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The Effect of Quality Cost on EPQ Model with Defective Items and Shortages Allowed
C. Krishnamoorthi, S. Panayappan
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 slot 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. The objective of this research is to investigate the quality cost factors in the EPQ model in order to find the optimal lot size. The relevant model is built, solved and necessary and sufficient conditions for a unique and global optimal solution are derived. An illustrative example is provided and numerically verified.
Keywords
EPQ, Cost of Quality, Defective Items, Shortages, Demand and Production.
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