Abstract
The Economic Production Quantity (EPQ) model is commonly used by practitioners in the fields of production and inventory management to assist them in making decision on production lot size. The common assumptions in this model are that all units produced are perfect and shortages are not allowed. But, in real situation the defective items will be produced in each cycle of production and shortages and scrap are possible. These assumptions will underestimate the actual required quantity. Hence, the defective items can not be ignored in the production process. Rework process is necessary to convert those defective into finished goods. This study proposes EPQ model that incorporates both imperfect production quality and falsely not screening out a proportion of defects, thereby passing them on to customers, resulting in defect sales returns. To active this objective a suitable mathematical model is developed and the optimal production lot size which minimizes the total cost is derived. An illustrative example is provided and numerically verified. The validation of result in this model was coded in Microsoft Visual Basic 6.0.
Highlights
The primary operation strategies and goals of most manufacturing firms are to seek a high satisfaction to customer’s demands and to become a low-cost producer
The Economic Production Quantity (EPQ) model is commonly used by practitioners in the fields of production and inventory management to assist them in making decision on production lot size
This study proposes EPQ model that incorporates both imperfect production quality and falsely not screening out a proportion of defects, thereby passing them on to customers, resulting in defect sales returns
Summary
The primary operation strategies and goals of most manufacturing firms are to seek a high satisfaction to customer’s demands and to become a low-cost producer. Classic EPQ model assumes that all items produced are of perfect quality and a continuous inventory issuing policy for satisfying product demand. Swapan Kumar Manna [7] developed two deterministic economic production quantity (EPQ) models for Weibull-distribution deteriorating items with demand rate as ramp type function of time. Biswajit Sarkar et al [8] developed an economic production quantity model for both continuous and discrete random demand of merchandise and a certain percent of the total product is of imperfect quality, which follows a probability distribution. This paper uses mathematical modeling to derive the long run average cost function for the proposed EPQ model with scrap, rework and sales return employs optimality conditions to determine the optimal production quantity for the proposed mode.
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