The integrated economic production quantity model for inventory and quality

Date

2004-12

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Publisher

Texas Tech University

Abstract

Determining the optimal production lot sizing has been widely used by the classical economic production quantity (EPQ) model. However, the analysis for finding an EPQ has several weaknesses which lead many researchers to make extensions in several aspects on the original EPQ model. The cost of quality is one of good aspects to be added to the EPQ model since there are a lot of costs incurred such as prevention, appraisal, failure, warranty (products returned from customer), inspection, and rework costs. The integration of cost of quality and EPQ should be able to link and classify each cost of quality in practical way of inventory management. This paper deals with the finite production inventory model integrated with quality costs for a single product imperfect manufacturing system. This problem assumes that the product quality is not always perfect unlike the traditional EPQ model. The defect rate is considered as a proportion of the production rate, and defective items are reworked at some cost either before, or after sales (products returned by the customer). The prevention, appraisal, and inspection costs have somewhat inverse relationships to the defective rate. The replacement rate from products returned by the customer is also considered to be another random variable with known failure rate in the field.

The purpose of this research is to investigate the quality cost factors in the economic production quantity inventory model in order to find the optimal lot size. The objective is to develop mathematical models in order to minimize the annual total cost of inventory and quality.

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