Quality improvement in an inventory model with finite-range stochastic lead times

Quality improvement in an inventory model with finite-range stochastic lead times

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Article ID: iaor20063055
Country: India
Issue: 3
Start Page Number: 177
End Page Number: 189
Publication Date: Sep 2005
Journal: Journal of Applied Mathematics & Decision Sciences
Authors: , ,
Keywords: quality & reliability
Abstract:

Typically, traditional inventory models operate under the assumption of perfect quality. In this paper we modify an inventory model with finite-range stochastic lead time to allow for a random number of defective units in a lot. However, there is an extra cost for holding the defective items in the lot for the period before it is returned to the supplier. This paper also considers the option of investment to improve quality. Closed-form relationships are obtained for a quality-adjusted model as well as a quality improvement model. Numerical examples confirm that the option of investment in quality improvement results in significant cost savings. Sensitivity analysis shows that the quality improvement model is robust.

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