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This paper examines impacts of random scrap rate on production system in supply chain environment with a specific n+1 distribution policy. The purpose of introducing such a specific shipping policy is to cut down inventory holding costs for both producer and customer in vendor-buyer supply chain environment. Mathematical modeling along with Hessian matrix equations is used to simultaneously determine the optimal policies for production lot-size as well as number of shipments first. Then impacts of random scrap rate on the proposed system are analyzed. Numerical example is provided to show its practical usage and to demonstrate impacts of scrap rate on the system.       Key words: Imperfect production system, random scrap rate, replenishment lot size.

Impacts of random scrap rate on production system in supply chain environment with a specific shipping policy