Planning Supply with 'Opportunity Goods' : Complementing Premium Parts with Select Discount Components

In this paper, we introduce the notion of an "opportunity good" as a discount production input that may prove of satisfactory quality upon inspection and otherwise can be returned to the supplier. While in a quality-sensitive setting it is never optimal to source only opportunity goods without ever running out of stock, it is often best to complement high-quality premium inputs by a significant fraction of goods that are of low but sufficiently high-variance quality, provided they can be returned at a reasonable fee. Such dual sourcing of components is currently being used in certain industries to produce sensitive equipment. In an EOQ framework, we examine the optimal production input split between opportunity goods and high-quality inputs.