A supply chain inventory model for vendor-buyer system with defective items and imperfect inspection process

Abstract

This paper studies a collaborative vendor-buyer model with defective items and inspection errors. The vendor produces a batch of product and delivers it to the buyer with unequal size policy. The shipment lot delivered from vendor to buyer contains some defective items. The inspection process conducted by the buyer is assumed to be imperfect. The inspector may incorrectly classify non-defective item as defective or incorrectly classify a defective item as non-defective. An easy procedure is developed to find the solutions of the model. The results from numerical example show that the probability of defective items and inspection errors affect the total cost. The type I inspection error gives a greater impact on total cost than that of type II inspection error.