An EPQ model for an imperfect production system with rework and shortages

An Economic Production Quantity (EPQ) model is commonly used by practitioners in the fields of production and inventory management. The common assumptions in this model are that all units produced are perfect and shortages are not allowed. But, in a real situation the defective items will be produced in each cycle of production and shortages and scrap are possible. Hence, the defective items cannot be ignored in the production process. Rework process is necessary to convert those defective into finished goods. In this paper, inventory models for a single stage production process are developed where defective items produced are reworked. Two models of rework processes are considered, an EPQ model without shortages and with shortages. A suitable mathematical model is developed and the optimal production lot size, which minimises the total cost is derived. The relevant model is built, solved. An illustrative example is provided and numerically verified. The validation of the result in this model was coded in Microsoft Visual Basic 6.0.