AN EOQ INVENTORY MODEL FOR ECO-FRIENDLY PRODUCTS WITH LEARNING EFFECT AND CARBON EMISSION CONSIDERATIONS

Abstract

As environmental considerations grow more significant and operating supply chains cost-efficiently more critical, inventory management has become a vital component of sustainable business practices. Traditional Economic Order Quantity (EOQ) models focus mainly on reduction of ordering and inventory holding costs, and ignore factors relating to organizational learning and carbon footprint resulting from inventory operations. To overcome this, the present study presents an EOQ inventory model for eco-friendly products while considering the learning effect and carbon emission cost in the inventory decision-making process. It is assumed that the repeated ordering activities would cause the cost of ordering to decrease continuously as a learnable function with respect to the number of times of ordering. Further, carbon emissions due to replenishment and inventory holding are monetized through a Carbon

Pricing mechanism, transportation cost is explicitly taken into account to make it more representative of the actual logistics operations. This model aims to find  the optimal order quantity for minimizing the total annual inventory cost including purchase cost, learning-based ordering cost, holding cost, transportation cost and carbon emission cost. The optimum order quantity is determined from a calculus-based optimization process, and the second-order condition is used to determine the optimality of the solution. The proposed framework is applied to a numerical example to show that the framework is applicable and the effect of learning and environmental costs on inventory decisions is illustrated. The results show that learning effects can be combined with carbon aware replenishment policies to enhance cost efficiency and promote sustainable replenishment practices. The model proposed in this paper has provided useful managerial insights for firms aiming to achieve an economic performance while simultaneously managing for environmental responsibility in managing eco-friendly products...