The imperfect production processes always result in imperfect products and decrease the profit of the business. Improving the production processes by increasing the investment cost will decrease the percentage of defective items. The trade-off between the investment cost and the marginal improvement on products is a key problem. In this study, we develop an EPQ model of deteriorating items with investment on imperfect production processes. An algorithm is developed to derive a replenishment policy such that the expected unit time profit is maximized. Numerical examples are provided to illustrate the theory.
Key words: Economic production quantity, imperfect quality, deterioration, investment.
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