Inventory optimization under machine downtime: A production model with alternative unit replenishment

In the manufacturing sector, machine failures frequently disrupt the supply chain, leading to financial losses, particularly when downtime is prolonged. Various methods have been proposed to assess the impact of machine failures on profitability. However, the literature lacks a comprehensive approach that addresses machine failures in the context of maintaining a continuous supply chain through the implementation of an alternative production source during shortage. To bridge this gap, this study proposes an Economic Production Quantity (EPQ) model that incorporates machine failure and compares the manufacturer's profit under two scenarios: one with shortages and another with an alternative production unit compensating for the shortfall. The model aims to maximize profit by optimizing the decision variables. The proposed model is validated through numerical examples, with a detailed sensitivity analysis and managerial insights provided to support decision-making from a business perspective.