Manufacturer EOQ with Considering Customer Stochastic Demand, Different Inspective Strategies and Raw Material Quality Defect

Abstract

Single-period newsboy models and the corresponding EOQ models are, respectively, constructed under the condition that the manufacturer inspects raw materials of his supplier with total or sample inspection strategies and the manufacturer repairs or cheaply disposes the defective quality products when single supplier and manufacturer are faced with the customer stochastic demand and quality defects of raw materials. It is also found that marginal effect will be enlarged when unqualified products are disposed at a reduced price. There is a smaller impact to EOQ when manufacturer cheaply disposes the unqualified products when he repairs the products. Under demand-obeying normal distribution, EOQ will be linearly decreasing when the number of unqualified products increases. But EOQ will be linearly increasing when the order is greater than the mean demand and EOQ will also be linearly increasing with the demand standard deviation increase. Finally, the propositions and inferences are confirmed which can exert an impact on EOQ by adopting Monte Carlo simulation software. This research can provide some theoretical basis for manufacturers to reduce internal and external loss costs.