Year: 2006
Type: article
Abstract: We study the effect of service level constraint on the economic production quantity (EPQ) model with random defective rate. We first prove that the expected overall cost for imperfect quality EPQ model with backlogging permitted is less than or equal to that of the same model without backlogging. Secondly, the relationship between “imputed backorder cost” and maximal shortage level is derived for decision‐making on whether the required service level is achievable. Then an equation is proposed for calculating the intangible backorder cost for the situation when the required service level is not attainable. By including this intangible backorder cost in the mathematical analysis, one can derive a new optimal lot‐size policy that minimizes expected total costs as well as satisfies the service level constraint. Numerical example is provided to demonstrate its practical usage.
Author: Yuan-Shyi Peter Chiu
Institution: Chaoyang University of Technology
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $2,550
OpenAlex ID: W1963745337