Optimal integrated production-inventory system for imperfect quality items considering unequal shipment policy

Abstract

This article studies a single–manufacturer single–retailer production–inventory model for imperfect quality items considering unequal shipment policy. The retailer performs a screening process to identify the non–defective items and the defective items at the arrival of each shipment, during the screening process, the defective items of one shipment are accumulated and then handled in multiple batches. Two multi–batch handling strategies for defective items are discussed, i.e., the handling numbers of all shipments are the same and the handling number increases with shipment quantity. An analytical model is developed to investigate each multi–batch handling strategy's performance. The numerical results indicate that the proper multi–batch handling strategy can comprehensively influence the total cost of the system. The results also show that, in the multi–batch handling situation, applying the unequal–sized shipment policy can result in a significant cost reduction compared with the equal–sized shipment policy.