OPSEARCH (2017) 54:735–751

DOI 10.1007/s12597-017-0301-1

THEORETICAL ARTICLE

A surface response optimization model for EPQ system

with imperfect production process under rework
and shortage

Ahmed Abdel-Aleem1 · Mahmoud A. El-Sharief1 ·

Mohsen A. Hassan1,2 · Mohamed G. El-Sebaie1

Accepted: 25 January 2017 / Published online: 7 February 2017

© Operational Research Society of India 2017

Abstract Most research studies on the economic production quantity (EPQ) model
considered that produced items are of perfect quality. On the other hand, real
production systems have some product defects. Considering the imperfect items
makes the inventory model more complex, and more difficult to solve analytically
rather than it is time consuming. Therefore, an efficient approach like D-optimal
response surface methodology (RSM) is required since heterogeneous combination
of data can be modeled to generate response surfaces and obtain optimum decision
parameters values. This paper solves the EPQ model with sales return, rework,
shortage and scrap by RSM optimization technique in order to optimize the long run
average cost function. ANOVA analysis of data obtained from the total cost RSM
quadratic model has shown that the Model is significant according to F, “Prob [ F”
and p-values.

Keywords RSM model · Optimization · EPQ · Imperfect items · Rework · Shortage

& Ahmed Abdel-Aleem

ahmed.abdelaleem@aun.edu.eg
Mahmoud A. El-Sharief
msharif@assiut.edu.eg
Mohsen A. Hassan
mohsen.khozami@ejust.edu.eg
Mohamed G. El-Sebaie
mgad@aun.edu.eg
1
Department of Mechanical Engineering, Faculty of Engineering, Assiut University,
Assiut 71516, Egypt
2
Department of Materials Science and Engineering, School of Innovative Design Engineering,
E-JUST University, Alexandria, Egypt

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1 Introduction

In production and operations management inventory problem is the most interesting

and researched topic. Its importance is due to it provides flexibility to manage
industrial plants, production lines, and maximizing service to customers. The
success of a company is tied up with proper management of its inventory.
Optimization of the inventory problem is concerned with making balance between
two divergent objectives: maximizing customers service by increasing inventory
size and minimizing the cost of holding inventory by decreasing the inventory size.
The company can minimize Inventory costs by maintaining zero inventories.
However, customer service may suffer, and customers may decide to get their needs
elsewhere. This has a cost, which is known as stock-out cost so it is necessary to
minimize stock-out cost and provide a higher level of customer service [1].
In this area of research, Harris 1913 has put the seed of economic order quantity
model (EOQ), and economic production quantity (EPQ). The EPQ inventory model
deals with determining the most desirable production size under certain production
conditions, whereas the EOQ model concerning with finding the optimal inventory
quantity that minimizes the total costs of inventory.
The classical EPQ model assumes that the parts produced have good quality [2].
However, in real life applications, the quality of the components is not perfect, but
depends on reliability of the production process.
Cheng [2] is actually the first who incorporated the imperfect items in the inventory
model. The proposed model relates the unit cost of production with quality assurance
and process capability, considering that unit cost production is not fixed, depends on
reliability. Using differential calculus to get the optimal solution. Salameh and Jaber [3]
introduced imperfect production inventory situation. Extending the traditional EPQ/
EOQ model. Considering 100% screening, and marketing defective parts at a reduced
price. Building up a mathematical model which is solved by differential calculus. Goyal
and Cárdenas-Barrón [4] presented a simplification to the model introduced by Salameh
and Jaber [3] which leads to lot size calculations easier to implement and simpler than the
lot size. Jamal et al. [5] considered two different operational policies of rework cost in a
system with single-stage, to minimize the total system cost using differential calculus.
Hejazi et al. [6] propose EPQ model to determine the economic production lot
size with reduced pricing, presenting that the inspection process to find defective
items identifies four groups of products, perfect, imperfect products, defective
rework able, and defective non-reworkable products.
Tripathy et al. [7] developed a reliability based EOQ model with demand
dependent unit cost of production in a fuzzy environment for exceptional products.
Calculating the optimal order quantity that satisfies the minimum expected resultant
cost. the model is solved using fuzzy arithmetic approach to the crisp EOQ (CEOQ)
model. Nadjafi and Abbasi [8] presented an EPQ model considering process quality
cost and depreciation cost as continuous functions of time. Using simulated
annealing (SA) and iterated local search (ILS) to get the minimum value of the
annual total cost. Tripathy and Pattnaik [9] developed a model similar to the work of
Cheng [2], Tripathy et al. [10], Tripathy and Pattnaik [11], and assuming that

