Effect of rework, rejects and inspection on lot size with work-in-process inventory

Abstract

The economic order quantity and economic production quantity models are the most commonly used inventory models in production environments for the calculation of optimum lot size. However, these models are based on the unrealistic assumption that every process produces good quality products every time. Moreover, the impact of inspection is neglected in all extended inventory control models involving work in process inventory. By taking both imperfect production and lot size inspection into consideration, this paper presents a more realistic approach for the modelling of optimum lot size and total cost with a focus on the work in process inventory. A mathematical model is derived for optimum lot size based on the minimisation of the average cost. Our approach incorporates the effect of rework, rejects and inspection on work in process inventory. The significant effect of imperfect production and inspection on optimum lot size is evaluated via numerical examples. In comparison to existing models, the proposed model is a more generalised and flexible form of inventory model for independent demands.