An economic order quantity for deteriorating items with allowable rework of deteriorated products

Abstract

This paper presents an inventory model for deteriorating items with variable demand when shortage is permitted and quantity discount in purchase cost, and rework on deteriorating products are also allowed. The main idea of this research is to study the effects of the discount and the rework on the inventory costs. In this paper, it is assumed that for a certain quantity of purchased items, the seller would offer a discount and the manager would have the choice to either accept the discount or dismiss. On the other hand, there is also a similar decision-making scenario, where the manager makes a decision to reduce the total costs by using the rework and reducing the shortage periods or reducing the total costs by ignoring the rework cost and increasing the shortage periods. The implementation of the mathematical model is illustrated with a numerical example and sensitivity analysis describes the effects of the parameters on the total costs. The results show that the rework will decrease the total costs of the inventory system, significantly.