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e- ISSN: 2348-4470
p- ISSN: 2348-6406
International Journal of Advance Engineering and Research
Development
Volume 3, Issue 3, March -2016
Environmentally Responsible EOQ Modeling:
A Re-assessment
Future Scope for Research
Priya Malani
P. G. Student, Department of Production and Industrial Engineering
M. B. M. Engineering College, J.N.V. University
Jodhpur (Rajasthan), India
[email protected]
Dr. Vikas Kapoor
Department of Production and Industrial Engineering
M. B. M. Engineering College, J.N.V. University
Jodhpur (Rajasthan), India
[email protected]
Abstract — This paper explores the long-standing problem of inventory management in general,
and focuses attention specifically on the basic EOQ model in light of environmentally responsible
regime. In the beginning a critical review has been provided that covers the recent interest of the
research fraternity in optimizing the quantity to be ordered under the constraint of carbon
emission regulatory framework. Through the brief study of various research publications of the
carbon constrained EOQ models, the authors propose extension of an earlier model of cap and
offset regulation for developing economies like India. This paper also throws some light on a
working framework of carbon emission regulation policy in countries such as India.
Index Terms—Inventory Management, Economic Order Quantity Model, Carbon emissions, Cap
and offset, Carbon taxing, Emission Regulation.
I. INTRODUCTION
Inventory keeping has been an invariable part of human civilization ever since man started utilizing
earth’s resources. And while earth’s resources have depleted, the number of human beings utilizing them
have grown many fold. The global rate of human population growth peaked around 1963 but, the number
of people living on earth and sharing finite resources like water and food has grown by 2/3 since then
topping out over 8 billion today.
Population growth causes multiple environmental problems. With growing population each country
needs more crops, more goods, and to keep economies healthy - there is a galloping demand for
consumables. This causes a tremendous load on earth. Global warming is the key issue of all. The
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International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
Intergovernmental Panel on Climate Change (IPCC) reports that global warming poses a grave threat to
the world’s ecological system and the human race, and it is very likely caused by increasing
concentrations of carbon emissions, which mainly results from such human activities as fossil fuel
burning and deforestation [1]. In order to alleviate global warming, the United Nations (UN), the
European Union (EU), and many countries have enacted legislation or designed mechanisms to curb the
total amount of carbon emissions.
These include the Kyoto Protocol [2] and the European Union Emission Trading System (EU-ETS),
which implements a mandatory ‘‘cap and trade’’ system in the 27 EU [3] member countries. Among these
legislation and mechanisms, carbon emission trading is generally accepted as one of the most effective
market-based mechanisms, which has been broadly adopted by UN, EU, and many governments. It is
followed in more than 20 countries globally. Australia, Canada, Japan, and the USA are also paving the
way for domestic carbon emission markets.
Bonney and Jaber [4] structured human groups according to their role in inventory at various levels.
They can be arranged hierarchically into 5 categories: international organizations, nation states, local
government, companies and other organizations & individuals (level 1 to 5 respectively), as shown in
Figure 1.
1: Organizations
2: Country
3: Local
Governments
4: Enterprises
5: Individuals
Figure 1: Inventory at Various Human Levels
Virtually no inventory is held at international level except for humanitarian/relief purposes. An
example of Level 1 is United Nations. At Level 2, there are strategic stocks of food, energy, medicine,
military supplies, etc. At Level 3 there is minimalistic inventory – just enough to enable governance.
Physical inventories are majorly concentrated at Level 4. They include production, manufacturing,
warehousing, goods in transit, retail goods, waste items, etc. It is individuals in Level 5 who work in
various levels mentioned above and are responsible for buying, using and disposing items made mostly at
Level 4 within the broad constraints set by governing bodies at Level 2 and Level 3.
