Imperfect EOQ System

Since the introduction of the economic order quantity (EOQ) model by Harris (1913), frequent contributions have been made in the literature toward the development of alternative models that overcome the unrealistic assumptions embedded in the EOQ formulation. For example, the assumption related to the perfect-quality items is technologically unattainable in most supply chain applications. In contrast, products can be categorized as “good quality,” “good quality after reworking,” “imperfect quality,” and “scrap” (Chan et al. 2003; Pal et al. 2013). In practice, the presence of defective items in raw material or finished product inventories may deeply affect supply chain coordination, and, consequently, the product flows among supply chain levels may become unreliable (Roy et al. 2015). In response to this concern, the enhancement of currently available production and inventory order quantity models, which accounts for imperfect items in their mathematical formulation, has become an operational priority in supply chain management (Khan et al. 2011). This enhancement may also include the knowledge transfer between supply chain entities in order to reduce the percentage of defective items.