Optimal Production and Ordering Strategies with Defective Items and Allowable Shortage under Two-part Trade Credit

Abstract

Abstract. This study investigated a production-inventory model with defective items under a two-part trade credit, where the agreement of conditionally freight concession is considered in an integrated supply chain. It is assumed here that the retailer conducts the inspection process before selling incoming items. All the defective items are discovered, stored, and sold as a single batch to a secondary market at a decreased price. Furthermore, shortages are allowed and completely backlogged for the retailer. The purpose of this study is to determine the optimal number of shipments per production cycle for the supplier and the optimal length of time when there is no inventory shortage and replenishment cycle for the retailer, such that the total pro t function has a maximum value. In theoretical analysis, the existence and uniqueness of the optimal solutions are shown, and an algorithm is developed to nd the optimal solutions. Furthermore, numerical examples are presented to demonstrate the solution procedures, and a sensitivity analysis of the optimal solutions regarding all parameters is also carried out.

Single and Multi-Stage Manufacturing Systems Under Imperfect Quality Items with Random Defective Rate, Rework and Scrap

“…In this paper, the defective rate of items has been assumed a constant number. Yang, et al, [25] incorporated the trade credit into an inventory problem with shortage and the constant defective items. Beranek and Buscher [26] suggested an integration between pricing and quality decisions under market segmentation by considering imperfect quality items.…”

Multistage supply chain production–inventory model with collaborative preservation technology investment

“…Recently, Nobil et al [39] aimed an EPQ model with an imperfect production system included the purchasing of raw materials. Following this, numerous studies concerning imperfect production processes have been published; these include Sana [40], Treviño-Garza et al [41], Hsu and Hsu [42], Jaggi et al [43] and Kang et al [44], Jain et al [45], Yang et al [46].…”