Integrated production-inventory models with imperfect production processes and a limited capacity for raw materials

This paper deals with inventory models that unify the decisions for raw materials and the finished product for a single product manufacturing system. The product is manufactured in batches and raw materials are jointly replenished from outside suppliers. The system is assumed to deteriorate during the production process. As a result, some proportion of nonconforming items is produced. The objective is to minimize the total variable cost for the system. A solution procedure is developed to find a near optimal solution for the basic model. The analysis for the basic model is extended to cases where the proportion of defective items is not constant or the defective rate is a function of production setup cost.