Retailer`s optimal decision policy of a stochastic manufacturing process with rework process of defective items under two-level trade credit finance

Though production facilities are advancing day by day, some imperfection in manufacturing process still remains. This paper develops a manufacturing system with rework process of defective items. We have assumed that the defective items are repairable and a portion of the reworked items is considered to be scrap. In model, it is proposed that demand of items, proportion of defective products and scrap rate are randomly distributed with known probability density function. In the model it is also assumed that the supplier of raw materials offers a delay period to the manufacturer and manufacturer extends a similar delay policy to his customers. The main objective of the system is to minimize the manufacturer's overall cost and to determine manufacturer's optimal replenishment policy. The optimal replenishment policies are also discussed with the help of some theorems. Numerical examples are illustrating the theoretical results and sensitivity of important cost parameters is discussed.