Optimal lot size for EPQ inventory model for items of different qualities

The classic economic production quantity (EPQ) model assumes that all items produced by a manufacturing process during a production run are of perfect quality. Due to deterioration or other factors, the production process may shift and produce some items of a lesser quality. In this study, we assume that during production, items are screened and classified as type A for perfect quality or type B otherwise. For simplicity, we assume that the percentage of type A items produced is constant so that the production rates for the both types of items are constants. The demands for both types are assumed to be known with certainty and are constant over time. Inventory models that account for the production of such an item are presented. The optimal operating policy that maximizes the total profit for the EPQ model under the effect of imperfect quality items is derived. Explicit expression for the optimal production quantity is obtained and the uniqueness of the optimal solution is demonstrated. Various variations of the model are investigated. Numerical examples illustrating the models are also given.
1. INTRODUCTION The classic economic production quantity (EPQ) model assumes that 100% of the items produced by a manufacturing process during a production run are of perfect quality. Due to [...]