Sustainable Inventory Management

Abstract

The Economic Order Quantity (EOQ) model, proposed by Harris in 1913, is one of the most studied models for the inventory management. The model aims at identifying the optimal lot size minimizing the total inventory costs, typically only holding and ordering costs. Many researchers extended this model trying to adapt it to real-life situation by providing new mathematical models. The increasing attention paid to sustainable manufacturing led, in the last years, to include the external costs of logistics in the EOQ model. Starting from a literature review on the inventory management models, this chapter defines the new Sustainable Order Quantity (SOQ) model. In the model, the loss factor parameter quantifies the loss in energy per unitary load transported and unitary distance covered, univocally identifying the various transport means. The optimal order quantity is derived minimizing a logistic cost function that considers both economic and social-environmental costs. The model allows determining at the same time the reorder level, the safety stock as well as the optimal transport means.