Abstract
The classical inventory model assumes that the quality of the items received matches with the quality required. In many cases the deviation in quality results in additional costs to the stockiest and sometimes lead to rejection of the received lot. The cost of inspection along with the other inventory costs can be unified into a single model by embedding an acceptance sampling plan into the inventory model. When the lot is accepted there is a possibility of unseen defectives, which may reach the customer leading to loss of goodwill. If the lot is rejected on inspection, the model suggests rectification and removal of non-confirming units. In this paper a model is developed to determine (i) the Economic Order Quantity and (ii) a single sample plan of the attribute type, which minimizes the Average Total Inspection. The model utilizes spreadsheet solutions to handle statistical functions.
Highlights
Inventory control is one of the fundamental areas of management in any organization
In this paper we study a simple lot size inventory model governed by deterministic demand
The value of Q* depends on the value of Pa but n and Pa is not known initially. It depends on the sampling plan adopted
Summary
Inventory control is one of the fundamental areas of management in any organization. According to Love (1979), the term inventory refers to “an idle resource of any kind having an economic value”. There will be a time lag between placement of an order and the actual receipt of the order quantity This is called lead time and is generally denoted by L, which may Statistical procedures are normally adopted by managers to estimate the demand for a period and buffer stocks are maintenance to reduce the risk of facing a shortage. A common question is “at what cost can we avert a shortage?” To answer this question we have to use a „model‟ that explains the economic aspects of inventory. Such a model shall be analysed and an inventory ordering rule should be arrived at. According to Silver (1981), a major portion of literature on inventory models does not seem to have given due consideration to these costs
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