The Study of inflation and time value of money effect in batch size production with reworking consideration

Esmaeilnezhad, Bahman; Aghababaei, Salman; Fattahi, Parviz; Khodakarami, Vahid; Moradipour, Hoda

The Study of inflation and time value of money effect in batch size production with reworking consideration

Document Type : Research Paper

Authors

Bahman Esmaeilnezhad ¹

Salman Aghababaei ¹

Parviz Fattahi ¹

Vahid Khodakarami ¹

Hoda moradipour ²

¹ Bu-Ali Sina University

² Islamic Azad University

Abstract

Economic Production Quantity (EPQ) model is one of the most famous inventory management models. In the economic production models, there is the possibility of producing defective items that missing (lacking) of it leads a nunrealistic model. In addition, inflation and the time value of money in the economic model make a considerable difference in the cost calculations. In this paper, the production of defective items in multi-product state by considering inflation, the time value of money and sequence dependent setup times are studied. The findings of previous studies showed that inserting the issue of inflation, the time value of money and also sequence dependent setup times in inventory management model leads to change optimal batch. A heuristic algorithm was used for reaching optimal point. The results of sensitivity analysis based on the parameters of interest rates, inflation rates and combination rate showed that not considering inflation and interest rates and sequence dependent setup times will lead to errors in calculating costs.

Keywords

Lot sizing

Inflation rate

Interest rate

Rework

Rotation cycle policy

Subjects