A simplified approach to the multi-item economic production quantity model with scrap, rework, and multi-delivery

Chiu, Yuan Shyi Peter; Wu, M-F.; Chiu, Singa Wang; Chang, Huei-Hsin

doi:10.1016/j.jart.2015.09.004

Cited by 18 publications

(5 citation statements)

References 19 publications

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“…Taleizadeh et al (2014) formulated a singlemachine multi-item EPQ problem considering scrap, interruption and rework on imperfect products, too. Chiu et al (2015) propose a new solution for multi-item EPQ problem considering rework, scrap and multi-delivery in the modeling. proposed another multi-item EPQ model considering inventory holding, ordering, shortage and warehouse disuse costs.…”

Section: Literature Reviewmentioning

confidence: 99%

Sustainable EOQ and EPQ models for a two-echelon multi-product supply chain with return policy

Soleymanfar

Makui

Taleizadeh

et al. 2021

Environ Dev Sustain

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In this work, a new model is developed to determine optimum sustainable economic order quantity (EOQ) and economic production quantity (EPQ) values for multiple products of a supply chain with two echelons, consist of a retailer and a supplier, considering product return policy. Based on a literature review on previous related works in sustainable inventory area, 17 different sustainability cost functions, in three types of economic, environmental and social, are defined to form the profit functions of the retailer and the supplier as the main members of the chain. We formulate the profit function of each members of the chain using direct accounting approach as a careful method, considering sustainability costs and return policy to produce and supply multiple products. Two different scenarios for product return are studied considering return amount as a variable or a given parameter. After a numerical example according to an Iranian supply chain that supplies various petrochemical products, a sensitivity analysis related to three parameters of the problem that imposed return functions of products has been conducted. The results show that the total profit amount of each members of the sustainable supply chain is sensitive on the return parameters with different rates.

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Section: Literature Reviewmentioning

confidence: 99%

Sustainable EOQ and EPQ models for a two-echelon multi-product supply chain with return policy

Soleymanfar

Makui

Taleizadeh

et al. 2021

Environ Dev Sustain

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“…Mokhtari et al (2021) studied multiproducts-constrained EPQ models with a rework process. Other research such as Pal et al (2014) and Chiu et al (2015) study rework operations in the EPQ model with defective goods.…”

Section: Decision-making Under Randomnessmentioning

confidence: 99%

Call option contract in a supply chain with random yield and random demand using downconversion approach

Zamani

Esmaeili

Zhang

2023

JM2

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Purpose This study aims to examine the value of the call option contract in hedging the risks in the supply chain. The decentralized supply chain without call option contract is first studied as the criterion model for evaluations. This paper addresses several questions: What will be the optimal manufacturer’s production quantity, retailer’s ordering and pricing policies in the presence of random demand and random yield by applying the downconversion approach? How will the call option contract influence the optimal decisions for the members of the supply chain? Can the risk from randomness be divided among the members in the supply chain through the call option contract? Design/methodology/approach This paper considers a two-level decentralized supply chain under random yield and random demand in which the manufacturer takes advantage of the downconversion approach with two scenarios, with and without option contract. To the best of the authors’ knowledge, no article or study uses the downconversion approach in a supply chain regarding random yield and random demand. Furthermore, the paper considers pricing with option contract in the supply chain, which makes this article stands out significantly from other articles in the literature. Findings This study shows that the downconversion approach would reduce the risk caused by the random yield, which appears to be the appropriate method for the environmental goal of the supply chains. Moreover, adopting a call option contract can increase flexibility and mitigate risks, resulting in more expected members’ profits. Research limitations/implications To simplify the model, the authors assume one manufacturer and one retailer, so extending the model to consider multiple retailers instead of one retailer and inventory sharing between them would be interesting. Considering the option and exercise prices as decision variables would be important future research topics. Put option and bidirectional option contracts could be investigated in the future. Another extension is modeling asymmetry of information in supply chain. Originality/value This paper provides managerial insights on dealing with both demand and yield risks in a manufacturer–retailer supply chain. The manufacturer has a random yield production and produces two types of vertical products: low-end and high-end. To reduce waste caused by the random yield, the manufacturer uses a downconversion approach in which low-end products are made by converting the defective high-end products. The manufacturer purchased a shortage of high-end products from the secondary market (i.e. emergency sourcing). High-end products are sold through the retailer, and low-end products are sold directly by the manufacturer. The customer demand for high-end products in the end market is random and depends on the selling price, and the customer demand for the low-end products in the secondary market is independent and random. The retailer contracts the manufacturer with the call option to obtain high-end products to meet a random demand; in fact, by using the call option contract, the authors try to balance the risks between two members. Two scenarios of with and without call option contract are proposed. After the high-end product demand is observed, the retailer would exercise the option order quantity in the call option contract scenario and then place an instant order with the manufacturer if necessary. In each scenario, the manufacturer and the retailer make their decisions simultaneously (static game) to determine the retailer’s optimal ordering and pricing policies and the optimal production quantity of the manufacturer (Nash equilibrium) by maximizing their expected profits. Finally, the impact of the model parameters on the supply chain is expressed through numerical examples. The numerical analysis shows that the call option contract provides greater profit than the wholesale price contract.

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“…An inventory model for an imperfect production system with rework and shortages also has been developed by Sanjai and Periyasamy (2019). Several other researchers who have also developed models related to imperfect products and rework are Chiu et al (2014) and Chiu et al (2015) studied the optimal common production cycle policy for a multi-item EPQ model with scrap, rework, and multiple deliveries. Nobil et al (2019) introduce an EPQ problem for an imperfect manufacturing system with non-zero setup times for rework items.…”

Section: Literature Reviewmentioning

confidence: 99%

Multi-item inventory policy with time-dependent pricing and rework cost

Nafisah

Maharani

Astanti

et al. 2021

Int. J. Ind. Optim.

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The price of broiler chickens at the consumer level varies daily. The price can be very low or otherwise. The price has resulted from the imbalance between the availability of chicken from suppliers and the market demand. As a result, demand will also fluctuate because it is influenced by consumer purchasing power. When the price of live chickens is low, the carcass company will usually buy in large quantities and expect to sell them at a higher price. The problem arises when the chicken overstock company will risk product damage due to product buildup in the refrigerated warehouse, so rework is necessary. In this paper, we will be developed a multi-item inventory model that considers material prices that vary to time, probabilistic demand, and rework costs. The aim is to determine the right policy for controlling frozen chicken products' inventory to minimize losses and total inventory costs. This model can evaluate the best time to order broiler chickens, how much to order, how long the interval between orders, and the optimal number of orders, resulting in minimum total inventory cost per period. The model solution is carried out with an optimization approach based on the parameters that affect the model. A numerical example is given at the end of this paper for model validation and illustrates the model solving algorithm.

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A simplified approach to the multi-item economic production quantity model with scrap, rework, and multi-delivery

Cited by 18 publications

References 19 publications

Sustainable EOQ and EPQ models for a two-echelon multi-product supply chain with return policy

Sustainable EOQ and EPQ models for a two-echelon multi-product supply chain with return policy

Call option contract in a supply chain with random yield and random demand using downconversion approach

Multi-item inventory policy with time-dependent pricing and rework cost

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