An EOQ model with random disruption and partial backordering

Abstract

Perfect quality of batches is an assumption in the classic economic order quantity (EOQ) model (of inventory management); however, in practice some disruptions may occur in a supply chain. This paper presents an EOQ model with random disruption and partial backorders. So, when shortage occurs (due to quality problems or normal shortages), some customers are willing to wait for delivery until the next period. There is a finite probability that batches may be defective so an ‘all or none’ policy is used after inspection of batches. The optimal inventory cost and the corresponding decision variables are studied. A solution method is proposed to optimise the inventory cost, and then two numerical examples and a sensitivity analysis are provided to illustrate the results.