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Supply chain management (SCM) is a field of study which covers a wide range of research issues involving strategic to operational models. In the past two decades, SCM has drawn much attention from manufacturers and organizations for optimizing their operations. In this paper, a mathematical model to optimize costs of the supply chain for defective and repairable goods through the application of just-in-time (JIT) logistics is proposed. The hypothesis is that the defective goods are repairable and some of them are considered as scraps. The aim of this model is to minimize the total cost of production, maintenance, freight, reworking, scrap goods and shortage to retailers. The proposed model is novel and LINGO has been used to solve it. The validity of the model was proven by testing 12 sample problems and the results showed correctness and fine function of the model. Based on the data parameters, this model can also determine which manufacturer or distributor in the particular period of the production needs to be active. The model is applicable for all producers that are encountering with problem of producing of defective goods.

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