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Abstract
In this paper we consider a two echelon inventory model installation under the classical EOQ to study the effects of supply quality on cost performance. Usually that the vendor supplies their product to the buyers and the products are accepted and then used after screening any defects. K.Shouri,I.Konstantaras develops a model with a new concept and considered a single echelon inventory installation and rejection of defective supply batches in their model paper “An EOQ model with backorders and rejection of defective supply batches”[International Journal of production economics 155(2014) 148-154] Now we extend this model with two echelon inventory system with single vendor and multi buyer’s model. We first present an exact model for the system expected cost and show its convexity. Optimal cost and respective values of the decision variable (i.e) planned order quantity and backorders are then obtained in a closed form. Numerical experiments were performed to illustrate the effects of parameter on the decision and the total system cost.
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