A simple integrated production policy of an imperfect item for vendor and buyer

Abstract

This article develops a simple approach for determining an optimal integrated vendor–buyer inventory policy for an item with imperfect quality. The objective is to minimize the total joint annual costs incurred by the vendor and the buyer. This model is assumed to produce a certain number of defective items during the production process. Items of poor quality detected in the screening process of a lot are sold at a discounted price. The expected annual integrated total cost function is derived and a solution procedure is proposed to determine the optimal policy. Finally, a numerical example is also given to illustrate the solution procedure presented in this article.

Keywords:

• Inventory
• economic order quantity
• imperfect quality

Acknowledgments

SURESH KUMAR GOYAL is a Professor in the Department of Decision Sciences and Management Information Systems, Concordia University, Montreal. He was awarded a BSc in Mechanical Engineering at Ranchi University (India), a Dip. Tech. Sci. in Production Engineering from the University of Manchester Institute of Science & Technology, and an MSc in operational research from the University of Strathclyde. Professor Goyal has been a senior Lecturer at Polytechnic of Wales, a Research Fellow in the Department of Operational Research at the University of Strathclyde, a Lecturer at Newcastle upon Tyne Polytechnic and an assistant maintenance Engineer at Gauhati Refinery in India. He has published over 200 articles in Indian, American, Canadian, Danish and British journals. Professor Goyal's articles have appeared in Management Science, Operations Research, Operational Research Quarterly, International Journal of Production Research, Hydrocarbon Processing, Petroleum management, etc. The application of operational research techniques in small companies is his present research interest, and in the past his research included the application of operational research techniques to stock control and maintenance problems.

CHAO-KUEI HUANG is an associate Professor in Industrial Engineering and Management at Cheng Shiu University in Taiwan. He holds a PhD in Industrial Management from the National Taiwan University of Science and Technology. His research interests are in the field of stochastic models, inventory controls and logistical management. He has had publications in the International Journal of Operations and Quantitative Management, Production Planning & Control, Journal of Information & Optimization Sciences, Journal of Statistics & Management Systems, International Journal of Production Economics and Opsearch.

KUO-CHAO CHEN is a Lecturer at Cheng Shiu University in Taiwan. He holds a MSc in Material Science Engineering from National Tsing Hua University. His research interests are in the field of superconductor's characteristics and stochastic models, inventory controls. He has had publications in Supercond. Sci. Technol.