An Inventory Model Integrating Rework and Fuzzy Demand A Literature Review and Direction for Research

Abstract

Sustainable development is urgently needed in Indonesia to reach the goals towards a fair and prosperous society. As one of the economic sectors, the manufacturing industry in Indonesia is expected to provide benefits to consumers, investors, employees, government and citizens. The manufacturing industry needs to control its production costs. One of the techniques is inventory control. There are many models of inventory control available, one of the most popular ones is the Economic Production Quantity (EPQ) model. Unfortunately, EPQ has limitations due to some of the adopted assumptions that makes this model cannot be fully relied on effectively to solve practical problems of inventory control. The major disadvantage from EPQ model is that it does not consider reworking of defect products that do not conform to the standard. Likewise, the number of demand that is used in EPQ model is based on forecasting, which obviously contains element of subjectivity, ambiguity and vagueness, which generally are not considered in the various forecasting methods. This study develops an EPQ model considering rework product and demands that are fuzzy, using the method of Continuous Time Markov Chain (CTMC). The objective of this study is to propose the extension of the EPQ model and to apply it to a company. The obtained results were compared to EPQ model solutions. The results of the model solution are expected to be more optimal and more realistic than the EPQ model with little disturbances in the production and demand.

Keywords— CTMC; EPQ; fuzzy demand; inventory; rework