The optimum settings for order quantity, process quality level, and warranty period

Abstract

Chen and Liu’s (2007) [19] model presented the optimum profit model between the supplier and the buyer for the supply chain system. However, their model with simple manufacturing cost did not consider the used cost of customers in pure procurement policy. In this study, the authors propose a modified Chen and Liu’s (2007) [19] model for obtaining the optimum order quantity, process quality level, and warranty period of product by maximizing the expected total profit of the society. The advantage of this modified model is to obtain the joint control of inventory and quality control. Taguchi’s quadratic quality loss function will be applied in evaluating the product quality. Finally, sensitivity analysis of parameters will be provided for illustration.

Keywords:

• order quantity
• process quality level
• warranty period
• quadratic quality loss function