Abstract

Generally, the majority of the inventory models work on the concept that overall units produced must be perfect in terms of quality and that the storage capacity of the warehouse is unlimited. In fact, under realistic conditions, it is not possible to manufacture products with complete perfection. Furthermore, there are always some limits associated with storage capacity of the warehouse. This paper formulates an inventory model that considers the impact of imperfect quality items and shortages. The cost of storage in rented warehouse (RW) is greater than own warehouse (OW) due to fact there are better preservation facilities in RW. This work considers that defective items are completely withdrawn after the inspection process. The purpose of this inventory model is to establish the optimal order quantity and backorder size that maximize the total profit. Some numerical examples are solved, and a sensitivity analysis is included.

Highlights

  • In the traditional economic order quantity (EOQ) inventory model there are two assumptions: i) the manufactured products are of good quality; and ii) all units are stored in one warehouse only

  • Due to the restricted capacity of the own warehouse (OW) there is a need of an extra storage with better preserving facilities which has unlimited storage capacity

  • This extra storage facility is known as rented warehouse (RW)

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Summary

Introduction

In the traditional economic order quantity (EOQ) inventory model there are two assumptions: i) the manufactured products are of good quality; and ii) all units are stored in one warehouse only. Wee et al (2007) presented another variant of the inventory model of Salameh and Jaber (2000) by imposing the assumption that in each cycle of the supply chain the shortages are backlogged and proved that backordering cost is inversely proportional to total profit. Eroglu and Ozdemir (2007) developed another extension of Salameh and Jaber (2000)’s inventory model in which the shortages are allowed. They suggested that there exists a quantity of items with good quality which can covert the existing demand as well as backorders. This paper develops an inventory model for imperfect quality items with shortages in a two warehouses environment. Assumptions and Notation 2.1 Assumptions (i) A known, constant, and continuous demand rate is considered. (ii) Instantaneous replenishment rate. (iii) A single product is considered. (iv) Proportion of imperfect quality items ρ follows a uniform [0 ≤ α ≤ β ≤ 1]. (v) The shortage are allowed and fully backlogged

Notation The inventory model is built utilizing the following notation
Sensitivity Analysis
Conclusion

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