Keywords: EOQ, economic order quantity, reverse logistics, thermodynamics, entropy costs, exergy costs, inventory management, modelling, system entropy
Simple price-driven Reverse Logistics system with entropy and exergy costs
This paper contributes to an emerging research area of non-classical inventory management that postulates that the behaviour of production systems very much resembles those of physical systems. It applies classical thermodynamics reasoning to modelling inventory systems to reduce system entropy (or disorder). This paper also introduces the concept of exergy (useful energy) cost, which represents here the amount of useful work wasted (exergy destroyed) because of system entropy. First, this paper modifies the Economic Order Quantity (EOQ) model to account for exergy and entropy costs. Second, the modified EOQ model is used to develop and investigate a simple Reverse Logistics (RL) model. Third, this paper assumes forward and backward commodity flows to be price dependent and therefore a profit approach is adopted. A new model is developed with numerical examples presented and results discussed.