ARTICLE IN PRESS

Int. J. Production Economics 111 (2008) 686696

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Optimal buffer inventory and opportunistic preventive

maintenance under random production capacity availability
Romulo I. Zequeiraa,, Jose E. Valdesb, Christophe Berenguerc
College of Management of Technology (CDM), Chair of Technology and Operations Management (TOM), Ecole polytechnique federale de
a

Lausanne (EPFL), EPFL/CDM/ILEMT/TOM Odyssea, Station 5, CH-1015 Lausanne, Switzerland

b
Facultad de Matematica y Computacion, Universidad de La Habana, C. San Lazaro y L, CP 10400, La Habana, Cuba
c
CNRS - Institut Charles Delaunay/Systems Modelling and Reliability Laboratory, Universite de technologie de Troyes,
BP 2060 - 12, rue Marie Curie F-10010 Troyes cedex, France
Received 11 July 2005; accepted 8 February 2007
Available online 24 April 2007

Abstract

In this paper we study the determination of the optimal maintenance policy for a manufacturing facility and the optimal
buffer inventory to satisfy the demand during the interruption period due to a maintenance action. We consider the
possibility of imperfect production and that opportunities for the fabrication of the buffer inventory and opportunities to
carry out a maintenance action to the production facility are random.
r 2007 Elsevier B.V. All rights reserved.

Keywords: Preventive maintenance; Imperfect production; Buffer inventory; Opportunistic maintenance; Random production capacity
availability

1. Introduction consumer dissatisfaction due to defective items or

Normal deterioration or unexpected external
shocks can provoke machine breakdowns or defec-
tive production. Machine breakdowns are impor-
tant causes of variability increase in process times
and ows of production systems, leading to reduced
manufacturing performance (Hopp and Spearman,
2000). Imperfect production may increase total
production costs due to possible rework or material
loss. Imperfect production can also provoke
Corresponding author.
E-mail addresses: romulo.zequeira@ep.ch (R.I. Zequeira),
vcastro@matcom.uh.cu (J.E. Valdes),
christophe.berenguer@utt.fr (C. Berenguer).
increased lead times.
The probability of defective production or break-
downs can be reduced by carrying out preventive
maintenance. Preventive maintenance can also
improve production quality and yield (Sloan,
2004). Nevertheless, preventive maintenance actions
may render unavailable the production facility with
the consequent economic loss. If we are dealing with
the nal products, unavailability of the manufactur-
ing facility may cause lost sales or increased costs
due to backordering. If we are considering produc-
tion processes, unavailability of one machine may
provoke the disruption of the entire production
system.
One way to avoid economic losses due to
production unavailability caused by preventive

