Determining an optimal replenishment run time and lot size for an imperfect manufacturing system and rework under markdown policy

Abstract

This study proposes a continuous production inventory model for deteriorating items with preservation technology, rework and price-dependent demand under markdown policy. In this study, we have adopted the markdown policy to reduce inventory cost and clearance at the end of the season or to sell old or slow-moving inventory at the end of its life. Rework is another main factor to reduce production cost and environmental problem. The preservation technology is also considered during product deterioration period to control the deterioration rate of products. The shortages are not allowed. We have also considered that in one cycle, the production system can produce items in several determined replenishment cycles under markdown policy. The aim of this research is to derive the optimal production-run time, the optimal replenishment cycle length, the optimal length of time horizon and the optimal production quantity so as to minimize the total average cost. An example and sensitivity analysis is shown to illustrate the model.