Optimizing replenishment policy in an EPQ-based inventory model with nonconforming items and breakdown

a r t i c l e i n f o The optimal replenishment policy for an economic production quantity (EPQ)-based inventory model with nonconforming items and breakdown is presented. A real-life production system inevitably generates nonconforming items and has equipment breakdowns owing to process deterioration or other uncontrollable factors. This study addressed these issues in an EPQ-based system to optimize a replenishment policy that minimizes the long-run average cost for the proposed system. Whenever a breakdown occurs, the machine is assumed to immediately be under repair, and an abort/resume inventory control policy is adopted. Under this control policy production of the interrupted lot resumes immediately after the machine is fixed and restored. A mathematical model and a recursive algorithm were used to derive the optimal replenishment policy. A numerical example was used to demonstrate the practical application and better cost efficiency of the proposed policy compared to a breakdown that occurs under a no-resumption policy. This paper is concerned with determining the optimal replenishment policy for an economic production quantity (EPQ) based inventory model with nonconforming items and random machine breakdown. Harris (1913) first introduced the economic order quantity (EOQ) model to assist corporations in minimizing total inventory costs. He employed the mathematical techniques to balance the setup and stock holding costs in order to derive the optimal order size that minimizes the long-run average cost. For the manufacturing firms, when items are produced in-house instead of being acquired from outside suppliers, the EPQ model is often adopted to cope with the non-instantaneous stock replenishment rate in order to obtain minimum production-inventory cost per unit time (Taft, 1918). Disregarding the simplicity of the original EOQ and EPQ models, the concept of cost minimization and the technique of mathematical modeling remain broadly used (Nahmias, 2009; Silver et al., 1998). Quite a few more complicated and practical production-inventory models have since been extensively The classic EPQ model implicitly assumes that all items made are of perfect quality. However, in real-life manufacturing systems, due to process deterioration or various other factors, production of imperfect quality items is inevitable. Studies that extended the EOQ and EPQ models by undertaking issues of the defectiveness and its corresponding quality cost have been broadly conducted (Chen et al. Samples of articles are surveyed as follows. Hariga and Ben-Daya (1998) studied the economic production quantity problem in the presence of imperfect processes. The time to shift from …