Impacts of inspection errors and trade credits on the economic order quantity model for items with imperfect quality

Chun‐Tao Chang · Mei-Chuan Cheng · Pao-Yi Soong

29 citations0/0 files storedInternational Journal of Systems Science Operations & Logistics

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Supply Chain and Inventory Management Sustainable Supply Chain Management Working Capital and Financial Performance

Abstract

It is common for a retailer to receive some imperfect quality items in a lot. An imperfect inspection process may lead to misclassification errors. Inspection errors due to human fallibility, flawed inspection techniques, or environmental factors can occur, incurring additional costs. In addition, a supplier may provide a permissible delay in payments to stimulate demand from the retailer. In this paper, we develop an economic order quantity (EOQ) model that takes into account these phenomena (i.e., permissible delays in payments, defective items, and inspection errors) in determining the optimal ordering policy that maximises a retailer's total profit. Four theorems are provided to find the retailer's optimal ordering policy. Finally, numerical examples are given to illustrate each of these theorems and sensitivity analysis is performed to obtain managerial insights.

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References

1985Economic Order Quantity under Conditions of Permissible Delay in Payments 1986Optimal Lot Sizing, Process Quality Improvement and Setup Cost Reduction 2000Economic production quantity model for items with imperfect quality 1986Economic Production Cycles with Imperfect Production Processes 1995Ordering Policies of Deteriorating Items under Permissible Delay in Payments 1997An ordering policy for deteriorating items with allowable shortage and permissible delay in payment 2002On the economic order quantity under conditions of permissible delay in payments 2007Economic order quantity for items with imperfect quality: Revisited

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2017A two-warehouse integrated inventory model with imperfect production process under stock-dependent demand and quantity discount offer 2023A comprehensive inventory management system for non-instantaneous deteriorating items in supplier- retailer-customer supply chains 2019Optimal ordering policy in an economic order quantity (EOQ) model for non-instantaneous deteriorating items with defective quality and permissible delay in payments 2023A four-echelon supply chain inventory model for growing items with imperfect quality and errors in quality inspection

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