An EOQ model with partial backordering with regard to random yield: two strategies to improve mean and variance of the yield

This paper presents an economic order quantity (EOQ) inventory model with partial backordering, where a buyer purchases its required products from a supplier. Each received batch from the supplier includes a random proportion of defective items. In other words, supplier's production process works to a random yield. A recursive solution method to find the optimal values for main decision variables is examined through a series of numerical examples. Moreover, it is considered that the yield can be improved at a given cost. To this extent, two ways to achieve the yield improvement have been considered: the first way is investment in order to improve the mean of the yield to an ideal value, and the second way is investment to reduce the yield variability to an acceptable value. The impacts of the proposed strategies are investigated through some numerical analysis and managerial insights are proposed.