0925-5273/$ - see front matter r 2007 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2007.02.037
 ARTICLE IN PRESS
R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696
maintenance actions is building a buffer inventory
to satisfy the demand during the production
unavailability period. Nevertheless, inventory nan-
cing often incurs considerable opportunity costs.
Holding products in inventory also implies costs
due to allocation space, equipment required to
support and move it and deterioration. Hence,
keeping minimum inventory levels is of practical
interest. Besides, it has been shown that process
reliability can be improved keeping low inventory
levels together with increasing the skill levels of
workers (Alles et al., 2000). Keeping low inventories
is encouraged by modern management approaches
like just-in-time (Hopp and Spearman, 2000).
Investment in capacity expansion remains one of
the most critical decisions for manufacturing
organizations (Chou et al., 2007; Julka et al.,
2007). Because of high utilization of installed
production capacities it can be expected that the
extra production capacity to build the buffer
inventory is available only at random times.
Furthermore, it can be assumed that once it is
available it can be used to produce the whole buffer.
One example is when the extra production capacity
is a facility that produces different kinds of items
under a non-preemptive policy. If the inter-arrival
times and quantities to be produced are random
then the times at which this extra production
capacity is available are random (Anupindi and
Tayur, 1998). Non-preemptive scheduling policies
are usual in manufacturing environments (Nahmias,
2004).
In practice, unexpected production demand or
spare parts shortage can cause the rescheduling of
the times of planned preventive maintenance. In
these cases a natural assumption is to consider that
periods between opportunities for the maintenance
action to the production facility are random.
Motivated by the previous random characteristics
that are relevant to the management of production
facilities, we study in this paper a production system
that can shift out of control and begin to produce a
proportion of defective items. Preventive mainte-
nance actions to restore the production facility to a
good-as-new condition have random durations and
are opportunistic, to decrease overall costs. Besides,
preventive maintenance actions provoke the un-
availability of the production facility. To satisfy the
demand during the unavailability period of the
manufacturing facility a buffer is built in advance
when extra production capacity is available. We are
interested in nding the optimal time threshold T
687
after the last preventive maintenance action for
using the extra production capacity the rst (ran-
dom) time it is available, and the optimal size S of
the buffer inventory.
Note that the expected holding costs increase
when T decreases and, if the maintenance action is
made after the buffer inventory is built, as we
assume in this paper, the expected number of
defective items increases when T increases. Simi-
larly, the expected shortage increases when S
decreases and the expected holding costs increase
when S increases. Therefore, the optimal determina-
tion of the values of T and S has a signicant
practical interest.
1.1. Literature review
The analysis of breakdowns in production sys-
tems has received attention in the past. Groenevelt
et al. (1992) study economic lot sizing decisions
considering the effects of machine breakdowns
and corrective maintenance. Analytical models of
preventive maintenance and safety stock strategies
are presented by Cheung and Hausman (1997)
and Dohi et al. (2001) considering a production
environment subject to random machine break-
downs.
Models with a practical appeal to study imperfect
production process have been proposed. Porteus
(1986) assumed the production process to be
perfectly functioning at the beginning of a lot.
Production may shift to an out-of-control state each
time a unit is produced. Once the process is in the
out-of-control state all items produced are defective.
Rosenblatt and Lee (1986) assumed that the
production system is functioning perfectly at the
beginning of a lot and that the process may shift out
of control at some random time and begin to
produce a proportion q of defective items.
Models considering preventive maintenance of
systems with buffers have been developed. van der
Duyn Schouten and Vanneste (1995) examined
maintenance optimization for production systems
considering buffer capacity. In their model the
decision to start a preventive maintenance action
depends on the buffer level and on the condition of
the installation. Meller and Kim (1996) studied a
two-machine system with a xed capacity buffer
between the machines. Their model can be used to
determine the optimal buffer inventory that triggers
preventive maintenance on the rst production
machine. Perry and Posner (2000) studied a single
 ARTICLE IN PRESS
688 R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696
machine that produces items to inventory. When a
machine breakdown occurs a repair operation
begins. Otherwise a preventive maintenance action
is initiated after a xed time of continuous opera-
tion. Chelbi and Ait-Kadi (2004) presented a model
to nd the optimal size of the buffer and the optimal
preventive maintenance time considering random
duration for corrective and preventive maintenance
actions. The buffer ensures the supply during the
repair or the preventive maintenance. Rezg et al.
(2005) consider a production unit submitted to an
age-based maintenance policy. A buffer stock is
built to guarantee the supply to the next stage in the
production system. They evaluate the average cost
per time unit of the proposed strategy. Chelbi and
Rezg (2006) consider the optimization of a produc-
tion system under an age-based policy. They
optimize under an unavailability constraint the
maintenance policy and the buffer that guarantees
continuous supply of the production facility.
Salameh and Ghattas (2001) proposed a model to
calculate the just-in-time buffer inventory that
minimizes the cost rate considering the sum of
the buffer inventory holding costs and the cost due
to shortage in a cycle. Zequeira et al. (2004)
extended the model of Salameh and Ghattas
(2001) considering the possibility of imperfect
production and that the duration and cost of the
maintenance action depend on the state of the
production facility.
1.2. Main contribution
In this paper we propose a new model that
extends the model presented by Salameh and
Ghattas (2001) by considering several aspects of
