An optimal setup cost reduction and lot size for economic production quantity model with imperfect quality and quantity discounts

Abstract

The purpose of this paper concentrates on an economic production quantity model with the factors of imperfect quality and quantity discounts, in which the inspection action occurs during the production stage. There is specific consideration of there being a finite production rate, and the quantity discounts offered by the supplier serves the purpose of stimulating buying greater quantities. This is in contrast to EPQ models that do not take these added factors into consideration. The objective of this paper is to determine the setup cost reduction, which is a function of capital investment, and inventory lot size. An alternative solution procedure was developed that does not employ the Hessian Matrix concavity in the expected total profit. We develop an algorithm to determine the optimal solution for this model. Theoretical results are discussed and a numerical example is proposed. Managerial insights are also examined.

Optimal pricing and ordering policy for defective items under temporary price reduction with inspection errors and price sensitive demand

“…Under this assumption, they suggest that the optimal order quantity increases as defective rate increases. The work of Salameh and Jaber [44] has been extended by several researchers, who deal with learning in screening (Jaber et al [23]), quality improvement (Yoo et al [59]), backlog and delay of payments (Li et al [31]), economic production quantity model (Lin et al [33]), and supply chain coordination (Treviño-Garza et al [54]).…”