Optimal Lot Size in a Manufacturing System with Imperfect Raw Materials and Defective Finished Products

Abstract

In real-world manufacturing systems, encountering with imperfect raw materials and generation of defective finished products are inevitable. In order to cope with these practical problems, this paper studies a manufacturer which orders raw materials from external source (supplier), and then produces a finished product. The raw materials contain imperfect quality items and, in addition, the production process is defective. The imperfect raw materials are sold after screening process, while the defective finished products go under a further rework process. It is also assumed that defective rate of machine is a random variable, resulting three possible cases regarding occurrence of backordering shortage. The aim is to determine economic order/production lot sizes for each case in such a way that the total cost of system is minimized. The optimal closed form solution is derived for each case separately. Moreover the applicability of the proposed manufacturing model is illustrated via a numerical example.