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demand exceeds supply, but the unit cost of production is related inversely to
reliability of the production process and related directly to the demand rate by a
power function. Numerical example gives that this situation makes saving in the
unit production cost than proposed by Tripathy et al. [10].
Guchhait et al. [12] established production inventory models considering
damageable items with variable inventory costs and demands depends on reliability
in an imperfect production process. Using variational calculus based Euler–
Lagrange function and Newton–Raphson method to find maximum total profit. Lin
and Srivastava [13] presented a new quantity discounts two-warehouse inventory
model with maintenance actions in an imperfect production process. The objective
is minimizing the total expected cost per unit time. An efficient algorithm was
developed to help the manager to determine the order policy quickly and accurately.
Taleizadeh et al. [14] developed economic production quantity (EPQ) model that
considers random defective items and failure in repair and the production capacity is
limited, including backorder in minimizing the total expected cost using convexity
analysis. Roul et al. [15] proposed a multi-item imperfect production inventory
models under reliability consideration with uncertain resource constraint under
dynamic demand, The defective items are fully or partially reworked. The objective
is to maximize profit and solved using generalized reduced gradient method and
Hamiltonian (Pontryagin’s Maximum Principle), fixed-final time and free-final state
system, Kuhn–Tucker conditions.
Sarkar [16] analyzed an economic manufacturing quantity (EMQ) model under
imperfect production process and advertising demand pattern with the effect of
inflation. The imperfect quality components are reworked at a cost. Maximizing
profit function by Euler–Lagrange theory.
Hsu and Hsu [17] developed an integrated vendor–buyer production inventory
model with imperfect quality items. Conducting a 100% screening process of the lot
and considering inspection errors, the defective items are marketed at a discounted
price to a secondary market. The expected total annual cost is minimized
analytically. Cárdenas-Barrón et al. [18] presents a brief introduction to forty-one
papers published by the International Journal of Production Economics covering the
research studies in inventory management for the work done after Harris Economic
Order quantity model. Hsu and Hsu [19] developed integrated inventory model for
vendor–buyer coordination in an imperfect production process with shortage
backordering. Minimizing the total joint annual costs incurred by the buyer and the
vendor. The model is solved analytically.
Khan et al. [20] proposed an economic order quantity (EOQ) for imperfect
quality products similar to Salameh and Jaber [3] a screening process is adopted
considering the errors in inspection and the defective items are sold at a discount.
The total profit is maximized analytically. Cárdenas-Barrón et al. [21] studies EPQ
inventory model with delivery and rework to find rreplenishment lot size and
shipment policy under two cases. The proposed solution procedures are simple and
require no tedious computational effort. Furthermore, it treats both variables
according to their nature.
Nobil et al. [22] presents EPQ problem with multi-product and non-identical
machines in an imperfect production process with scrapped items taking into the

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account various maintenance policies in defective production systems, interruption in