As mentioned earlier, individuals at Level 5 have started consuming more and more, giving birth to
consumerism. This represents one of the greatest changes in human experience ever, and is a global
phenomenon now. A large number of people have come to define life materially and have fostered
new kinds of hopes and frustrations accordingly. A development perspective has become an
indispensable parameter of the economic growth of a country, especially for developing nations like
India. According to the Ecological Society of America, human society today is 30% more material
dependent than is sustainable from the world’s available resources and 85 countries are exceeding their
domestic bio-capacities. Such countries compensate for their lack of local material by depleting the
stocks of other countries which have a material surplus. Consumer driven consumption has led to
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International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
planet-wide ecological degradation, as companies race recklessly to increase their production, seek
monopoly and cement their brand. This is a vicious cycle, leading to contamination of land, forest,
water and air. The consequences can be seen in form of global warming, climate change and
pollution induced health concerns.
Environmentalism is a topic of keen interest amongst the thinkers of society today. It is a broad
philosophy, ideology and social movement regarding concerns for environmental conservation and
improvement of the health of the environment, particularly as the measure for this health seeks to
incorporate the concerns of non-human elements as well. Ironically, a majority of people increasingly
agree that climate change is a global emergency, but there is no consensus on how to fix it. Industries
plan too often; fix too little, too late. If the Industrial policies of a country place too much emphasis on
renewable energy, critics point to its infeasibility because of its high cost. Environmentalists often
offer views that seem to be a naïve wish list to cripple the economic growth of a country. Awareness of
potential environmental degradation is no longer enough, and there is a pressing requirement to ensure
that people actively care about it.
With environmental problems emerging globally, concern has started creeping into the inventory
management area. Supply Chain Management under the umbrella of Inventory management has been a
focal area of research since early 1920s. The first mathematical treatment of inventory systems was
Economic Order Quantity (EOQ) model developed by Harris in 1920s [5]. This model is still relevant and
is studied and extrapolated till date. Studies are going on to create such inventory systems which are
environmentally responsible. It is suggested that in order to understand how to create such systems it is
likely that further theoretical developments will be required and that there may be a need to develop
methods that will determine inventory levels based on measures other than cost. Realistic costs are
difficult to calculate even with the classic models but are virtually impossible with unusual and
potentially catastrophic events. Also, and more importantly, models based on unreliable costs can be very
misleading. Additionally, using cost minimization as a performance measure is unlikely to give sufficient
importance to meeting users’ and society’s requirements. Generalizing models in terms of utility may be
intellectually satisfying but leads to problems of estimation and quantification.
Currently companies are increasingly sensitive and responsive to the carbon emissions i.e., emissions
of carbon dioxide and other greenhouse gases associated with their operations [6]-[7]. Under the influence
of environment conscious customers, socially responsible governments and other pressure groups, they
are undertaking initiatives to reduce their carbon footprint. In a recent paper, Chen [8] notes that firms
have focused for the most part on reducing emissions through innovations of the physical processes
involved, for example by redesigning products and packaging, deployment and use of less polluting
sources of energy, or replacing energy inefficient equipment and facilities. For example, determining how
frequently supply deliveries are made could be as important in mitigating carbon emissions as the energy
efficiency of the vehicles used to make these deliveries [9]. Operational adjustments, such as
modifications in batch sizes or order quantities, have proven to be an effective way to reduce the impact
of carbon emissions [6] [8] [10] [11]. Thus, in recent years, green and sustainable supply chain
management has been studied extensively. In the following state of the art, we will focus on papers
dealing with sustainability modeled in inventory management, demand and vertical coordination.
The business practices and operational policies have considerable impact on carbon emissions. For
example, vehicles are used to make deliveries, so the decision of placing order and the frequency will
have impact on the carbon footprint depending on energy efficiency of the vehicle. In such case JIT and
lean manufacturing which favor frequent deliveries with less than truckload shipments, small production
runs and multiple regional warehouses can have impact on carbon footprint equivalent to energy
efficiency of individual units deployed in production or distribution. Different policies for relating carbon
footprint to industry can be broadly bifurcated as 1) Price based: Imposing a tax on all carbon emissions
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International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
or above a strict cap specified by the authorities; 2) Quantity based: Cap and trade (imposing a cap on
emissions and allowing firms to trade emission permits among each other); 3) Carbon offset: investing in
carbon offset to mitigate carbon caps.
