Abstract
Nowadays supply chain management is a popular practice in manufacturing systems, and just-in-time (JIT) production plays a crucial role in supply chain environments. Companies are using JIT production to gain and maintain a competitive advantage. The characteristics of JIT systems are consistent high quality, small lot sizes, frequent delivery, short lead time, and close supplier ties. This paper presents an integrated inventory model to minimize the sum of the ordering/setup cost, holding cost, quality improvement investment and crashing cost by simultaneously optimizing the order quantity, lead time, process quality and number of deliveries while the probability distribution of the lead time demand is normal. This integrated inventory model is useful particularly for JIT inventory systems where the vendor and the purchaser form a strategic alliance for profit sharing.
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