An EOQ model with process reliability considerations

Abstract

The classical economic order quantity (EOQ) model assumes that items produced are of perfect quality and that the unit cost of production is independent of demand. However, in realistic situations, product quality is never perfect, but is directly affected by the reliability of the production process. In this paper, we consider an EOQ model with imperfect production process and the unit production cost is directly related to process reliability and inversely related to the demand rate. In addition, a numerical example is given to illustrate the developed model. Sensitivity analysis is also performed and discussed.

Keywords:

• inventory
• economic order quantity (EOQ)
• quality
• demand and process reliability

after one revision

This study was made possible by partial funding from Centre for Technology Innovation, Singapore.

after one revision

This study was made possible by partial funding from Centre for Technology Innovation, Singapore.

Acknowledgements

The authors sincerely acknowledge the anonymous referees for their constructive suggestions.