Determining optimal price, replenishment lot size and number of shipments for an EPQ model with rework and multiple shipments

Ata Allah Taleizadeh; Solaleh Sadat Kalantari; Leopoldo Eduardo Cárdenas-Barrón

doi:10.3934/jimo.2015.11.1059

Article Contents

2015, Volume 11, Issue 4: 1059-1071. Doi: 10.3934/jimo.2015.11.1059

This issue Previous Article Production planning in a three-stock reverse-logistics system with deteriorating items under a continuous review policy Next Article Comparative analysis of supply chain financing strategies between different financing modes

Determining optimal price, replenishment lot size and number of shipments for an EPQ model with rework and multiple shipments

1.
School of Industrial Engineering, College of Engineering, University of Tehran, Tehran
2.
School of Industrial and Systems Engineering, College of Engineering, University of Tehran, Tehran
3.
School of Engineering and Sciences, Tecnológico de Monterrey, E. Garza Sada 2501 Sur, C.P. 64849, Monterrey, Nuevo León

Received: April 30, 2014

Revised: August 31, 2014

Published: September 2015

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Abstract

In a regular manufacturing process at the end of each production cycle defective items are identified. Then some defective items are considered scrap and the others, after a reworking process with a defective rate, could convert in a perfect quality items. In this direction, this research work deals with the problem of the joint determination of selling price, replenishment lot size and the number of shipments for an economic production quantity (EPQ) model with rework of defective items when multi-shipment policy is used. After proving concavity of the long-run average benefit function, a practical algorithm is developed to find the optimal price, replenishment lot size and number of shipments in order to maximize the average long-run benefit function. A special case when there is no scrap is identified and explained. Furthermore, in order to show the practical usage of the proposed algorithm a case study from real world is presented and solved.

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Mathematics Subject Classification: 90B05.

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