Abstract

This paper deals with the production and inventory problems under partial backlogging, trade credit and reworking of imperfect quality items. The objective is to determine the optimal production lot size and maximum backlogging level simultaneously while still minimizing the total cost. The problem is modeled as a four-branch function with dual variables. A three-dimensional searched-based algorithm was developed to solve the problem described. Numerical examples are given to illustrate the solution procedure and discuss the impact of various system parameters. The study concludes with a computational analysis that leads to variety of managerial insights.

Key word: Optimization, imperfect production system, reworking, trade credit, partial backlogging.