An optimal policy for a single-vendor single-buyer integrated production–inventory problem with process unreliability consideration

This article develops a model to determine an optimal integrated vendor–buyer policy for flawed items in a just-in-time manufacturing environment. The objective is to minimize the total joint annual costs incurred by the vendor and the buyer. The production process is assumed to deteriorate during processing and produces a certain number of defective items. For practical purpose, the article is concerned with the policy in which the delivery quantity to the buyer is identical at each replenishment. The expected annual integrated total cost function is derived and a solution procedure is established to find out the optimal solution. Finally, the solution technique is illustrated with a numerical example available in the literature.