of having good quality lot rejected. This risk results in the possibility of the producer having to replace the rejected good quality products.

Consumer's risk is the risk associated with the mistake of having bad quality lot accepted. This risk results in the possibility of the consumer having to reorder products that are later unusable due to bad quality.

The acceptable quality level is the minimum level of quality that a consumer is willing to accept.