Optimal Lot Sizing Policy for an Unreliable Manufacturing System Under Cost-Effectiveness Criterion

Abstract

The traditional method of determining the optimal Economic Manufacturing Quantity (EMQ) policy for an unreliable production system is the minimization of the expected cost per unit time in the steady state which does not consider the reliability of the system in true sense. The purpose of this article is to introduce an alternative criterion of optimality called cost effectiveness which takes into account both cost and reliability aspects of the production system. The proposed EMQ model is formulated under general failure and general repair time distributions. The criteria for the existence and uniqueness of the optimal production time which maximizes the cost effectiveness are derived. Finally, a numerical example is taken to compare the cost effective production policy with the corresponding average cost one.