Optimal lot-sizing policy for a failure prone production system with investment in process quality improvement and lead time variance reduction
Journal of Industrial and Management Optimization
To survive in today's competitive market, it is not enough to produce low-cost products but also quality-related issues and lead time needs to be considered in the decision-making process. This paper extends the previous research by developing a stochastic economic manufacturing quantity (EMQ) model for a production system which is subject to process shifts from an incontrol state to an out-of-control state at any random time. Moreover, we consider the option of investment to increase the
... s quality and decrease the lead-time variability. Closed-form solutions of the proposed models are obtained by applying the classical optimization technique. Some lemmas and theorems are developed to determine the optimal solution of the decision variables. Numerical results are obtained for each of these models and compared with those of the basic EMQ model without any investment. From the numerical analysis, it has been observed that our proposed model can significantly reduce the cost of the system compared to the basic model. 2020 Mathematics Subject Classification. Primary: 90B05, 90B30. (Sumon Sarkar). Substitution of (33) in (31) and (32) yields t imp and V imp of Theorem 4.5. Optimal production lot-size can be obtained by the relation Q imp = DT imp . Appendix D Proof of Lemma 4.6: The proof is similar to that of Lemma 4.4. Proof of Theorem 4.7: The proof is similar to that of Theorem 4.5.