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A piecewise nonlinear optimization for a production-inventory model under maintenance, variable setup costs, and trade credits

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Abstract

This study investigates a production-inventory model considering system maintenance, variable setup costs, and trade credits. In production systems, manufacturers usually carry out system maintenance when systems are in an out-of-control state. We also consider setup costs because these costs may decrease over time, for example, when manufacturers effectively improve production efficiency because of the effect of the learning curve. The model considers trade credits because suppliers commonly provide credit periods to manufacturers. This study determines the optimal replenishment frequencies that minimize total costs. We provide lemmas for optimality, develop a piecewise nonlinear optimization algorithm to solve the problems described, and verify the model using a practical case in the automotive parts industry. Based on numerical experiments, we discuss how system parameters affect the decision behaviors of manufacturers. The results of this study can serve as references for business managers and administrators.

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Acknowledgements

The authors express their gratitude to the editor and the anonymous reviewers for their detailed comments and valuable suggestions to improve the exposition of this paper. This paper is supported in part by the National Science Council under Grant NSC 102-2221-E-011-159-MY3 and NSC 102-2410-H-011-029-MY3.

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  1. Department of Industrial Management, National Taiwan University of Science and Technology, Taipei, Taiwan

    Yu-Chung Tsao

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  1. Yu-Chung Tsao
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Correspondence to Yu-Chung Tsao.

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Tsao, YC. A piecewise nonlinear optimization for a production-inventory model under maintenance, variable setup costs, and trade credits. Ann Oper Res 233, 465–481 (2015). https://doi.org/10.1007/s10479-013-1507-0

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