Integrated vendor-buyer strategies for imperfect production systems with maintenance and warranty policy

Aditi Khanna, Prerna Gautam, Biswajit Sarkar, Chandra K Jaggi
2019 Reserche operationelle  
Collaboration has evolved as a key component of many modern supply chains, supporting the competitive advantages of companies in a range of operations from manufacturing to sales. With this viewpoint, the present paper develops an integrated inventory model in which manufacturing is carried out at the vendor's end so as to fulfill demand at the buyer's doorway. As the production process is presumed to be imperfect it shifts from an "in-control" state to "out-of-control" state at any random time
more » ... at any random time and yields non-conforming items. The vendor uses regular preventive maintenance actions for the efficient operation of the production system and offers free minimal repair warranty on the products sold to the buyer. Along with preventive maintenance actions the vendor also uses the rework process and restoration process as effective steps towards minimizing the imperfections of the production system. The proposed model solves the non-linear cost minimization problem through a generalized reduced gradient method by using Lingo 15.0. The aim is to jointly optimize the order size, backorder size and the number of shipments in order to minimize the integrated cost of the vendor and the buyer. Numerical analysis and sensitivity analysis is performed on key parameters that render some important supervisory insights. Mathematics Subject Classification. 90B05. Article published by EDP Sciences c EDP Sciences, ROADEF, SMAI 2020 436 A. KHANNA ET AL. business and is widely implemented. Prompted to this, an integrated inventory model has been presented by considering rework of non-conforming items, restoration of the production system and use of regular preventive maintenance actions during the non-production time. Also, the vendor offers free minimal repair warranty to the buyer as a promotional tool. An integrated model is developed with the motive to serve the decision makers with some important inferences. Almost all the organizations these days consider quality and reliability as a genuine technique to achieve improved profitability and greater benefits for the organization. In the manufacturing sector occurrence of imperfect quality items due to the faulty production process is unavoidable. Some of the interesting work in this area is given by [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] . In practical production systems, imperfect items can be reworked, which significantly reduces the overall costs of production and inventory [19] [20] [21] [22] [23] [24] [25] [26] . Since the production process is imperfect so it is essential to take proper maintenance actions to deliver breakdown-free operations. Preventive maintenance comes with a motto to ensure optimum life for the equipment and it also increases productivity by reducing the downtime of a production unit. The primary goal of maintenance actions is to safeguard the system against any breakdown and malfunction during run-time. Reference [29] investigated the effects of pull systems and level material shipping to derive formulas for the buffer in limited demand variability. Reference [30] developed a flow approximation of a production system with finite buffers and unreliable machines. Later, [29] [30] [31] [32] [33] [34] etc. investigated the area further. Further, the organizations believe that in order to gain loyal customers and to elevate sales one needs to provide better post-sale services and other prevailing offers at the forefront. Warranty is known to be a renowned promotional strategy to boost sales and it can also be interpreted as an assurance given by the vendor to the buyer to ensure the reliability of their purchases. Reference [35] developed a framework for the production policy so as to achieve an optimal safety stock, production rate and production lot size. Reference [36] proposed a model for imperfect production system considering preventive maintenance and optimal buffer inventory with warranty. Reference [37-39] explored the imperfect production systems with maintenance and warranty. Moreover, in the era of the supply chain, the crucial aspects of coordination and collaboration with the channel partners have got a lot of attention worldwide. The various perks that come up with integrated modelling include financial savings, sharing new risks, competitive advantage, expanding the overall profits and other mutual benefits. In real-world inventory situations, the manufacturing and sales operations are performed by different players of the supply chain. Numerous researchers have put efforts to establish coordination between vendor and buyer by using integrated optimization in their modelling. Some of the pioneering work in the area of integrated modelling was proposed by [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] . Later, Chung [50] presented an updated study of [47] by providing the complete proofs and justifications for the algorithm proposed by Wu and Ouyang [47] . Reference [51] proposed an inventory model to showcase coordination between vendor and buyer under an imperfect production environment, the model assumes that the inspection is carried out simultaneously with production process at vendor's end and items of good quality are delivered to the buyer in small sizes via compound supplies. Reference [52] [53] [54] [55] [56] have contributed recently in the area of integrated inventory modelling. This paper extends the existing inventory literature by developing a model for the two important players of supply chain viz. the vendor and the buyer. The production process is governed by the vendor and it is assumed to be imperfect i.e. the system might deviate from an in-control state to out-of-control state and it ends up in the production of defectives in both the states. In order to maintain the smooth flow of the production system the model investigates the use of regular preventive maintenance actions. Also, the vendor should respond to the buyer needs efficiently, thus, to enhance the post-sales experience, a free minimal repair warranty policy is considered. The model further takes into account the rework process as an effective step towards managing the defectives. The process restoration is employed so as to keep the system under an in-control state for the subsequent cycle which is quite a necessary step towards maintaining the efficiency of the production system. Shortages are assumed to occur at the buyer's place which are fully backordered. The study contributes in overcoming the traditional vendor-buyer models by constructing an integrated framework under the influence of the above-discussed scenarios which indeed helps in increasing the operational efficiency of the supply chain. A solution procedure is proposed in order to obtain the optimal solution. The model is validated with the help
doi:10.1051/ro/2019029 fatcat:556557wtpvfhxe4yqgrquog4ge