A Research on Inventory Management

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Inventory management is a topic that has been captured the attention of academic and business communities for long time. Of the most important points that investigated by academicians and practitioners for decades is the selecting of the Economic Order Quantity (EOQ). As the name suggests, EOQ is the order quantity that minimizes total inventory cost. Despite the many variants of the EOQ that have appeared in the literature to fine tune it to reality, it still has limitations. A major one is that it does not take into account the hidden costs inherent in inventory systems. Some of these costs relate to sustainability issues including environmental, social labor, and economic effects. This research proposal considers some of these costs,…show more content…
It “frequently manifests itself as a queue; for example, materials may wait to be processed or a plant is not fully utilized as it waits for materials; machines wait for service or maintenance men wait to service machines; finished goods wait for customers' orders or customers wait for goods, etc.” (Drechsler, 1968). To reduce the effect of entropy, Jaber et al. (2004) suggested adding a third cost component (entropy) when analyzing production and inventory policies. They found that using the entropy cost approach leads to higher profits than what the classical EOQ model suggests and recommends ordering in larger quantities less frequently. Their results also showed that reducing the lot size without considering entropy cost would have opposite result than expected. Thermodynamically, entropy is related to another property, which is the exergy. Exergy is defined as the useful amount of energy available. Generally, entropy generation is proportional to exergy consumption (destruction). As an indicator, exergy can be considered as a good measure of sustainability for each material used. “Exergy indicators” are based on the exergy content of a resource and the rate of losing that exergy to the environment. These indicators can assist in the selection of energy and resources that can minimize the environmental impact in the long term (Koroneos et al., 2012). The increasing concerns of human societies about sustainable development have interested
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