A piecewise nonlinear model for a production system under maintenance, trade credit and limited warehouse space

Abstract

Small and medium size manufacturers exist commonly in developing countries. Limited warehouse space is a characteristic in small and medium size manufacturers. In today’s business environment, many upstream companies offer a credit period to downstream companies. In production system, a manufacturer usually adopts the system maintenance when the system is in the out-of-control state. Therefore, this paper considers a production-inventory model for a manufacturer under system maintenance, trade credit and limited warehouse space. The objective is to determine the optimal production run time to minimise the total cost. We develop an algorithm based on several theorems for solving the problem described. We provide several examples to illustrate the solution procedure and discuss how system parameters affect the manufacturer’s decision behaviour. Computational analysis demonstrates that the results of the proposed model are consistent with economic insights.