Studying the effect of stochastic breakdowns, overtime, and rework on inventory replenishment decision

Abstract

This study investigates the effect of stochastic breakdowns, overtime, and rework on the inventory replenishment decision. The overtime capacity and inevitable situations during the manufacturing process, such as the production of imperfect items and random breakdowns, are often considered in advance by production manager to smoothen fabrication schedules, maintain the desired quality, and reduce the impact from undesirable interruptions. This study builds a model to characterize these real features of a manufacturing process and derive the total relevant expenses of the system. Although a closed-form solution is unobtainable, a recursive algorithm is proposed to help find the optimal runtime for the batch fabrication plan. A numerical illustration shows how the proposed procedure and algorithm function. It also demonstrates the ability of the proposed model to reveal diverse crucial information regarding the individual and combined influences of deviations in overtime factors, the mean-time-to-failure, and rework- related variables, on the optimal replenishment runtime, total operating expenses, and different cost contributors. The research results will facilitate better decision-making aimed at increasing the competitive advantages of a manufacturing firm.