EPQ model with learning effect for imperfect quality items under trade-credit financing

Abstract

Although high and advanced technologies are used to produce high quality items, some defective items are produced due to an error in technical operation or in maintenance. The defective cost is the expense involving rework, repair and replacement of defective items, and also the cost incurred due to loss of goods quality. The learning function acts as a substantial function for cost diminution. Meanwhile, the impact of learning is an incident which occurs approximately everywhere and enables the workers to carry out new work with better performance after flowing repetition over a course of time. Further, a retailer offers buyers an allowable setback time to arrange the money payable to him and no extra fine if money is paid within the allowable financing time period. On the other hand, if the cash is not paid on trade-credit financing period of time, the retailer will charge on remaining cash provided by the buyer after the allowed period. Keeping these facts, we developed an inventory model for imperfect quality items with a learning effect, in which demand rate is assumed as an exponential function of the trade credit period. The expected total profit function is maximized with respect to trade credit financing period under learning effect. A numerical example is illustrated, and a comprehensive sensitivity analysis is depicted to understand the robustness of the model.

Keywords

• learning effects
• imperfect items
• trade-credit financing
• defective cost