The carbon emissions trading is likely to emerge as a multibillion-dollar market in global emissions
trading with the increasing ratification of Kyoto Protocol (KP) by countries and rising social
accountability of polluting industries in the developed nations. The recent surge in carbon credits trading
activities in Europe and U.S. is an indication of how the emissions trading industry is going to pan out in
the years to come. One carbon credit is equivalent to one ton of carbon dioxide or its equivalent
greenhouse gas (GHG). Carbon credits are “Entitlement Certificates” issued by the United Nations
Framework Convention on Climate Change (UNFCCC) to the implementers of the approved Clean
Development Mechanism (CDM) projects. Emissions Trading (ET) is a mechanism that enables
countries with legally binding emissions targets to buy and sell emissions allowances among themselves.
II. LITERATURE REVIEW
The research papers [4], [8]-[17] reviewed on carbon constrained EOQ models are tabulated in Table 1.
01
02
Environmental
ly Responsible
Inventory
Models: Non
Classical
Models for a
Non-Classical
Era
EOQ Model
for the CoOrdinated
Two-Level
International
Chain Supply
Considering
Imperfect
Items and
Environmental
Impact
Remarks
Carbon Offset
Author(s),
Year and
Journal
Cap & Trade
Title of the
Publication
Taxes on
Emission
S.
N.
Strict Emission
Caps
Carbon Regulation
Strategies
Basic Inventory
Model worked on
Table 1 :A Review of Environmentally Responsible EOQ Models
Maurice
Bonney,
Mohamad Y.
Jaber
2010, IJPE
 Theoretically establishes the importance of revising
inventory management in order to reduce carbon
emission.
 Influence of packaging waste and plant location on
environment investigated.
 Proposes a simplistic extended EOQ model which
includes some environmental cost and names it
Enviro-EOQ model.
Economic
Order
Quantity
M.I.M. Wahab,
S.M.H.
Mamum, P.
Ongkunaruk
2011, IJPE
 A co-ordinated international supply chain where the
vendor and the buyer are in different country
 Environmental impact incorporated into the optimal
decisions of supply chain considering carbon
emission costs both fixed and variable.
Economic
Order
Quantity
with
defective
items
03
Managing
Carbon
Footprints in
Inventory
Management
Guowei Hua,
T.C.E. Cheng,
Shouyang
Wang
2011, IJPE
04
Carbon
Footprint and
Saif Benjaafar,
Yanzhi Di,
 Operation decisions in inventory management under
carbon emission trading mechanism.
 Derives optimal order quantity, impacts of carbon
emission trading, carbon price and carbon cap on
order decisions, carbon emission and total cost.
 Extension of much generated EOQ model proposed
by Benjaafar (2010)
 Demonstrates how operational adjustments can
reduce carbon emission to some extent as an alternate
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✓
✓
✓
✓
✓
Economic
Order
Quantity
✓ ✓
Economic
Order
428
International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
05
The
Management
of Supply
Charts:
Insights from
Simple
Models
Mark Daskin
2012, IEEE
Including
Sustainability
Criteria into
Inventory
Models
Yann Bouchery,
Asma Ghaffari,
Zied Jemai,
Yves Dallery
2012, EJOR
06
The Carbon
Constrained
EOQ
Xi Chan, Saif
Benjaafar, Adel
Elomri
2012, IJOR
07
A Sustainable
EOQ Model :
Theoretical
Formulation
and
Applications
Daria Battini,
A. Persona,
Fabio
Sgarboassa
2013, IJPE
08
09
10
Carbon
Emissions in
A MultiEchelon
Production
Inventory
Model with
Lead Time
Constraints
Single Period
Inventory
Model Under
Dual Sourcing
and Product
Carbon
Footprint
Constraint
The Carbon
Constrained
Ramzi
Hammami,
Imen Nouira,
Yannick Frein
2014, IJPE
Emel Arikan,
Werner
Jammirnegg
2014, IJPE
Vincent
Hovelaque,
to costly investments in carbon reducing
technologies.