the operation of production systems whose behavior
is random, namely the time at which a production
capacity is available to produce a given type of item,
and the opportunities to carry out preventive
maintenance actions. That is, we consider that the
extra production capacity to build a buffer inven-
tory is available at random times and that the
maintenance action begins at the rst opportunity
for maintenance after the end of the fabrication of
the buffer inventory. Further we consider in the
model the possibility of imperfect production.
A similar problem, usually known as opportunity-
based age replacement, has been examined pre-
viously to establish optimal replacement policies
(Dekker and Dijkstra, 1992; Jhang and Sheu, 1999).
1.3. Notation
The following terms will have a specic meaning
in this paper:
 Normal production corresponds to the produc-
tion of the facility to which the maintenance
action is to be made.
 Extra production corresponds to the production
of the facility that fabricates the buffer inven-
tory.
A cycle is dened as the period of time between two
subsequent resumptions of fabrication in the
normal production facility.
a production rate of the extra
production facility,
b consumption rate,
Cm expected cost of a maintenance action,
T threshold time after a production
resumption: in a cycle, the fabrication
of the buffer inventory begins at the
rst time after T at which the extra
production capacity is available,
S buffer inventory level,
BS expected shortage cost in a cycle as a
function of S,
CT; S expected cost in a cycle as a function of
T and S,
CRT; S cost rate as a function of T and S,
DT; S expected cost in a cycle due to defective
items, as a function of T and S,
d cost per defective item,
h inventory holding cost in $ per unit per
time unit,
HT; S expected inventory holding cost in a
cycle as a function of T and S,
LT; S expected cycle length as a function of T
and S,
q probability that an item produced
when the manufacturing facility is in
the out-of-control state is defective,
W random variable, in the cycle it is the
time from the instant in which the
buffer fabrication is nished to the
next maintenance opportunity time,
Z parameter of the (exponential)
distribution of W,
X random variable, in the cycle it is the
time to shift to the out-of-control state,
F x distribution function of X,
f x probability density function of X,
 ARTICLE IN PRESS
R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696
l failure rate of X when F x 1  elx ,
pT probability of imperfect production in
a cycle,
pS probability of shortage in a cycle,
r shortage cost in $ per unit short,
Y random variable, time after T at which
the extra production capacity is
available,
u parameter of the (exponential)
distribution of Y,
Z random variable, maintenance action
duration,
EZ expected value of a random variable Z,
Gz distribution function of Z,
gz probability density function of Z.
For a distribution function, say V x, its survival
function 1  V x will be denoted by V x.
Values of random variables are denoted by the
corresponding lowercase letters.
2. The model
Assumptions:
1. Maintenance actions return the facility to a
good-as-new condition.
2. Periods between subsequent times at which
the extra production capacity becomes
available are exponentially distributed with
mean u1 .
3 Once the extra production capacity is available
it can be used to produce a buffer inventory of
size S, regardless of the value of S.
4. The time between opportunities for maintenance
is exponentially distributed with mean Z1 .
5. The normal production facility shifts out of
control at the random time X after a production
resumption, and begins to produce defective
items. Once the facility is in the out-of-control
state each item produced is defective with
probability q.
6. The out-of-control state of the normal produc-
tion machine is not detectable before the
preventive maintenance action.
7. The defective state of items is not detected
immediately, but at a time much greater than the
cycle time.
8. The probability of defective production for the
extra production capacity is negligible.
9 If at the end of a maintenance action there is
buffer inventory available, the facility does not
689
resume production until depletion of this
remaining buffer inventory.
10 During the normal production period the
production rate is equal to the consumption
rate. Deliveries are made in small lots and
therefore inventory levels are kept low.
As we commented in the Introduction, one
example in which assumptions 2 and 3 apply is
when two types of production facilities for produ-
cing the same good are available: one that can
produce several types of products (the extra
production capacity, for example a exible manu-
facturing system), and the normal production
facility, which produces only one product. Note
that under this setting assumption 3 is realistic
because if setup costs are high, then stopping the
production of the buffer inventory and resuming
later would increase costs. Therefore, it can be
considered that once the extra production facility
begins to build the buffer, then it will produce it
completely, and other products demand for the
extra production capacity will be satised later.
Finally, when the buffer inventory is much smaller
than the normal production batch, then producing
it will likely be fast, reinforcing the practicality of
assumption 3.
Note from assumption 7 that the shortage in a
cycle because of defective items cannot be lled up
from the buffer inventory of the cycle. This last
assumption corresponds in practice, for example, to
the important case of failure modes not detectable
during the production process, but after some time
of use by the nal consumers.
From assumption 8 we could wonder why not to
use the extra production capacity for normal
production, if the reliability of the extra production
capacity is very high. A case when it is not possible
to use the extra production capacity for the normal
production is the example we have discussed
previously, i.e. when the extra production capacity
has to be used for producing different items that
compete for that production capacity. Assumption
8 is acceptable for example when the buffer
inventory is much smaller than the quantity
produced between preventive maintenance actions
by the normal capacity. In that case the expected
quantity of defective items produced by the extra
production capacity is reduced because the total
quantity produced is small.
Assumption 9 can be justied by cost arguments.
Maintaining the remaining buffer after a preventive
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690 R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696

