Optimal Inspection and Ordering Policies for Products with Imperfect Quality

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Abstract
Optimal inspection and ordering policies for products with imperfect qualities are considered. Two inspection policies and their effects on the economic ordering quantities are analyzed. The two inspection policies are the Blind Purchase (BP) policy and the Selective Purchase (SP) policy. Under the BP policy, products are purchased without inspection, but fraction of each shipment is inspected before they are sold to the customers. Under the SP policy, it is assumed that all items received have been inspected prior to purchase and thus are of good quality (but cost per item is usually higher under SP compared to BP). Several properties and areas of dominancy of the two inspection policies are presented.