Determining Replenishment Lot Size and Shipment Policy for an EPQ Inventory Model with Delivery and Rework

Leopoldo Eduardo Cárdenas-Barrón,Pandian Vasant,Ata Allah Taleizadeh,Gerardo Treviño-Garza

doi:10.1155/2015/595498

Leopoldo Eduardo Cárdenas-Barrón, Pandian Vasant + Show 2 more

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https://doi.org/10.1155/2015/595498

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Abstract

The determination of production-shipment policies for a vendor-buyer system is dealt within this paper. The main objective is to derive the optimal replenishment lot size and shipment policy for an EPQ inventory model with multiple deliveries and rework. This inventory model contains two decision variables: the replenishment lot size and the number of deliveries. Previous researches solve this inventory model considering both variables to be continuous. However, the number of deliveries must be considered as a discrete variable. In this direction, this paper solves the inventory model considering two cases: Case 1: the replenishment lot size as a continuous variable and the number of shipments as a discrete variable and Case 2: the replenishment lot size and the number of shipments as discrete variables. The final results are two simple and easy-to-apply solution procedures to find the optimal values for the replenishment lot size and the number of deliveries for each case.

Highlights

A key challenge in the inventory management in any organization is to answer the following simple question: How many products to order? This question is responded to by the traditional economic order quantity (EOQ) inventory model
It is well known that the EOQ inventory model was derived by Harris [1] in 1913
The economic production quantity (EPQ) inventory model was proposed by Taft [2] in 1918

Summary

Introduction

A key challenge in the inventory management in any organization is to answer the following simple question: How many products to order? This question is responded to by the traditional economic order quantity (EOQ) inventory model. We have read the papers by Chiu et al [7] and Chiu et al [8] with substantial interest and we have found that their inventory model contains two decision variables: the replenishment lot size and the number of deliveries. We think that the researchers that have been attracted by works of Chiu et al [7] and Chiu et al [8] may be interested in knowing the solution procedure that gives the optimal solution to the decision variables according to its nature In this direction, this paper solves their inventory model considering two cases: Case 1: the replenishment lot size as a continuous variable and the number of shipments as a discrete variable and Case 2: the replenishment lot size and number of shipments as discrete variables.

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