maintenance actions incurs costs. Besides, using the The cost due to defective items dy; w, condi-
remaining buffer delays the resumption of the tioned on Y and W, is
normal production, with the consequent production Z TyS=aw
cost reduction. dy; w dqb F x dx.
0

2.1. Maintenance policy Hence the expected cost due to defective items is
Z 1 Z 1 Z TyS=aw
The policy we will consider is the following. Let y DT; S dqb ZuF x
0 0 0
be the rst time after the threshold time T, measured
euyZw dx dy dw.
from T, at which the extra production capacity is
available. After a production resumption a buffer The length of the cycle conditioned on Y, W and
inventory of size S begins to be built at time T y. Z, ly; w; z, is obtained as
Once the buffer inventory is built the maintenance 8
>
> S S S
action to the normal production facility begins at >T y w
< if zp ;
a b b
the rst opportunity for maintenance, at time ly; w; z
>
> S S
T y S=a w. See Fig. 1 where a realization of : T y a w z if z4 b :
>
the buffer inventory level as a function of time is
presented. We look for the values of T and S for Hence the expected length of the cycle is
which the cost rate is minimum. Z 1
1 1 S S
LT; S T Gz dz. (1)
u Z a b S=b
2.2. Cost rate function
The expected cost in a cycle is given by the sum of
When normal production and consumption rates the expected cost due to defective items, the
are equal and deliveries are made in small lots inventory holding cost, the expected shortage cost
(assumption 10) normal production inventory hold- and the preventive maintenance cost.
ing costs are kept at low levels. Therefore, we will Z 1 Z 1 Z TyS=aw
not consider those costs in the analysis but the CT; S dqb uZ
buffer inventory holding cost. Note that deliveries 0 0 0
uyZw
in small lots are encouraged by the just-in-time e F x dx dy dw
 
approach. S S2 S2
The expected buffer inventory holding cost in a h
2a 2b Z
cycle and the expected shortage cost in a cycle are Z 1
given by the following equations: rb Gz dz C m .
S=b
 2 
S S2 S
HT; S h , We look for the values of T and S for which the
2a 2b Z cost rate
Z 1 CT; S
CRT; S
BS rb Gz dz. LT; S
S=b
attains its minimum value, where LT; S is given by
Eq. (1).
It is natural to consider times to shift to imperfect
Extra production
S capacity availability production with increasing failure rates for produc-

tion facilities that deteriorate with the time of

operation. Nevertheless, in some cases it can be
assumed that the shift to imperfect production is
provoked by external actions (shocks), for example,
T y S/ w S/ time erroneous operator actions or abnormal environ-
z z mental conditions that can be assumed to have a
Preventive
Maintenance
Preventive constant arrival rate. That is, in these cases the
Maintenance
exponential distribution is a good model for the
Fig. 1. Realization of inventory level as a function of time. time to shift to imperfect production. Even when the
 ARTICLE IN PRESS
R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696 691

failure rate is increasing the exponential distribution the following equation:

may be used under certain conditions as a good DS T; S
approximation for the time to shift to imperfect ( Z 1 !
production (Xie et al., 2000). One advantage of the 1 S 1
dqb Gz dz
use of the exponential distribution is its analytical a b S=b al
  
