Environmentally Responsible EPQ Model with Rework Process of Defective Items

A real economic growth only comes from increasing quality and quantity of the factors of production. Most production systems produce items which are of imperfect quality. In a production/inventory situation items which are received or produced are not of perfect quality. Thus the presence of defects which is inevitable in a produced/ordered lot is sorted out by the process of screening. Handling of the defective items varies by industry and product types. For example, defective items may be dealt by the way of rework processor by sold at discount prices. To make the fulfillment of the demands in right proportion and at the right time, inventory models (Economic order/production quantity) were formulated. We consider an EPQ model with rework process of defective items with the inclusion of environmental costs. The expected profit functions are developed using renewal reward theory, and closed form of expressions for the optimal production lot size are derived with numerical example in different cases.