An Integrated Inventory Model with Controllable Lead time and Setup Cost Reduction for Defective and Non-Defective Items

Abstract

In this paper, the study deals with the lead time a nd setup reduction problem in the vendorpurchaser integrated inventory model. The cost of c apital (i.e., opportunity cost) is one of the key factors in making the inventory and investment decisions. Lead time is an important element in any inventory system. The proposed model is presents an integrated inventory model with controllable lead time with setup cost r eduction for defective and non defective items under investment for quality improvement. In this analysis, the proposed model, we assumed that the setup cost and process quality is logarithmic function. Setup cost reduction for defective and non defective items, is the main focus for the proposed model. The objective of the proposed model is to minimize the total cost of both the vendor-purchaser. The mathematical model is derived to investigate th e effects to the optimal decisions when investment strategies in setup cost reductions are adopted. This paper attempts to determine optimal order quantity, lead time, process quality and setup cost reduction for production system such that the total cost is minimized. A so lution p0rocedure is developed to find the optimal solution and numerical examples are present ed to illustrate the results of the proposed models.