The influence of production rate on “out-of-control” probability and system reliability in a decentralized supply chain model

Abstract

Abstract Improving product quality is one of the most salient features in modern business to reach numerous numbers of customers. Thus, every company is working to improve customer satisfaction level by increasing product quality. But, to satisfy customer’s demand, companies may, sometimes increase the rate of production which affects the production system. This paper develops a supply chain system with one manufacturer and one retailer. In manufacturer’s end, an investment is considered to improve the system performance which is measured through a probabilistic value (“out-of-control” probability). A model is discussed in this paper regarding the dependency of production with the “out-of-control” probability with a negative exponential function of production rate. Besides that, the retailer also incurs an investment to reduce its setup cost. This paper develops a decentralized supply chain model and is analysed mathematically and validated with numerical and graphical analysis.