Required Reading is (A sustainable EOQ model: Theoretical formulation and applic

Question

Required Reading is (A sustainable EOQ model: Theoretical formulation and applications.)

Note: Look at highlighted areas on the pages noted. These will help you to understand

? Introduction (pg. 145)

? Life cycle assessment of a purchasing order quantity (pg. 146)

? S-EOQ and EOQ Computation - understand difference between them

(pgs. 149 – 150)

? Discussion and Conclusions (pgs. 152 – 153)

Requirement: Outline mathematical progression of Sustainable Order Quantity and explain the need for this. Note: there are similarities between S-EOQ and EOQ. (6 pts.)

Explanation / Answer

Traditional inventory models involve different decisions that attempt to optimize material lot sizes by minimizing total annual supply chain costs. However, the increasing concern on environmental issues stresses the need to treat inventory management decisions as a whole, by integrating economic and environmental objectives. Recent studies have underlined the need to incorporate additional criteria in traditional inventory models in order to design “responsible inventory systems”. Therfore, the integration of factors affecting the environmental impact within the traditional EOQ model and proposes a “Sustainable EOQ Model”. All sustainability factors linked to the material lot size are analyzed from the beginning of the purchasing order to the end of its life inside the buyer plant. Thus, the environmental impact of transportation and inventory is incorporated in the model and investigated by an economic point of view. In particular internal and external transportation costs, vendor and supplier location and the different freight vehicle utilization ratio are considered in order to provide an easy-to-use methodology. The optimization approach is applied to representative data from industrial problems to assess the impact of sustainability considerations on purchasing decisions if compared with the traditional approaches.

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