An integrated production-inventory model with reprocessing and inspection

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Abstract
Competitive pressures continually force management to examine cost and quality levels of production systems. In this paper these issues are addressed via a model that synthesizes several potential features of production systems: production processes, quality control procedures, in-process inventory and reprocessing. For any specified inspection configuration the model can be used, for serial production systems, to obtain closed-form expressions for two important decision variables: optimal lot size and reprocessing batch size, which minimize the total system costs. A numerical example highlights the interdependencies and the role of various system features in determining the values of the decision variables and hence in reducing the total costs. The paper also discusses the managerial implications of the model.