Abstract
ABSTRACT Since defective items are inevitably produced in an imperfect manufacturing process, the rework process is performed to convert those defective products into finished goods. This study proposes an inventory model that considers the defect rate to conform the real production environment. Additionally successful lean production is making various efforts and continuous improvements to continuously reduce setup cost, while the reduction of setup cost alters the optimal lot-size. This research thus considers changeable setup costs caused by the effect of lean production in making production and delivery lot-size decisions with minimum total cost in the JIT supply chain.
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