Journal of Applied Mathematics and Decision Sciences
Volume 2005 (2005), Issue 3, Pages 177-189
Quality improvement in an inventory model with finite-range stochastic lead times
Department of BCIS/QM, Frank G. Zarb School of Business, Hofstra University, Hempstead 11549-1340, NY, USA
Received 10 January 2002; Revised 1 May 2002
Copyright © 2005 Javad Paknejad et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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.