Over several decades, the continuous-review inventory model has been widely studied based on various assumptions and restrictions such as those related with quality improvement, service level constraint, and setup cost reduction. We extend Moon and Choi's  model by assuming setup cost reduction and quality improvement. A distribution free approach is employed such that only mean and standard deviation need to be known. The total system cost is minimized with respect to decision variables against the worst possible distribution scenario. The benefit of using quality improvement and setup cost reduction in this model is shown. Numerical examples show that this model offers significant improvements over existing models. Finally, sensitivity analysis of the key parameters is also presented.
Bibliographical noteFunding Information:
The authors would like to thank three anonymous reviewers for their useful comments to improve the paper. This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government (MEST) (No. 2012R1A2A2A01012355) and the research fund of Hanyang University (HY-2014-N, Project number 201400000002202) for new faculty members.
All Science Journal Classification (ASJC) codes
- Control and Systems Engineering
- Hardware and Architecture
- Industrial and Manufacturing Engineering