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Journal of Applied Mathematics and Decision Sciences
Volume 2005 (2005), Issue 3, Pages 177-189

Quality improvement in an inventory model with finite-range stochastic lead times

Department of BCIS/QM, Frank G. Zarb School of Business, Hofstra University, Hempstead 11549-1340, NY, USA

Received 10 January 2002; Revised 1 May 2002

Copyright © 2005 Hindawi Publishing Corporation. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


Typically, traditional inventory models operate under the assumption of perfect quality. In this paper we modify an inventory model with finite-range stochastic lead time to allow for a random number of defective units in a lot. However, there is an extra cost for holding the defective items in the lot for the period before it is returned to the supplier. This paper also considers the option of investment to improve quality. Closed-form relationships are obtained for a quality-adjusted model as well as a quality improvement model. Numerical examples confirm that the option of investment in quality improvement results in significant cost savings. Sensitivity analysis shows that the quality improvement model is robust.