An integrated process targeting and continuous review system with sampling inspection

Abstract

It is common in the integrated targeting inventory literature to assume 100% inspection. Yet, sampling inspection is still a valid alternative in numerous situations. Inspection time has been assumed negligible in the literature of integrated inventory and sampling inspection. Neglecting inspection time is unrealistic, especially when rejected lots are sent for 100% inspection. This research work integrates process targeting, production lot-sizing and inspection. Given a scenario of a producer and distributer, the objective is to determine the optimal mean setting at the producer, the production lot size to be produced and shipped to the distributor and the reorder point at the distributor under a given sampling inspection plan. To the best of the authors’ knowledge, sampling inspection and its associated costs are rarely addressed in integrated supply chain models, and have never been addressed in integrated models with controllable production rates. Numerical illustrations using an efficient solution technique are presented to highlight the impact of various model parameters. The results indicated that inspection time has a significant impact on the total cost of the developed model, especially, when tightened inspection plans are used.