The simultaneous effect of holding safety stock and purchasing policies on the economic production quantity model subject to random machine breakdown

Abstract

In this paper, we develop an economic production quantity (EPQ) model under machine breakdown and two types of repair (corrective and preventive). also, study the simultaneous effect of holding safety stock and purchasing policy. In order to avoid shortages occurring as a result of the random repair time, in addition to keep safety stock, we suppose that the manufacturer could purchase some quantities from an external supplier. This paper addresses the following question: how the manufacturer determine the optimal values of safety stock, production and purchasing lot sizes, simultaneously, to minimize the expected total cost? The introduced model is then compared with the situations in which the manufacturer only keeps safety stock or just uses an external supplier, respectively. The results through the analysis show that using the simultaneous policy when the system is prone to shortages due to long repair times, have more improvement in the performance of the system rather than using the safety stock or purchasing policies, separately.