 Impact of collaboration among firms on their costs
and carbon emissions within same supply chain.
 Model proposed analyze the effect of various
strategies of emission regulations including strict
emission caps, taxes on emissions, cap-&-offset and
cap-&-trade.
 Benefits of investing in carbon efficient technologies.
 Proposed a modified EOQ model subject to
associated carbon costs with inventory at its various
stage: ordering, holding, production backordering
 Proposes an interactive multi-objective optimization
procedure that enables the firm to provide preference
information about economic, environmental and
social tradeoffs.
 Formulates classical EOQ as multi objective problem
and later extends it into a multi echelon inventory
optimization.
 Addresses the formulated model as Sustainable Order
Quantity model.
 Establishes that opportunity for reducing carbon
emissions via operational adjustments exists
whenever the operational drivers of emissions are
different from the operational drivers of cost.
 Order quantity modifications under which relative
reduction in emission is greater than the relative
increase in cost derived. Factors affecting the
difference in magnitude of emission reduction and
cost increase investigated.
 Application of above under a variety of carbon
regulatory policies and other operational models
demonstrated.
 Develops model for calculating the full costs of a
single product replenishment problem based on the
traditional EOQ Model. In the numerical applications
reported, intermodal and road freight transportation
options were considered for the same product and the
model was applied to understand the real effects of
sustainability considerations in EOQ when direct
accounting method is applied.
 Shows how the lead time constraints, the inventory
policy and the multi echelon context can impact on the
amount of emissions.
 Correlation between carbon emissions and the
decisions of manufacturing, ordering and inventory
positioning.
 Individual caps can achieve significant lower emissions
but can paradoxically lead to increasing the per unit
emissions with comparison to global cap.
 Single period inventory model with carbon footprint
constraint for one and two supply chain.
 Comparison of dual sourcing strategies on shoring and
faster transport mode with respect to their economic
and environmental implications.
 Impact of an internally driven environmental constraint
on the ordering policy and the resulting tradeoff
between economic and environmental performance.
 Shows link between EOQ policy, total carbon
emissions, price and environmental demand.
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Quantity
✓
✓
Economic
Order
Quantity
Model, Multi
Echelon
Model
✓
✓ ✓
Economic
Order
Quantity,
Facility
location,
Newsvendor
models
✓
Economic
Order
Quantity
✓
MultiEchelon
Production
Inventory
✓
✓
Newsvendor
problem,
Dual
sourcing
✓
✓
Economic
Order
429
International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
11
EOQ Model
with Carbon
Emission
Dependent
Demand
Laurent
Bironneau
2014, IJPE
A Carbon
Sensitive Two
Echelon
Inventory
Supply Chain
Model with
Stochastic
Demand
Malek Abu
Alhaj, Davor
Svetinovic, Ali
Diabat
2015,
Resources,
Conservation &
Recycling
Quantity
 Establishes conditions and mechanisms that allow a
company to maximize profit while minimizing
emissions.
 Deduces that environmental strategy is more
significant for cheaper and green labeled products; a
public mechanism such as a carbon tax will decrease
total and marginal emissions.
 Develops a mixed integer program that minimizes the
cost of a stochastic two echelon supply chain.
 Model is solved using (General Algebraic Modeling
System) GAMs.
 The optimal design (lowest cost) tends to change in
order to make the supply chain less centralized and to
reduce the pressure on certain distribution centers.
Joint
Location
Inventory
Problem (2
echelons)
✓
III. PROBLEM FORMULATION
There is sparse evidence of EOQ model formulations with carbon constraints. This regime of supply
chain management has recently started drawing attention. The models proposed by various authors take
classical EOQ model as the basis of their investigation. In this paper, we consider the models formulated
by Benjaafar [8] for various carbon reduction policies. The emissions may be either direct emissions from
fuel or indirect emissions from electricity consumption. The carbon policies considered are Carbon Tax
and Carbon Cap and Offset. We settle to only these two policies because they appeal to be more practical
for developing countries. For a developing country, cap and trade may not be viable for small
manufacturers because the country might land up in higher debts for exceeding allotted carbon limit and
buying carbon credits for sustaining.