tractability. When the time to shift to imperfect 1 1 1
production is exponential, i.e. F x 1  elx , the  elTS=a
a 1 l=u 1 l=Z
expected cost due to defective production is given by Z 1 !
   1 1 S S 1
S 1 1 1 1  T Gz dz
DT; S dqb T u Z a b S=b l
a u Z l 1 l=u   "
   S 1 1 1 S 1
1 1 G T 
 elTS=a  . b b u Z a l
1 l=Z l
    #)
1 1 lTS=a
2.3. Determination of the optimal policy  1 e .
1 l=u 1 l=Z

The necessary condition to obtain the optimal It seems difcult to prove the convexity of the
value of S is given by cost rate function with respect to S. Nevertheless, it
U S S 0, (2) can be seen that under some conditions there exists,
for a value of T given and the other parameters
where xed, a unique value of S for which the cost rate
q q function attains its global minimum. Note that if the
U S S CT; S  LT; S  CT; S  LT; S following condition holds
qS qS
q2 q2
is given by the following equation: CT; S  LT; S  CT; S  LT; S40
(  qS 2 qS 2
S S 1 (3)
U S S DS T; S h LT; S
a b Z
then U S S is strictly increasing and if there is, for T
   )
S S 1 1 1 S xed, a positive value S of S for which U S S  0,
S G then the cost rate attains its global value at S  for
2a 2b Z a b b
(    the value of T given. Otherwise, if condition (3)
S 1 1 S S holds and for all S40 it holds that U S S40, then
r G T
b u Z a b the cost rate attains its global minimum value at
 Z 1 ) S 0, for the given value of T. It is obtained that
b q2 q2
1 Gz dz CT; S  LT; S  CT; S  2 LT; S
a S=b 2
   qS " qS
1 1 S Z 1Z 1  
 Cm G , Zwuy b S
a b b dq Zue f T y w
0 0 a2 a
where   Z TyS=aw #
1 S
DS T; S LT; S  g F x dx dy dw
Z Z b b 0
1 1
 
dqb ZueZwuy 1 1
0 0 h LT; S
(   a b
1 S    
 F T y w  LT; S 1 S2 S2 S S
a a  2 g
   Z TySw ) b 2a 2b Z b
  
1 1 S a
1 S 1 1 S S
 G F x dx dy dw. r g T
a b b 0 b b u Z a b
 
If the time to shift to an out-of-control state is 1 S
 Cm 2 g . 4
exponential with mean l1 then DS T; S is given by b b
 ARTICLE IN PRESS
692 R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696

Note that, in our setting, when z ! 1 we should where

have gz ! 0. That is, the probability that a
q q
maintenance action duration is too large is negli- U T T CT; S  LT; S  CT; S  LT; S
qT qT
gible. Hence from (4) it follows that for values of S
large enough it can be expected that condition (3) is given by the following equation:
holds. Therefore, if costs due to imperfect produc-  2 
tion and holding inventory are greater than zero S S2 S
U T T DT T; S  h
and S is large enough then U S S is strictly 2a 2b Z
Z 1
increasing in S.
We give now a sufcient conditionEq. (6)for  rb Gz dz  C m ,
S=b
(3) to hold, which is independent of the distribution
of the duration of the maintenance action. Eq. (4) where
can be rewritten as Z 1 Z 1
DT T; S dqb ZueZwuy
q2 q2 0 0
CT; S  LT; S  CT; S  2 LT; S "  
2
qS Z 1Z 1 qS S
b  F T y w  LT; S
dq ZueZwuy 2 a
0 0 a Z TyS=aw #
 
S  F x dx dy dw.
f T y w dy dw
a 0
 
1 1 When the time to shift to an imperfect production
LT; S h LT; S
a b is exponential, DT T; S is given by the following
   2  equation:
1 S S S2 S
 2g DT; S h
b b 2a 2b Z ( Z !
   S 1
1
1 1 S S DT T; S dqb Gz dz
rb T Cm . 5 b
S=b l
u Z a b
    
