Joint economic lot size model with quality improvement for a single supplier and a single buyer cooperative collaboration

Abstract

This paper explores the impact of quality improvement on joint economic lot size (JELS) models. It begins with the individual optimality of a supplier, which makes the deliveries during the production period, as soon as the quantity is equal to the batch size. The individual optimality of the buyer is based on the economics order quantity (EOQ) model, whereas the supplier is based on the economic manufacturing quantity (EMQ). A cooperative collaboration is stated based on a long-term agreement for sharing information. The result of the study shows that the JELS with quality improvement will provide smaller sub-lot sizes and lower joint total cost of 2.25% compares to the JELS without quality improvement. The purpose of quality improvement is to increase the proportion of conforming items. The result shows this proportion can only be improved under 0.879 and this value depends on the parameters in the investment function.