INTEGRATED PRODUCTION-INVENTORY MODEL UNDER PROCESS DETERIORATION AND INSPECTION ERRORS

The proposed work integrates production-inventory planning, quality inspection, and investment allocation to improve the production system's reliability and productivity. A mathematical model is developed to optimize the production run length and investment amount in setup cost reduction. The model minimizes setup, holding, and incorrect inspection costs. It is assumed that the production cycle begins in an in-control state with a fixed defective rate and may shift to an out-of-control state, after which the process deteriorates exponentially. Furthermore, the inspection process is imperfect; errors may occur, which increases the total cost. A numerical example is provided to demonstrate the model's applicability and draws out managerial insights. For instance, investment in reducing the setup cost may cut the total annual cost by 22.60% and shorten the production run length by 59.15%.