This study proposes an extended EPQ model incorporating both imperfect production and Type I and II inspection errors, where not only some defects are not successfully screened out and thus passed on to customers, causing defect returns for refund, but also a portion of non-defects are screened out and disposed of like defects. In handling screened and returned items, we consider rework and salvage. We solve the model optimally and present sensitivity analyses to provide managerial insights.
展开▼