the manufacturing process and rework. They solved their model using hybrid genetic
algorithm (HGA) compared with the conventional GA and GAMS. Kassar et al. [23]
developed two economic production models (EPQ) with imperfect quality in raw
material and finished product. A 100% screening process is applied. The total profit
per unit time is maximized analytically to find the optimal economic order quantity.
Taleizadeh et al. [24] developed a two-level supply chain vendor managed
inventory (VMI) model covered of one vendor and several non-competing retailers
with different deterioration rate for the raw material and the finished products. The
objective is to find all of the retail price, the replenishment frequency of raw material,
the replenishment cycle of the product, and the production rate that maximizes the
total profit considering Stackelberg approach. Abdel-Aleem et al. [25] applied the
fuzzy and adaptive neuro-fuzzy inference systems in optimization of production
inventory problem in areal case study in cement production. He showed the priority of
the ANFIS and the prediction has shown very good agreement with the real
production quantity with absolute relative error does not exceed 0.0005. Taleizadeh
et al. [26] developed a pricing and lot sizing EPQ inventory model considering
reworking and multiple shipment policies. The model determines the replenishment
lot size and the selling price conjointly by maximizing the total profit in two special
cases. Mahata and De [27] developed a price dependent demand rate EOQ inventory
system of ameliorating items under retailer partial trade credit policy with
incorporating the interest charges for items. The total profit is maximized.
Roy et al. [28] present an EOQ model considers that each ordered lot contains
imperfect items and partial back ordering is done. The objective is to determine the
optimum values of shortage period and lot size, which maximizes the expected
average profit. Krishnamoorthi and Panayappan [29] proposed EPQ model
considering items with imperfect quality and the proportion of defective items
which are falsely not screening out, with rework for the imperfect items from
regular production and customer sales return. He considers shortage in his work, the
objective is to minimize the total cost. He solved the model by a simple traditional
analytical optimization strategy to get only the optimal production lot size.
The traditional “one-at-a-time” optimization strategy is relatively simple, and
only the individual effects of the parameters affecting total cost of inventory can be
graphically depicted. Unfortunately, when there are more decision parameters,
traditional optimization strategy fails to locate the region of optimum response.
Therefore an efficient approach like response surface methodology (RSM) is
required [30] since heterogeneous combination of data is modeled to generate
response surfaces and obtain optimum decision parameters values.
This paper uses RSM optimization technique to optimize the average cost function
for long run in the EPQ model considering sales return, rework, shortage and scrap
proposed by Krishnamoorthi and Panayappan [29]. The optimal combined conditions
of production lot size, demand rate, proportion of regular production defective items
and proportion of customer sales defective items from will be obtained.
The remainder of the paper is coordinated as follows: the next section describes
RSM model for the studied EPQ problem. Section 3 presents RSM run design and
calculation procedure used to optimize the EPQ model. Section 4 presents and

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discusses the results obtained from RSM optimization. Finally, Sect. 5 concludes
this paper and provides hints for further future work.

2 RSM model for EPQ problem

This section explains the concept of the RSM method, then show the mathematical
model for the EPQ inventory problem, finally the run and calculation procedure for
solving this problem using RSM.

2.1 RSM concept

Response surface methodology (RSM) is a mathematical and statistical technique

beneficial for optimizing processes. It used in great applications in the design
process and development of the new products, as well as in the improving the design
of current products.
RSM used in great applications, especially in the industrial world, mainly in situations
where several input variables affect potentially in quality characteristic or some
performance measure of the process or product. This quality characteristic or performance
measure is called the response typically measured on a continuous scale [31].
RSM model consists of statistical and mathematical techniques, generally used to study
the effect of numerous variables and get the optimum conditions for the system [32].

2.2 Mathematical model

2.2.1 Model parameters

TC Total cost per unit time

D Rate of demand (units/unit time)
P Rate of production (units/unit time)
d Regular production defective items rate (d = PX)
w The returns rate of customer defective items in units (w = DY)
Q Production size
Co Setup cost
Cp Cost of production per unit
Ch Cost of inventory holding per unit/year
CQ Cost of quality improvement
CR Unit reworking cost
Cr Unit rejecting cost
Ѳ Proportion of scrap items (the un reworked defective items)
Y proportion of customers defective items (Y is in range 0:0.1)
X Proportion of regular production defective items (X is in range 0:0. 1)
T Total time of the cycle

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2.2.2 Assumptions

In addition to the assumptions used in the classical EPQ model The following
assumptions are considered in the model:

1. Single stage single product production system,

2. constant amount of defective items and producing one type of defective,
3. constant Production and supply exceeds demand,
4. All demands must be satisfied,
5. proportion of defectives exceeds Proportion of scrap,
6. produced defective items are reworkable and the rework process may led to
scraps,
7. Negligible inspection cost,
8. Zero setup time for the rework process.

