Production and inventory control decisions play a primordial role in manufacturing systems. However, most of the researches dealing with production-inventory control policies do not integrate explicitly the deterioration process due to product quality alteration.

This paper studied manufacturing system optimal flow control composed of an imperfect process and a finished product inventory. After a random period operating in the ‘in-control’ state, the manufacturing system can switch to the ‘out-of-control’ state and starts producing non-conforming items. The manufacturing system ‘in-control’ horizons have a general deterioration distribution. Restoration actions with random durations are thus planned to restore the manufacturing system to the ‘in-control’ state after a specific logistic period to prepare required restoration resources. Restoration durations have a general distribution.

In order to respond to demand and to hedge against shortages during restoration phase, a production-inventory control policy based on the hedging point policy is implemented. The control policy entails to build and to maintain a security stock of finished products during production phases. The problem is to control the manufacturing system production rate to minimize the policy overall cost including setup, restoration, inventory holding, shortage, and non-conforming items costs. An analytical model is proposed and the expression of the overall incurred cost is derived and used as a basis for optimal assessment of the production-inventory control policy. Numerical examples and sensitivity analysis are also carried out through a numerical simulation program in order to illustrate the effectiveness and the robustness of the proposed approach.