IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v267y2018i1p138-149.html
   My bibliography  Save this article

Disposal versus rework – Inventory control in a production system with random yield

Author

Listed:
  • Sonntag, Danja
  • Kiesmüller, Gudrun P.

Abstract

In a production environment where random yield plays a fairly significant role, a decision has to be made on how to handle products that do not satisfy given quality requirements. We consider a single-stage production system with a positive production time and random yield. To ensure that only high quality items are sold to the customer, a post-production quality control system has been put in place. We compare two different strategies for defective items: disposal or rework. Disposal is possible without any time delay whereas the rework process requires a positive rework time. While disposed-of items leave the production process, reworked products stay in the process and are assumed to be as good as products that are perfect when they are initially produced. The end products are stored in a warehouse to satisfy stochastic demand. We show how to determine the optimal base-stock level, which is very difficult because of unknown covariances between orders. Subsequently, an optimization model is proposed to support the planner’s decision on which strategy to choose when it comes to whether to dispose of or rework defective items. By means of a sensitivity analysis we show which parameters directly affect this decision and give managerial insights. The analysis indicates that significant cost reductions can be obtained by choosing the best strategy for defective products.

Suggested Citation

  • Sonntag, Danja & Kiesmüller, Gudrun P., 2018. "Disposal versus rework – Inventory control in a production system with random yield," European Journal of Operational Research, Elsevier, vol. 267(1), pages 138-149.
    • Handle: RePEc:eee:ejores:v:267:y:2018:i:1:p:138-149
    DOI: 10.1016/j.ejor.2017.11.019
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221717310305
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2017.11.019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Inderfurth, K. & Kiesmüller, G.P., 2015. "Exact and heuristic linear-inflation policies for an inventory model with random yield and arbitrary lead times," European Journal of Operational Research, Elsevier, vol. 245(1), pages 109-120.
    2. Woonghee Tim Huh & Mahesh Nagarajan, 2010. "Technical note ---Linear Inflation Rules for the Random Yield Problem: Analysis and Computations," Operations Research, INFORMS, vol. 58(1), pages 244-251, February.
    3. Jaber, Mohamad Y. & Khan, Mehmood, 2010. "Managing yield by lot splitting in a serial production line with learning, rework and scrap," International Journal of Production Economics, Elsevier, vol. 124(1), pages 32-39, March.
    4. Arthur Hsu & Yehuda Bassok, 1999. "Random Yield and Random Demand in a Production System with Downward Substitution," Operations Research, INFORMS, vol. 47(2), pages 277-290, April.
    5. Abraham Grosfeld-Nir & Yigal Gerchak, 2004. "Multiple Lotsizing in Production to Order with Random Yields: Review of Recent Advances," Annals of Operations Research, Springer, vol. 126(1), pages 43-69, February.
    6. Liu, John J. & Yang, Ping, 1996. "Optimal lot-sizing in an imperfect production system with homogeneous reworkable jobs," European Journal of Operational Research, Elsevier, vol. 91(3), pages 517-527, June.
    7. Candace Arai Yano & Hau L. Lee, 1995. "Lot Sizing with Random Yields: A Review," Operations Research, INFORMS, vol. 43(2), pages 311-334, April.
    8. Danja Sonntag & Gudrun P. Kiesmüller, 2016. "The shape of the yield and its impact on inventory decisions," 4OR, Springer, vol. 14(4), pages 405-415, December.
    9. Mordechai Henig & Yigal Gerchak, 1990. "The Structure of Periodic Review Policies in the Presence of Random Yield," Operations Research, INFORMS, vol. 38(4), pages 634-643, August.
    10. Anne Spence Wein, 1992. "Random Yield, Rework and Scrap in a Multistage Batch Manufacturing Environment," Operations Research, INFORMS, vol. 40(3), pages 551-563, June.
    11. Kut C. So & Christopher S. Tang, 1995. "Optimal Operating Policy for a Bottleneck with Random Rework," Management Science, INFORMS, vol. 41(4), pages 620-636, April.
    12. Christian Gotzel & Karl Inderfurth, 2005. "Approximate Policies for Hybrid Production and Rework Systems with Stochastic Demand and Yield," Operations Research Proceedings, in: Hein Fleuren & Dick Hertog & Peter Kort (ed.), Operations Research Proceedings 2004, pages 41-49, Springer.
    13. Inderfurth, Karl & Vogelgesang, Stephanie, 2013. "Concepts for safety stock determination under stochastic demand and different types of random production yield," European Journal of Operational Research, Elsevier, vol. 224(2), pages 293-301.
    14. Srinivas Bollapragada & Thomas E. Morton, 1999. "Myopic Heuristics for the Random Yield Problem," Operations Research, INFORMS, vol. 47(5), pages 713-722, October.
    15. Abraham Grosfeld-Nir & Yigal Gerchak, 2002. "Multistage Production to Order with Rework Capability," Management Science, INFORMS, vol. 48(5), pages 652-664, May.
    16. Dettenbach, Marcus & Thonemann, Ulrich W., 2015. "The value of real time yield information in multi-stage inventory systems – Exact and heuristic approaches," European Journal of Operational Research, Elsevier, vol. 240(1), pages 72-83.
    17. Nicky J. Welton & Howard H. Z. Thom, 2015. "Value of Information," Medical Decision Making, , vol. 35(5), pages 564-566, July.
    18. Danja Sonntag & Gudrun P. Kiesmüller, 2017. "The Influence of Quality Inspections on the Optimal Safety Stock Level," Production and Operations Management, Production and Operations Management Society, vol. 26(7), pages 1284-1298, July.
