Research And Application Of The EOQ Model Considering Quality Risk

EOQ (Economic Order Quantity, referred to as EOQ) is a hot issue for the enterprise's inventory optimization and rational use of funds. Previous studies have focused on the balance of inventory costs and ordering costs, with little regard to quality risk issue between suppliers and manufacturers in the supply chain. But in the actual transaction process, the effect which quality risk brings to the suppliers and manufacturers' revenue can't be ignored. Based on the quality risk factors of the supply chain, this paper summarizes the existing research results, and establishes a more realistic EOQ model.Firstly, the paper studies the EOQ model considering quality risk under certainty condition. Four EOQ expansion models are established by introducing parameters of product defective rate, defect processing cost, detection accuracy rate and detection cost, which called non-shortage, shortage backordering, consolidation of imperfect items batches and two-way imperfect inspection EOQ model respectively. The paper derives economic ordering quantity and procurement cost from each model. Numerical examples and sensitivity analysis are presented to illustrate each model.Secondly, the paper studies the EOQ model considering quality risk under random fuzzy condition. Assumptions under certainty condition are relaxed by assuming that defective rate is a random variable of a known distribution, ordering cost and inventory cost are random variables of a known range. Under the assumptions the EOQ model considering quality risk under random fuzzy condition is established. A program for the EOQ model solution is coded by using particle swarm theory through MATLAB software, and a numerical example is given to solve by the program.Finally, the EOQ models considering quality risk are used in the procurement of metal products in CSR ZY Co., Ltd, and their economic ordering quantity and procurement cost are calculated. The paper verifies the feasibility and accuracy of the EOQ models by comparing the procurement situation before and after the adoption of the EOQ models.