Abstract

The conventional method for determining production-shipment policy is by the use of differential calculus and Hessian matrix equations with the need of applying the first-order and second- order differentiations, on the long-run average production-inventory-delivery cost. A recent paper used conventional procedure to solve the production-shipment problem with quality assurance. This paper uses an alternative approach to re-examine such a problem without using the derivatives. As a result, optimal lot size and number of deliveries derived by the proposed algebraic method was confirmed to be identical, to what was obtained by using the conventional method. A simpler expression of cost function was also revealed.

Key words: Production-shipment policy, optimization, lot size, multiple distribution policy, algebraic approach, quality assurance, production planning.