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This paper develops a collaborative business model for imperfect process with setup cost and lead time reductions. We propose a simple solution procedure to derive the optimal order quantity, lead time, delivery frequency and setup cost. Shortage during the lead time is assumed to be partially backordered. Numerical examples are carried out to show how the proposed model can result in a substantial cost savings over the traditional model.

A Collaborative Business Model for Imperfect Process with Setup Cost and Lead Time Reductions