Article2018

Stochastic supply chain model with imperfect production and controllable defective rate

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

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Supply Chain and Inventory Management Quality and Supply Management Sustainable Supply Chain Management

Abstract

This paper investigates the impact of ordering cost reduction and process quality improvement on an integrated vendor–buyer inventory system with variable lead time in just-in-time (JIT) manufacturing environment. We assume that the vendor invests money in order to improve the production process quality and reduce the number of defectives, and buyer invests money to reduce the ordering cost. Each lot received by the buyer contains a certain percentage of defective items and it is assumed that there is an inspection activity on the part of the buyer with a fixed screening rate greater than the demand rate. Shortages are partially backlogged with a certain limit of backorder price discount. The objective of this study is to obtain the optimal decisions and the best investment policy to minimise the joint total cost incurred by the buyer and the vendor. An efficient algorithm is developed to determine the optimal policy. The model is illustrated through a numerical example. From the numerical results, it is observed that significant savings can be achieved through the reductions of lead time, ordering cost and defective rate. Some managerial insights also obtained from the numerical study.

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References

1986Optimal Lot Sizing, Process Quality Improvement and Setup Cost Reduction 1986Economic Production Cycles with Imperfect Production Processes 2000Economic production quantity model for items with imperfect quality 1986A JOINT ECONOMIC‐LOT‐SIZE MODEL FOR PURCHASER AND VENDOR 1977An integrated inventory model for a single supplier-single customer problem 1982Principles of inventory and materials management 1988“A JOINT ECONOMIC‐LOT‐SIZE MODEL FOR PURCHASER AND VENDOR”: A COMMENT*1985Investing in Reduced Setups in the EOQ Model

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