Determining optimal price, replenishment lot size and number of shipments for an EPQ model with rework and multiple shipments
Ata Allah Taleizadeh - School of Industrial Engineering, College of Engineering, University of Tehran, Tehran, Iran (email)
Abstract: In a regular manufacturing process at the end of each production cycle defective items are identified. Then some defective items are considered scrap and the others, after a reworking process with a defective rate, could convert in a perfect quality items. In this direction, this research work deals with the problem of the joint determination of selling price, replenishment lot size and the number of shipments for an economic production quantity (EPQ) model with rework of defective items when multi-shipment policy is used. After proving concavity of the long-run average benefit function, a practical algorithm is developed to find the optimal price, replenishment lot size and number of shipments in order to maximize the average long-run benefit function. A special case when there is no scrap is identified and explained. Furthermore, in order to show the practical usage of the proposed algorithm a case study from real world is presented and solved.
Keywords: Pricing, replenishment policy, number of delivery shipments, EPQ model.
Received: May 2014; Revised: September 2014; Available Online: March 2015.
2015 Impact Factor.776