Optimization of a Multi–Product Intra-Supply Chain System with Failure in Rework

Globalization has created tremendous opportunities, but also made business environment highly competitive and turbulent. To gain competitive advantage, management of present-day transnational firms always seeks options to trim down various transaction and coordination costs, especially in the area of controllable intra-supply chain system. This study investigates a multi–product intra-supply chain system with failure in rework. To achieve maximum machine utilization, multiple products are fabricated in succession on a single machine. During the process, production of some defective items is inevitable. Reworking of nonconforming items is used to reduce the quality cost in production and achieving the goal of lower overall production cost. Because reworks are sometimes unsuccessful, failures in rework are also considered in this study. Finished goods for each product are transported to the sales offices when the entire production lot is quality assured after rework. A multi-delivery policy is used, wherein fixed quantity n installments of the finished lot are transported at fixed intervals during delivery time. The objective is to jointly determine the common production cycle time and the number of deliveries needed to minimize the long–term expected production–inventory–delivery costs for the problem. With the help of a mathematical model along with optimization technique, the optimal production–shipment policy is obtained. We have used a numerical example to demonstrate applicability of the result of our research.