Therefore, if 1 1 lTS=a
 1 e
1 l=u 1 l=Z
rXBr T; S, (6)   
1 1
where Br T; S is given by  elTS=a
1 l=u 1 l=Z
1 1  )
Br T; S 1 1 S
b T 1=u 1=Z S=a S=b  T .
u Z a
  2  
S S2 S
 DT; S h Cm ,
2a 2b Z It is obtained that
then U S S is strictly increasing.
From condition (6) it can be expected that U S S q2 q2
2
CT; S  LT; S  CT; S  2 LT; S
is increasing for high values of the shortage costs r. qT Z Z qT
1 1
It is not difcult to nd a numerical example to dqbLT; S ZueZwuy
show that the cost rate function CRT; S is not 0 0
 
convex as a function of T for S and the other S
parameters xed. Nevertheless, we will show that f T y w dy dw.
a
for S and the other parameters xed there exist,
under some conditions, a unique value of T for Hence if for all T
which the cost rate function CRT; S attains a
Z 1Z 1
global minimum.
dqbLT; S ZueZwuy
The necessary condition for the optimal T is given 0 0
by  
S
f T y w dy dw40, 8
U T T 0, (7) a
 ARTICLE IN PRESS
R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696
i.e. if the expected costs due to imperfect production
are greater than zero and if there exists, for S and
the other parameters xed, a positive value T  of T
for which condition (7) holds, then the cost rate
function CRT; S attains its global minimum at T  .
Otherwise if condition (8) holds and for all T40 it
holds that U T T40 then the optimal value of T is
0. Note that under the assumptions of our model if
there is no imperfect production then it is mean-
ingless to set a nite value for T and the optimal
value for T is T 1, i.e. not to carry out
maintenance actions.
Hence if conditions (3) and (8) hold then the
optimal values of T and S can be obtained using the
following algorithm:
1. Set an initial value S 1 of S.
2. Repeat until no changes in S j and T j occur,
j 1; 2; . . . .
2.1. Set S Sj . Let T j be the value of T for which
Eq. (7) holds. If T j o0 then set T j 0.
2.2 Set T T j . Let Sj be the value of S for which
Eq. (2) holds. If S j o0 then set S j 0.
In practice, we can set an interval for T and an
interval for S considering reasonable values for
the probability of imperfect production and the
shortage probability. Let pT and be pS be values
of the probability of imperfect production before
T and the shortage probability in a cycle, respec-
tively. An interval for T inside which the optimal
value of T can be expected to be is 0; T max ,
where T max is the value of T for which pT is close to
one. Similarly, an interval for S inside which the
optimal value of S can be expected to be is 0; Smax ,
where S max is the value of S for which pS is close to
zero.
Note that for T and S given the costs due to
holding inventory and to defective production
increase when the buffer replenishment rate a
decreases. In the Numerical example section
we study the dependence of the optimal T on S
for different values of the buffer replenishment
rate a.
3. Numerical example
Consider the following data: a 15 000 units per
year, b 30 000 units per year, u1 14 days,
Z1 2 days, EZ 1 day, q 0:1, d $10 per unit,
C m $150, h $25 per unit per year and r $1
per unit. Note that these data correspond to a mean
693
time equal to 14 days between occurrences of
opportunities to begin building the buffer inventory,
and to opportunities for the maintenance action
occurring each 2 days, in average. We will consider
an exponential time to shift to an out-of-control
state with failure rate l 1 year1 .
We will consider that the duration of the
maintenance action has an exponential distribu-
tion. Although other distributions like the Lognor-
mal are suitable to model time to repair since
they do not have the memoryless property, the
exponential distribution is more tractable analyti-
cally and in a number of situations it is a good
model for the time to repair since it gives greater
probability to short durations of the maintenance
action.
Fig. 2 presents the cost rate CRT; S as a
function of S and T for values of S between 0 and
379 units and for T between 4 and 82 days. Values 0
and 379 units for buffer inventory level S corre-
spond to a probability of 1 and 0.01, respectively, of
shortage in a cycle. Values 4 and 81 days for T
correspond to a probability of 0.01 and 0.20,
respectively, that before time T the production
shifts to imperfect production. Note from Fig. 2
that a global minimum exists for the cost rate
function CT; S for the interval considered for T
and S. Besides, for this data set the cost rate
function CRT; S is rather sensitive to both T
and S.
To look for the optimal values analytically we set
pT 0:9999 and pS 0:0001. In correspondence
with these probabilities, the intervals we set for the
search are [0 year, 9.2 year] and [0 units, 758 units]
for T and S, respectively. For the data set and
the intervals for T and S we are considering it can
be checked that condition (6) holds. Hence there is,
for each value of T, a unique value of S for which
the cost rate attains its global minimum. Besides,
since the expected costs due to imperfect production
are greater than zero, then condition (8) holds.
Therefore, there is, for each value of S, a unique
value of T for which the cost rate attains its
global minimum. The optimal values of T and S
are found to be 0.072 year, that is 26.3 days, and 98
units, respectively. The minimum cost rate is
$3443.9/year.
If the buffer inventory is not built, i.e. if S 0,
then the optimal value of T is 0.089 years, which
corresponds to 32.5 days. This leads to a cost rate of
$3723.2/year, which represents an increase of 8.1%
in relation to the minimum attainable cost rate
 ARTICLE IN PRESS
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5500

