Scrap

As stated in Chap. 2 , the economic order quantity (EOQ) model was first introduced in 1913. Seeking to minimize the total cost, the model generated a balance between holding and ordering costs and determined the optimal order size. Later, the EPQ model considered items produced by machines inside a manufacturing system with a limited production rate, rather than items purchased from outside the factory. Despite their age, both models are still widely used in major industries. Their conditions and assumptions, however, rarely pertain to current real-world environments. To make the models more applicable, different assumptions have been proposed in recent years, including random machine breakdowns, generation of imperfect and scrap items, and discrete shipment orders. The assumption of discrete shipments using multiple batches can make the EPQ model more applicable to real-world problems. The EPQ inventory models assume that all the items are manufactured with high quality and defective items are not produced. However, in fact, defective items appear in the most of manufacturing systems; in this sense, researchers have been developing EPQ inventory models for defective production systems. In these production systems, defective items are of two types: scrapped items and reworkable items.