    19. Inderfurth, Karl & Kovalyov, Mikhail Y. & Ng, C.T. & Werner, Frank, 2007. "Cost minimizing scheduling of work and rework processes on a single facility under deterioration of reworkables," International Journal of Production Economics, Elsevier, vol. 105(2), pages 345-356, February.
    20. Yu-Shan Chen, 2010. "The Drivers of Green Brand Equity: Green Brand Image, Green Satisfaction, and Green Trust," Journal of Business Ethics, Springer, vol. 93(2), pages 307-319, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter Berling & Danja R. Sonntag, 2022. "Inventory control in production–inventory systems with random yield and rework: The unit‐tracking approach," Production and Operations Management, Production and Operations Management Society, vol. 31(6), pages 2628-2645, June.
    2. Konstantaras, Ioannis & Skouri, Konstantina & Benkherouf, Lakdere, 2021. "Optimizing inventory decisions for a closed–loop supply chain model under a carbon tax regulatory mechanism," International Journal of Production Economics, Elsevier, vol. 239(C).
    3. Hsin-Chieh Wu & Horng-Ren Tsai & Tin-Chih Toly Chen & Keng-Wei Hsu, 2021. "Energy-Efficient Production Planning Using a Two-Stage Fuzzy Approach," Mathematics, MDPI, vol. 9(10), pages 1-17, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Berling & Danja R. Sonntag, 2022. "Inventory control in production–inventory systems with random yield and rework: The unit‐tracking approach," Production and Operations Management, Production and Operations Management Society, vol. 31(6), pages 2628-2645, June.
    2. G. P. Kiesmüller & K. Inderfurth, 2018. "Approaches for periodic inventory control under random production yield and fixed setup cost," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(2), pages 449-477, March.
    3. Voelkel, Michael A. & Sachs, Anna-Lena & Thonemann, Ulrich W., 2020. "An aggregation-based approximate dynamic programming approach for the periodic review model with random yield," European Journal of Operational Research, Elsevier, vol. 281(2), pages 286-298.
    4. Saurabh Bansal & Mahesh Nagarajan, 2017. "Product Portfolio Management with Production Flexibility in Agribusiness," Operations Research, INFORMS, vol. 65(4), pages 914-930, August.
    5. Danja Sonntag & Gudrun P. Kiesmüller, 2016. "The shape of the yield and its impact on inventory decisions," 4OR, Springer, vol. 14(4), pages 405-415, December.
    6. Barιş Ata & Deishin Lee & Erkut Sönmez, 2019. "Dynamic Volunteer Staffing in Multicrop Gleaning Operations," Operations Research, INFORMS, vol. 67(2), pages 295-314, March.
    7. Pan, Wenting & So, Kut C. & Xiao, Guang, 2022. "Benefits of backup sourcing for components in assembly systems under supply uncertainty," European Journal of Operational Research, Elsevier, vol. 302(1), pages 158-171.
    8. Song, Yuyue & Wang, Yunzeng, 2017. "Periodic review inventory systems with fixed order cost and uniform random yield," European Journal of Operational Research, Elsevier, vol. 257(1), pages 106-117.
    9. Dettenbach, Marcus & Thonemann, Ulrich W., 2015. "The value of real time yield information in multi-stage inventory systems – Exact and heuristic approaches," European Journal of Operational Research, Elsevier, vol. 240(1), pages 72-83.
    10. Victor F. Araman & Ioana Popescu, 2010. "Media Revenue Management with Audience Uncertainty: Balancing Upfront and Spot Market Sales," Manufacturing & Service Operations Management, INFORMS, vol. 12(2), pages 190-212, December.
    11. Gel, Esma S. & Salman, F. Sibel, 2022. "Dynamic ordering decisions with approximate learning of supply yield uncertainty," International Journal of Production Economics, Elsevier, vol. 243(C).
    12. Burak Kazaz, 2004. "Production Planning Under Yield and Demand Uncertainty with Yield-Dependent Cost and Price," Manufacturing & Service Operations Management, INFORMS, vol. 6(3), pages 209-224, October.
    13. Xu, He, 2010. "Managing production and procurement through option contracts in supply chains with random yield," International Journal of Production Economics, Elsevier, vol. 126(2), pages 306-313, August.
    14. Zare, Marjan & Esmaeili, Maryam & He, Yuanjie, 2019. "Implications of risk-sharing strategies on supply chains with multiple retailers and under random yield," International Journal of Production Economics, Elsevier, vol. 216(C), pages 413-424.
    15. M-C Wu & L-C Huang & H-M Hsu & T-S Su, 2011. "Multiple lot-sizing decisions in a two-stage production with an interrupted geometric yield and non-rigid demand," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(6), pages 1075-1084, June.
    16. Taesu Cheong & Chelsea White, 2013. "Inventory replenishment control under supply uncertainty," Annals of Operations Research, Springer, vol. 208(1), pages 581-592, September.
    17. Yong He & Xuan Zhao, 2016. "Contracts and coordination: Supply chains with uncertain demand and supply," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(4), pages 305-319, June.
    18. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    19. Jinzhi Bu & Xiting Gong & Dacheng Yao, 2019. "Technical Note—Constant-Order Policies for Lost-Sales Inventory Models with Random Supply Functions: Asymptotics and Heuristic," Operations Research, INFORMS, vol. 68(4), pages 1063-1073, July.
    20. Jim (Junmin) Shi & Xiaohang Yue & Yao Zhao, 2014. "Operations sequencing for a multi‐stage production inventory system," Naval Research Logistics (NRL), John Wiley & Sons, vol. 61(2), pages 144-154, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:267:y:2018:i:1:p:138-149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.