An optimal policy for a single-vendor and a single-buyer integrated system with setup cost reduction and process-quality improvement

Abstract

The single-vendor single-buyer integrated production inventory system has been an object of study for a long time, but little is known about the effect of investing in reducing setup cost reduction and process-quality improvement for an integrated inventory system in which the products are sold with free minimal repair warranty. The purpose of this article is to minimise the integrated cost by optimising simultaneously the number of shipments and the shipment quantity, the setup cost, and the process quality. An efficient algorithm procedure is proposed for determining the optimal decision variables. A numerical example is presented to illustrate the results of the proposed models graphically. Sensitivity analysis of the model with respect to key parameters of the system is carried out. The paper shows that the proposed integrated model can result in significant savings in the integrated cost.

Keywords:

• imperfect production process
• inventory
• integrated model
• setup-cost reduction
• process-quality improvement
• warranty

AMS Subject Classification:

• 90B05

Acknowledgements

This work was supported by the ‘Twelfth Five-Year Plan’ project of Jiangxi Social Science under grant number 11GL01 and the Science and Technology Research Project of Jiangxi Department of Education (grant number GJJ12263).

Additional information

Notes on contributors

Hui Shu

Hui Shu is a Professor in the Department of Business Administration at Jiangxi University of Finance and Economics, China. He received his PhD in Economics from Jiangxi University of Finance and Economics in 2004. He also gained his MS in Industrial Economics from Jiangxi University of Finance and Economics in 1999. He did his BS in Engineering from Beijing Institute of Technology in 1982. His research interests include quality control and management, technology innovation, standardisation management and integrated logistics management. He has so far guided 40 research scholars and published 98 papers in the areas of operations research, synergetics, integrated logistics management, regional logistics and reverse logistics. He currently serves as executive director of the Industrial Technology Research Society for the Chinese Economic Management Colleges, executive director of the Jiangxi Standardization Association, communication expert of the National Natural Science Foundation and senior member of Chinese Society of Technology Economics.

Xideng Zhou

Xideng Zhou is currently pursuing his PhD degree in Management Science and Engineering from Jiangxi University of Finance and Economics, China. He gained his MS in Enterprise Management from Guilin University of Technology in 2010. He did his BS in Engineering Management from Chengdu University of Information Technology in 2007. His research interests are production and quality management, inventory management, supply chain management and manufacturing systems.