Simultaneous settings of order quantity, wholesale price, production run length, process mean, and warranty period

Abstract

In this article, the authors propose a modified version of S.L. Chen and Liu's model with a two-stage production system. Assume that the retailer's order quantity is concerned with the manufacturer's selling price and the warranty period of product. The used cost of the customer is measured under the Taguchi's quadratic quality loss function and concluded in the retailer's profit function. The quality of the lot for the manufacturer is determined by adopting a two-stage single sampling rectifying inspection plan. The modified economic manufacturing quantity (EMQ) model is addressed in formulating the manufacturer's expected profit. The retailer's order quantity, manufacturer's wholesale price, production run length, process mean, and warranty period of product will be jointly determined by maximizing the total expected profit of the supply chain system including the manufacturer and the retailer. Finally, the quality investment policy is introduced to illustrate the profit improvement for the supply chain system.