An EPQ model with setup cost and process quality as functions of capital expenditure |
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Authors: | Kuo-Lung Hou |
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Institution: | Graduate School of Management, The Overseas Chinese Institute of Technology, 100, Chiao Kwang Road, Taichung, Taiwan, ROC |
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Abstract: | This paper considers an economic production quantity (EPQ) model with imperfect production processes, in which the setup cost and process quality are functions of capital expenditure. The mathematical model is derived to investigate the effects of an imperfect production process on the optimal production cycle time when capital investment strategies in setup reduction and process quality improvement are adopted. An efficient procedure is developed to find the optimal production run length, setup cost and process quality. Finally, a numerical example is provided to illustrate the theoretical results. Some managerial implications are also included. |
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Keywords: | Inventory Production cycle Imperfect production process Investment strategy |
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