2.2.3 The model

In this paper, the production process is considered to be not 100% perfect, i.e., some
products are defective. The aim of this study is to discuss the optimal solution for
the EPQ model proposed by Krishnamoorthi and Panayappan [29] which considers
product quality, rework and shortage. The optimization study determines the
optimal values for: (1) production lot size, (2) Demand rate, and (3) Proportion of
regular production defective items, (4) proportion of customers defective items,
which give the minimum total cost of production. The model excludes Setup Cost,
cost of Production, cost of holding inventory, cost of reworking, rejecting cost and
defective items quality cost.
A real production process is a result of the lack reliability of the machines a
randomly amount of produced items are defective. Amount of the defective
produced items could not be reworked and is considered as scrap and must be
discarded before the rework process starts.
The rest of defective items is directly reworked after the steady production
process. Shortage is allowed and it was satisfied and backordered by the next
replenishment. Here scrap can be scarded before starting the reworking process for
the defectives items. The following equations describes the total cost for this model
at the two situations (shortage and no shortage) [29]
DCo DCp
TCðat no shortageÞ ¼ þ
Qð1  hXÞ 1  hX


QCh ðPð1  hXÞ Dð1 þ YÞ 1  2Xh þ X þ X2 ð1  hÞ2
2

þ ð1Þ
2Pð1  hXÞ
DXCR ð1  hÞ DXhCr DCq X
þ þ þ
1  hX 1  hX 1  hX

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DCo DCp
TCðat shortageÞ ¼ þ
Qð1  hXÞ 1  hX


QCh ðPð1  hXÞ2 Dð1 þ YÞ 1 þ X  2Xh þ X2 ð1  hÞ2
þ
2Pð1  hXÞ ð2Þ
DXCR ð1  hÞ DXhCr DCq X BCh ð2Pð1  hXÞ  Dð1 þ YÞÞ
þ þ þ 
1  hX 1  hX 1  hX 2Pð1  hXÞ
B2 PB2 Cs ð1  XÞ
þ þ
2Qð1  hXÞ 2Qð1  hXÞðP  D  d  WÞ

3 RSM run design and calculation procedure

This section explains the RSM sign, number of runs and discusses the procedure to
solve the problem using RSM methodology. Finally tabulating the solved EPQ
problem and its parameters.

3.1 Number of runs

In this paper, the response surface methodology (RSM) is used to optimize the
inventory total cost function 1 and 2, obtain its feasible solution and derive a
statistical model and using it to determine the effects of production lot size, demand
rate, defective items proportion from regular production and defective items
proportion returns from customer sales, on total cost.
The design points are selected using D-optimal principle to minimizes the
variance related with the specified model coefficients estimates. Montgomery [33]
showed that the sum of the regression coefficients variances are smaller for
D-optimal design compared to the CCD [34].
By using Design Expert (trial version 10) statistical software to design, analyze the run
data and fit the model data to a second-order polynomial, as second-order polynomial
gives more stable results than higher order models by less than 5% error. Setting one block
and four numerical factors (production lot size, Demand rate, Proportion of regular
production defective items, and proportion of customers defective items) and one
categorical factor (shortage) were assigned into the design as shown in the following
Table 1. The thirty runs of the optimal design were chosen after that in (Table 3).
For four numerical factors and one categorical factor, RSM optimal design
approach based on the second order polynomial equation, is given by Eq. (3)
X
4 X
4 X
4 X
4
TC ¼ b0;k þ bi;k f i þ bi;j f i f j þ bii f 2i ð3Þ
i¼1 i¼1 j¼1 i¼1

i\j

where k is the shortage index, i and j refer to numeric factors. The decision
parameters levels were selected to satisfy the permissible conditions based on the

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Table 1 The levels of the factors

Numerical factor Units Type Min value Max value

Q (Production lot size), f1 Items Continuous 1 5000

D (Demand rate), f2 Items/unit time Continuous 1 10,000
Dr (Proportion of defective from regular – Continuous 0.01 0.1
production), f3
Dc (Proportion of defective from customer – Continuous 0.01 0.1
sales return), f4
Categorical factor Type Level 1 Level 2
Shortage, f5 Nominal No shortage Shortage exist

Fig. 1 RSM procedure

studied model. Also, analyze the results using the analysis of variance. It is shown
from the results that there is significant difference between the factors levels. Fig-
ure 1 shows the RSM procedure.

3.2 Solved EPQ problem and its parameters

The numerical data described for the studied model are summarized in Table 2.

Table 2 Parameters of the EPQ

Parameter Value
problem
P 5000 units
Co 100
Cp 100
Ch 10
CQ 5
CR 5
Cr 1
Ѳ 0.1

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4 Results and discussion

This section presents, discusses, tabulates the results of optimal solution EPQ
problem using the RSM Technique. Run results, Analysis of data, optimization and
confirmation test will be illustrated and discussed in the following sections in terms
of total cost response, Analysis of variance (ANOVA), predicted response surfaces,
and desirability.

