Abstract
Quality improvement and setup cost reduction of any production system are endless procedure. Customer's demand is always intended to have the best quality product and the industries always try to improve the quality of products. This paper develops a two-echelon supply chain model with quality improvement of products and setup cost reduction under controllable lead time. The lead time demand follows a normal distribution and in the second case, it does not consider any specific distribution except a mean and standard deviation. Both models are solved analytically to obtain global solution. Two improved iterative algorithms are developed in order to obtain the optimal results of decision variables numerically to minimise the total system cost. The expected value of additional information is calculated to show the financial effect for collecting the information about lead time demand distribution. Some numerical examples and sensitivity analysis are given to illustrate the model. [Received 8 December 2016; Revised 27 March 2017; Accepted 21 April 2017]
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