Economic order quantity for items with imperfect quality: Revisited

Abstract

We rectify a flaw in an economic order quantity (EOQ) model with unreliable supply, characterized by a random fraction of imperfect quality items and a screening process, developed by Salameh and Jaber [2000. Economic production quantity model for items with imperfect quality. International Journal of Production Economics 64(1–3), 59–64]. This leads to simple expressions of the optimal order quantity and expected profit per unit time. We then analyze the effect of screening speed and variability of the supply process on the order quantity, and show that the order quantity in our model is larger than that of the classical EOQ model when the variability of the yield rate is reasonably low. In addition, we extend the model by allowing for several batches of imperfect quality items to be consolidated and shipped in one lot. This is likely to be useful when there are economies of scale in shipping of imperfect quality items. Finally, we present numerical results to illustrate the application of the model and draw insights.