4.1 Run results

The number of runs were obtained using the D-optimal design. Table 3 summarizes
The values of the total cost. As shown there are thirty runs, fifteen for no shortage
and the other fifteen for shortage case. The last column is the response in terms of
total cost (TC).

4.2 Analysis of data

The second order model statistical significance is represented by [Eq. (1)]. The
analysis of variance (ANOVA) method is used to analyze the total inventory cost at
no shortage as shown in Table 4.
The coefficient of determination (R2) was calculated to find the fit of the model
and found to be 0.9942 (the better the model fits the data when the value of R2 is
closer to 1) [32] which shows that 99.42% of the response variability can be
explained by the model. The “Adj R-Squared” of 0.9832 is in good agreement with
the “Pred R-Squared” of 0.8996; i.e. this case is “Adeq Precision” because the
difference is less than 0.2 which measures the signal to noise ratio. The model ratio
of 28.012 indicates an adequate signal as ratio greater than 4 is desirable. The design
space can be navigated by This model.
The F-value is 90.52 which shows that the Model is significant. The p value
serves as a tool for checking the significance of each coefficient. Values of
“Prob [ F” less than 0.0500 indicate model terms are significant. In this case the
significant model terms are f1, f2, f1f2, f12. Values greater than 0.1000 indicate the
model terms are not significant. So the model can be reduced to make some
improvement.
The RSM second order polynomial model for total cost at shortage was obtained
as in Eq. (2), as the actual values of the variables are expressed.
TC ¼ b0;k þ b1;k f1 þ b2;k f2 þ b3;k f3 þ b4;k f4  0:020908 f1 f2 þ 19:72465 f1 f3
þ 8:08148 f1 f4  4:09395 f2 f3  4:68249 f2 f4 þ 3:06th223E þ 006 f3 f4
þ 0:038189 f12  4:42560E  004 f22 þ 5:33279E þ 006 f32 þ 1:75375E þ 007 f42
ð4Þ

The estimated coefficients of the total cost with and without shortage are shown
in Table 5.

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Table 3 Run design, number of runs and results for D-optimal technique
Run Factors Response

Production Demand Proportion of Proportion of Shortage Total cost

lot size (Q) rate (D) defective from defective from (TC)
Items Items/ regular customer sales Unit cost
unit time production (Dr) return (Dc)
f1 f2 f3 f4 f5

1 1 1 0.01 0.055 No shortage 205.2902317

2 1 1 0.055 0.1 No shortage 206.6083461
3 1 1 0.1 0.01 No shortage 207.9387889
4 2500.5 1 0.01 0.1 No shortage 12,587.45818
5 5000 1 0.1 0.1 No shortage 24,845.955
6 5000 1 0.01 0.01 No shortage 25,070.12031
7 5000 1 0.01 0.01 No shortage 25,070.12031
8 2500.5 5000.5 0.0325 0.055 No shortage 502,318.3158
9 2500.5 5000.5 0.1 0.055 No shortage 508,030.8449
10 5000 10,000 0.01 0.1 No shortage 971,637.2072
11 5000 10,000 0.01 0.1 No shortage 971,637.2072
12 1 5000.5 0.01 0.1 No shortage 1,001,581.074
13 5000 10,000 0.1 0.01 No shortage 989,245.9091
14 1 10,000 0.01 0.01 No shortage 2,002,957.766
15 1 10,000 0.01 0.01 No shortage 2,002,957.766
16 1 10,000 0.1 0.1 No shortage 2,029,891.85
17 5000 1 0.1 0.01 Shortage exist 106.498737
18 5000 1 0.1 0.01 Shortage exist 106.498737
19 1 1 0.01 0.01 Shortage exist 200.7466759
20 1 1 0.01 0.1 Shortage exist 200.7468468
21 1 1 0.1 0.1 Shortage exist 202.9909689
22 5000 1 0.01 0.1 Shortage exist 2352.968674
23 2500.5 5000.5 0.055 0.1 Shortage exist 485,080.0149
24 5000 10,000 0.01 0.01 Shortage exist 976,674.0209
25 5000 10,000 0.01 0.01 Shortage exist 976,674.0209
26 5000 10,000 0.1 0.1 Shortage exist 989,018.4098
27 2500.5 10,000 0.1 0.01 Shortage exist 1,005,083.321
28 1 5000.5 0.1 0.01 Shortage exist 1,015,038.461
29 1 10,000 0.01 0.1 Shortage exist 2,002,957.729
30 1 10,000 0.055 0.01 Shortage exist 2,016,364.482

