Title: Production and payment policies for an imperfect manufacturing system with machine maintenance and credit policies

Authors: Yu-Chung Tsao

Addresses: Department of Business Management, Tatung University, Taipei 104, Taiwan

Abstract: This paper considers an imperfect manufacturing system with machine maintenance and credit policies. The manufacturer adopts the machine maintenance when the system is in the out-of-control state. The supplier not only offers a credit period to settle the payment but also offers a cash discount to encourage the customer to pay the amount earlier. The interest earned is calculated based on retail price instead of purchase cost in most previous researches. The interest paid is not necessarily higher than the interest earned. The objective is to determine the retailer|s production run time and payment time that minimise the expected total annual cost. The model can be used as a cost-saving mechanism for an engineer-to-order production system. From numerical experiments, we discuss how the machine maintenance cost, the defective cost and the percentages of defective products affect the manufacturer.

Keywords: imperfect manufacturing systems; machine maintenance; technology management; credit period; cash discount; expected total annual cost; cost saving; engineer-to-order; ETO; defective cost; defective products; production management.

DOI: 10.1504/IJTM.2009.024918

International Journal of Technology Management, 2009 Vol.48 No.2, pp.240 - 257

Published online: 04 May 2009 *

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