Modified single-vendor single-buyer supply chain model with quality loss for product

Abstract

In 2009, Darwish developed a single-vendor single-buyer supply chain model with process mean integration for determining the optimal process mean, production lot size, and number of shipment of product to buyer. Taguchi proposed the quadratic quality loss function for measuring the product quality and redefines the product quality as the loss of society when the product is shipped and sold to the customer. The quality cost of conforming products is excluded in Darwish’s model, which is inconsistent with Taguchi’s quality concept. In this paper, the author presents a modified Darwish’s model with quality loss for obtaining the optimal process mean, number of shipment, and production lot size. The numerical results show that the modified model has larger process mean and expected total relevant cost of product, smaller production lot size, and same number of shipment than those of original one. The original Darwish’s model will underestimate the expected total relevant cost of product because he doesn’t consider the quality loss of conforming products.