The following figures shows the plots for the response surface of the combined
effect of the decision parameters on total cost.
Figure 2 shows the combined effect of production lot size and demand rate on
total cost. At low values for demand rate, the total cost is convex on production lot
size since the total cost experiences high values at low lot size and by increasing lot
size the total cost decreases then after reaching specified value for lot size it reaches

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Table 4 ANOVA for surface quadratic model of Total cost response

Source Sum of df Mean square F value p-value Remarks
squares Prob [ F

Model 1.561E+013 19 8.218E+011 90.52 \0.0001 Significant

f1-lot size 1.306E+012 1 1.306E+012 143.84 \0.0001
f2-demand rate 1.139E+013 1 1.139E+013 1254.80 \0.0001
f3-production 4.873E+009 1 4.873E+009 0.54 0.4806
defects
f4-customer defects 4.369E+009 1 4.369E+009 0.48 0.5036
f5-shortage 8.017E+009 1 8.017E+009 0.88 0.3695
f1 f2 1.343E+012 1 1.343E+012 147.88 \0.0001
f1 f3 9.526E+007 1 9.526E+007 0.010 0.9204
f1 f4 9.174E+007 1 9.174E+007 0.010 0.9219
f1 f5 7.520E+006 1 7.520E+006 8.283E 0.9776
−004
f2 f3 1.613E+007 1 1.613E+007 1.777E 0.9672
−003
f2 f4 2.137E+007 1 2.137E+007 2.354E 0.9623
−003
f2 f5 1.673E+008 1 1.673E+008 0.018 0.8947
f3 f4 7.492E+008 1 7.492E+008 0.083 0.7798
f3 f5 6.398E+008 1 6.398E+008 0.070 0.7960
f4 f5 6.742E+008 1 6.742E+008 0.074 0.7908
f12 1.182E+011 1 1.182E+011 13.02 0.0048
f22 2.846E+008 1 2.846E+008 0.031 0.8630
f32 2.710E+008 1 2.710E+008 0.030 0.8663
f42 1.864E+009 1 1.864E+009 0.21 0.6601
Residual 9.078E+010 10 9.078E+009
Lack of fit 9.078E+010 5 1.816E+010
Pure error 0.000 5 0.000

Table 5 Estimated coefficients for shortage and no shortage of Eq. (4)

Shortage (k) β0,k β1,k β2,k β3,k β4,k

No shortage +61,792.41912 −189.41917 +201.15956 −9.88493E+005 −1.69646E+006

Shortage exist +46,680.13925 −189.87927 +202.29336 −1.22544E+006 −1.93190E+006

minimum value. But at high values for demand rate the minimum total cost is
observed at higher value for lot size. The same effect of lot size on total cost is
shown in Figs. 3, and 4. The response showed that increasing demand rate cause
increase in the total cost, which means that the optimum value for total cost happens
at low demand rates. In Figs. 3, 4, 5, 6 and 7 it is shown that there is no significant
effect for proportion of defective from regular production, and proportion of
defective from customer sales return on total cost. From all figures it is shown that

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Fig. 2 Combined effect of production lot size f1 and demand rate f2 on total cost (f3 = 0.055, f4 = 0.055).
a No shortage, b shortage exist

Fig. 3 Combined effect of production lot size f1 and Proportion of regular production defective items f3
on total cost (f2 = 5000.5, f4 = 0.055). a No shortage, b shortage exist

there is no significant difference between the case at no shortage and when shortage
exists.