Cost rate ($/year) 5000

4500

4000

3500

3000
100
80 400
60 300
T( 40
da 200
ys) 20 100
its)
0 0 S (un

Fig. 2. Cost rate as a function of T and S.

80

70

60
Optimal T (days)

50

40

30

20

10
0 100 200 300 400 500 600 700 800
S (units)

Fig. 3. Optimal value of T as a function of S for a 3000 units per year (dotted line), a 6000 units per year (dashed line) and a 15 000
units per year (solid line).

when S and T are set at optimal values. If we The optimal value of T as a function of S for a
set T 0 then we obtain that the optimal 3000 units per year (dotted line), a 6000 units per
buffer inventory is S 147 for which the cost year (dashed line) and a 15 000 units per year (solid
rate is $4646.4/year. This corresponds to an in- line) is represented in Fig. 3. Note that for values
crease of 34.9% of the cost rate in comparison relatively small of S we have that the optimal T
with the attainable minimal cost rate if both increases when a increases. This can be explained in
decision variables T and S are set to the optimal the following way. For small values of S the buffer
values. inventory holding cost in a cycle is relatively small.

R.I. Zequeira et al. / Int. J. Production Economics 111 (2008) 686696
12000
11000
10000
Minimum cost rate ($/year)
9000
8000
7000
6000
5000
4000
3000
0 100
Fig. 4. Minimum cost rate as a function of S for a 3000 units per year (dotted line), a 6000 units per year (dashed line) and a 15 000
units per year (solid line).
For the values of T and S given, the expected cost due
to defective production in a cycle decreases when a
increases due to a faster buffer fabrication. Hence
when S has a value relatively small we can set
relatively high values for T, still maintaining the cost
due to defective production in a cycle at reasonable
levels. As a consequence, when S has a value relatively
small the optimal T increases when a increases.
For sufciently high values of S the inventory
holding costs behave as a quadratic function of S,
and the cost due to defective production tends to be
linear as a function of S. Therefore, when S is set to
a value relatively high and T is xed, the inventory
holding cost in a cycle has a high value that
increases when a decreases and therefore outweighs
defective production costs in a cycle. Hence for high
values of S we will carry out the maintenance action
less frequently when a decreases to keep the
inventory holding cost contribution to the cost rate
at reasonable levels. This corresponds to the results
represented in Fig. 3, where for high values of S the
optimal value of T increases when a decreases.
The minimum cost rate as a function of S, i.e.
taking the optimal value of T for each value of S, is
represented in Fig. 4 for a 3000 units per year
(dotted line), a 6000 units per year (dashed line)
and a 15 000 units per year (solid line). Note that
the minimum cost rate increases and the optimal S
decreases when a decreases, as it can be expected.
ARTICLE IN PRESS
695
200 300 400 500 600 700 800
S (units)
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