Manufacturing setup cost reduction and quality improvement for the distribution free continuous-review inventory model with a service level constraint

Abstract Over several decades, the continuous-review inventory model has been widely studied based on various assumptions and restrictions such as those related with quality improvement, service level constraint, and setup cost reduction. We extend Moon and Choi's [1] model by assuming setup cost reduction and quality improvement. A distribution free approach is employed such that only mean and standard deviation need to be known. The total system cost is minimized with respect to decision variables against the worst possible distribution scenario. The benefit of using quality improvement and setup cost reduction in this model is shown. Numerical examples show that this model offers significant improvements over existing models. Finally, sensitivity analysis of the key parameters is also presented.

[1]  Liang-Yuh Ouyang,et al.  Mixture inventory model involving variable lead time with a service level constraint , 1997, Comput. Oper. Res..

[2]  Shib Sankar Sana,et al.  A mathematical model on EPQ for stochastic demand in an imperfect production system , 2013 .

[3]  Herbert E. Scarf,et al.  A Min-Max Solution of an Inventory Problem , 1957 .

[4]  Wen-Chuan Lee,et al.  Computational algorithm for inventory model with a service level constraint, lead time demand with the mixture of distributions and controllable negative exponential backorder rate , 2006, Appl. Math. Comput..

[5]  Biswajit Sarkar,et al.  Integrated vendor-buyer supply chain model with vendor's setup cost reduction , 2013, Appl. Math. Comput..

[6]  G. Gallego,et al.  Distribution Free Procedures for Some Inventory Models , 1994 .

[7]  M. Mahdi Tajbakhsh,et al.  On the distribution free continuous-review inventory model with a service level constraint , 2010, Comput. Ind. Eng..

[8]  Adiel Teixeira de Almeida,et al.  Modeling a multi-attribute utility newsvendor with partial backlogging , 2012, Eur. J. Oper. Res..

[9]  B. Sarkar,et al.  An economic production quantity model with random defective rate, rework process and backorders for a single stage production system , 2014 .

[10]  Evan L. Porteus.  Optimal Lot Sizing, Process Quality Improvement and Setup Cost Reduction , 1986, Oper. Res..

[11]  Ilkyeong Moon,et al.  The distribution free continuous review inventory system with a service level constraint , 1994 .

[12]  Wei-Min Ma,et al.  Distribution-Free Continuous Review Inventory Model with Controllable Lead Time and Setup Cost in the Presence of a Service Level Constraint , 2012 .

[13]  Guillermo Gallego,et al.  Inventory management under highly uncertain demand , 2007, Oper. Res. Lett..

[14]  Kripa Shanker,et al.  Single-vendor multi-buyer integrated production-inventory model with controllable lead time and service level constraints , 2013 .

[15]  B. Sarkar,et al.  Improved quality, setup cost reduction, and variable backorder costs in an imperfect production process , 2014 .

[16]  Seyed Taghi Akhavan Niaki,et al.  Optimizing a bi-objective multi-product EPQ model with defective items, rework and limited orders: NSGA-II and MOPSO algorithms , 2013 .

[17]  Won Young Yun,et al.  The distribution free job control problem , 1997 .

[18]  Ag Ton de Kok,et al.  On the (R,s,Q) inventory model when demand is modelled as a compound Bernoulli process , 1998 .

[19]  I. Moon,et al.  The Distribution Free Newsboy Problem with Balking , 1995 .

[20]  Edward A. Silver,et al.  Changing the givens in modelling inventory problems: the example of just-in-time systems , 1992 .

[21]  Stephen G. Powell,et al.  Manufacturer incentives to improve retail service levels , 1998 .

[22]  Patrick S. Chen,et al.  Improved inventory models with service level and lead time , 2005, Comput. Oper. Res..

[23]  Ilkyeong Moon,et al.  Distribution free procedures for make-to-order (MTO), make-in-advance (MIA), and composite policies , 1997 .

[24]  Elizabeth M. Jewkes,et al.  Optimal investment in setup reduction in manufacturing systems with WIP inventories , 2001, Eur. J. Oper. Res..

[25]  G. Gallego,et al.  The Distribution Free Newsboy Problem: Review and Extensions , 1993 .

[26]  Liang-Yuh Ouyang,et al.  Quality improvement, setup cost and lead-time reductions in lot size reorder point models with an imperfect production process , 2002, Comput. Oper. Res..

[27]  Ilkyeong Moon,et al.  Min-max distribution free continuous-review model with a service level constraint and variable lead time , 2014, Appl. Math. Comput..

[28]  Kripa Shanker,et al.  Two-echelon supply chain inventory model with controllable lead time and service level constraint , 2009, Comput. Ind. Eng..

[29]  Yan-Chun Chen.  An optimal production and inspection strategy with preventive maintenance error and rework , 2013 .

[30]  Gerrit K. Janssens,et al.  A linear programming formulation for an inventory management decision problem with a service constraint , 2011, Expert Syst. Appl..

[31]  Liang-Yuh Ouyang,et al.  A note on periodic review inventory model with controllable setup cost and lead time , 2004, Comput. Oper. Res..