An EOQ model with imperfective quality items under an announced price increase

Abstract

The economic ordering quantity (EOQ) model has been widely applied to inventory management. However, some assumptions in the model are unrealistic in practice. One of the assumptions is that all produced units are of good quality. This article deals with an EOQ model for products with imperfect quality under an announced price increase, where the defectives are screened out by a 100% inspection process, and which can be sold as a single batch at the end of the inspection process. The optimal ordering policies associated with three kinds of effective times of the price increase are obtained. A numerical example is then provided to illustrate the proposed model. Besides, based on the numerical example, the effects of some important parameters on the optimal order quantity and the corresponding saving in cost are also investigated.