Production inventory model with defective items and integrates cost reduction delivery policy

Abstract

This paper integrates a cost reduction delivery policy and quality assurance into a production inventory model. During regular production time, the defective items are produced randomly. All defective items are eliminated/removed during regular production and it is assumed that finished items can only be delivered to customers if whole lot is quality assured at the end of production time. The integrated cost reduction delivery policy is one good aspect to be added to the EPQ. The objectives of this research are to derive the optimum quantity and to investigate the effect of reduction of cost delivery policy in the inventory model and to develop mathematical models under the behaviour of cost reduction delivery policy. A suitable mathematical model is developed and the optimal production lot size which minimises the total cost is derived. The global optimal solution is derived and an illustrative example is provided and numerically verified. The validation of the result in this model was coded in Microsoft Visual Basic 6.0.