Two-echelon supply chain model in an imperfect production with stochastic demand considering the rework of the defective items

Abstract

This article presents a two-echelon supply chain model consisting of a single manufacturer and a single retailer. Here, the manufacturer’s production system is imperfect and produces a certain proportion of defective products with the perfect products. The manufacturer starts reworking the defective products at the end of the main production. It is assumed that the customer’s demand to the retailer is stochastic in nature and the retailer’s demand to the manufacturer depends on the customer’s demand for the product to the retailer. Finally, we have derived a cost function of the system. Numerical examples have been presented to clarify the applicability of the proposed model and sensitivity analysis has been presented to study the effect of the change of the parameters on the optimal decision variables.