Lot sizing in a production system with rework and product deterioration

Abstract

Producing new and recovering defective products often takes place on a common facility, with these activities carried out in lots. Consequently, there is a necessity to coordinate the production and rework activities with respect to the timing of operations and also regarding appropriate lot sizes for both processes while completely satisfying a given demand. Thereby, it has to be taken into account whether the state of defective items may change in the course of time while they wait to be reworked. Such a deterioration of reworkable goods can result in increasing rework time and rework cost per unit. In this paper an EPQ model which addresses all of these aspects is presented. Considering set-up and inventory holding costs as well as set-up times, optimization algorithms are developed covering different planning situations. Closed-form results for optimal lot sizes can be obtained and exploited for new analytical insights into coordinated lot sizing in the case of returns and product deterioration.

Keywords:

• EPQ model
• Rework
• Deterioration

Acknowledgements

We would like to express our thanks to an anonymous referee for valuable comments and suggestions that have improved the content and exposition of the paper. The research presented in this paper forms part of the research on reuse in the context of the EU-sponsored TMR project REVerse LOGistics (ERB 4061 PL 97-5650) in which the following universities take part: Technical University Eindhoven, INSEAD, Otto-von-Guericke University Magdeburg, University of Piraeus, Erasmus University Rotterdam, and Aristoteles University of Thessaloniki.