Inventory and pricing decisions for an imperfect production system with quality inspection, rework, and carbon-emissions

Abstract

The present paper considers the effect of imperfect quality items on a pro-duction system which further undergoes inspection and rework. The demand of the prod-uct is price reliant. Two situations to handle the imperfect items are analyzed: Selling them at a reduced price and reworking them. The demand is assumed to meet with perfect products in either case. Further, the study incorporates the carbon-emissions borne during production of goods and their holding in the inventory system. The model aims at maximizing the profit function by jointly optimizing mark-up price and production quantity. To demonstrate model characteristics, numerical and sensitivity analysis are also presented.