AbstractThis paper considers production-maintenance policy for the deteriorating production system which can go‘out of control’while producing items. Once out of control, the production process produces some proportion of defective items. The defective items are reworked at some cost before being shipped, or, if passed to the customer, incur much larger warranty cost. Thus, to operate this system economically, periodic inspection and restoration of the process are needed. A mathematical model representing the expected annual cost is developed to determine the production cycle and process inspection intervals jointly. A case of equally spaced inspection intervals is solved by using an approximation to the cost function.