The lot size and inspection schedule in the integrated vendor-buyer supply chain system

One of the keys to successful e-business is the integration of the vendor-buyer inventory system. Many researches have studied the integrated inventory system by assuming perfect quality. This paper develops an optimal integrated lot size and inspection schedule for an imperfect product. It is assumed that a production process is subject to a random deterioration from the in-control state to the out-of-control state and, thus, produces some proportion of defective items. A numerical example and sensitivity analysis are carried out to show the worth considering the imperfect quality to derive an inspection schedule.