4.3 Optimization and confirmation test

Best results of minimum total cost response for EPQ model are extracted from thirty
runs summarized in Table 3, and illustrated in Table 6. Minimum total cost has been
observed in run 17 and 18. And the corresponding production lot size, demand rate,
proportion of defective from regular production and proportion of defective from
customer sales return are also obtained.
Numerical optimization was performed using Design Expert software to search
the design space by using the RSM second order polynomial defined by Eq. (3) to

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Fig. 4 Combined effect of production lot size f1 and proportion of customer sales return defective items
f4 on total cost (f2 = 5000.5, f3 = 0.055). a No shortage, b shortage exist

Fig. 5 Combined effect of demand rate f2 and proportion of regular production defective items f3 on total
cost (f1 = 2500.5, f4 = 0.055). a No shortage, b shortage exist

find the factors optimum values that satisfies the goals. Table 7 shows the goals
setting.
By adjusting the goal of the optimization parameters as ‘‘In Range” within the
high and low levels values which specifies acceptable results. The total cost goal is
adjusted as ‘‘Minimize” which make the best desired result is the lower value.
Design Expert software optimization analysis uses a numerical optimization with
objective function named desirability. Desirability (D) for the overall is the
multiplicative of all of each individual desirability (di) which is take a value
between 0 and 1 and calculated as shown in the following Eq. (5).

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Fig. 6 Combined effect of Demand rate f2 and proportion of customer sales return defective items f4 on
total cost (f1 = 2500.5, f3 = 0.055). a No shortage, b shortage exist

Fig. 7 Combined effect of Proportion of regular production defective items f3 and proportion of
customer sales return defective items f4 on total cost (f1 = 2500.5, f2 = 5000.5. a No shortage, b shortage
exist

!1n
1 Y
n
D ¼ ð d1  d2      dn Þ ¼ n di ð5Þ
i¼1

where n is the number of responses. The overall desirability function becomes zero
if any of the responses has a desirability value outside the acceptable range of the
desirability [35]. Since we have only one response it is expected that the overall
desirability is near 1.
The best values of parameters was difficult to be selected since each parameter of
the thirty runs has desirability value equal to 1 for shortage and no shortage
condition. In turn the confirmation test that should be conducted under the optimum
cost condition for shortage and no shortage is expected to show unrealistic values of

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Table 6 The best results of minimum total cost response

Run Factors Response

Production Demand Proportion of Proportion of Shortage Total cost

lot size (Q) rate (D) defective from defective from (TC)
Items Items/ regular production customer sales return Unit cost
unit time (Dr) (Dc)
f1 f2 f3 f4 f5

17 5000 1 0.1 0.01 Shortage 106.498737

exist
18 5000 1 0.1 0.01 Shortage 106.498737
exist

Table 7 Goals and ranges setting for optimization of total cost parameters
Factors and response Goal Low level High level

Production lot size (Q) In range 1.00 5000.00

Demand rate (D) In range 1.00 10,000.00
Proportion of defective from regular production (Dr) In range 0.01 0.100
Proportion of defective from customer sales return (Dc) In range 0.01 0.100
Shortage In range No shortage Shortage exist
Total cost (TC) Minimize 104.713 2.02989E+006

total cost especially for small demand rate. However, RSM optimum predicted
results show a close agreement with the optimum calculated from analytical solution
for demand rate greater than 1725 items/unit time. This can be attributed to the
absence of real data for EPQ inventory system.

5 Conclusion

Imperfect process EPQ model with rework, sales return, scrap and shortage has been
solved with RSM technique in order to obtain the optimum parameters conditions
for minimum total cost. EPQ analytical model is used to get the data since we do not
have real data. D-optimal response surface methodology (RSM) was used to
combine the heterogeneous data to generate response surfaces and obtain optimum
decision parameters values for the EPQ model with sales return, rework and scrap
under shortage condition. ANOVA analysis of data obtained from the total cost
RSM quadratic model has shown that the F-value is 90.52 which shows that the
Model is significant. Values of “Prob[F” less than 0.0500 indicate model terms are
significant. The p-value shows that each coefficient is significance.
The confirmation test revealed that the optimum cost condition for shortage and
no shortage give unrealistic values of total cost especially for small demand rate.
However, it showed a close agreement with the optimum calculated from analytical
solution for demand rate greater than 1725 items/unit time. This can be attributed to

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the absence of real data for EPQ inventory system which will be considered in a
future study. Finally, this paper can be extended in several ways. For example,
considering the probabilistic nature of the inventory parameters and deteriorating
rate, considering more than one product and multi machine production system, just
to name a few future researches.

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