An EPQ Model with Reworking of Imperfect Production Items and Shortages

Abstract

The classical EPQ model is a well-known and commonly used inventory control technique. Common assumptions in this model are that all units produced are of perfect quality and shortages do not occur. In an imperfect manufacturing process, defective items are produced. Therefore, a reworking process is necessary to convert the defective products into finished goods. In this paper, inventory models for a single stage production process are developed where defective items are produced and reworked, and where scrap is produced, detected and discarded during the rework. To activate this objective a mathematical model is developed and an optimal production lot size which minimizes total cost is derived. The relevant model is built, and solved and the necessary and sufficient conditions for a unique and global optimal solution are derived. An illustrative example is provided and numerically verified and sensitivity analysis is carried out with respect to the different parameters used to develop the model. The validation of result in this model was coded in Microsoft Visual Basic 6.0.