In the below formulations, we assume that there are no constraints on order sizes, no supply lead times,
all demands are fulfilled. We also assume that the carbon emissions cap is over the entire process and that
the emissions are linearly increasing in the associated decision variables. Of course, there may be instances
where emissions follow non-linear pattern but there is always a possibility to solve it approximately by a
piece-wise linear function. We assume that the emissions are measurable and quantifiable and the limits
are readily available.
The objective of a firm is to find an order quantity Q such that cost per unit time is minimized subject to
the constraint on amount of carbon emitted (as imposed by government or voluntary limit decided by the
firm). Consider a firm that faces a constant demand with rate D per unit time. Each time the order is
placed, the firm incurs a holding cost h per unit, fixed cost A per unit and a cost c per unit purchased or
produced. Similarly, emission cost is associated with ordering, holding and producing the inventory and
can be denoted as , ℎ and ̂ respectively. The problem can now be stated as follows:
( )=
+
+ ̂
+
≤
+
(1)
(2)
On solving above for optimal order quantity that minimizes carbon emission, we get
=
(3)
Let Q* denote the order quantity that minimizes the cost while ignoring carbon emission constraint.
Then, we know the value of Q* from traditional EOQ Model.
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International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
∗
=
(4)
The optimal solution to Eqn. 1 and Eqn. 2 will be:
=
Where
(5)
=
(6)
− ̂ . Then the optimal solution to problem (1)-(2) is
∗
=
∗
=
∗
≤
≤
∗
≥
∗
≤
,
,
.
A. Carbon Cap-and Offset
This is an alternate to taxing all emissions and to tax only emissions that exceed a certain threshold by
regulatory authorities. The firm is allowed to relax its cap through the purchase of emission offsets through
third parties. If the firm adjusts its order quantity such that sum of its operational and emission costs gets
minimized, then the problem can be formulated as follows:
( )=
Where,
=
+
+
+
+
−
(7)
− ̂ , t is the penalty paid per unit emitted in excess of the cap, and
= max (0, X).
The optimal order quantity that minimizes (7) is given by
⎧
⎪
⎪
=
where
=
⎨
⎪
⎪
⎩
+ℎ
∗
=
=
(
)
,
<
,
<
<
<
(8)
=
,
∗
,
=
=
<
,
<
>
< +ℎ
Corollary: It is a common observation that a lot of companies are not aware about the full cost
implications tied to their inventory. They often rely on the misguided premise that regular accounting gives
a reasonable estimate of the costs of their inventory. Inventory cost measurement, in itself, is a complex
problem. There are a number of alternative cost accounting systems that can be relevant for some purposes
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International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
while being inadequate or detrimental for others. The true cost of inventory simply entails many elements
and goes far beyond the basic bifurcations of ordering, holding and shortage costs. The ordering cost or
cost of replenishing inventory covers the friction created by orders themselves, that is, the costs incurred
every time an order is placed. Cost of procurement and inbound transportation costs form a part of
Ordering Cost. Ordering Cost is dependent on two factors - The cost of ordering in excess and the Cost of
ordering insufficient quantity. Carrying costs consist of inventory storage costs and cost of capital. Further,
inventory storage costs comprise of cost of building rental, facility maintenance and related costs,
operational costs, consumables, communication costs and utilities, besides the cost of human resources
employed in operations as well as management. Cost of capital includes the costs of investments, interest
on working capital, taxes on inventory paid, insurance costs and other costs associated with legal liabilities.
Shortage costs include loss incurred due to insufficient inventory, shrinkage cost, pilferage cost and
obsolescence cost. It is shown in Table 2.
Table 2. Components of Inventory Cost
Total Inventory Cost
Holding
Obsolesce Cost
Pilferage Cost
Shrinkage Cost
Cost of Legal Liabilities
Insurance Costs
Taxes on Inventory Paid
Interest on working Capital
Cost of Investment
Communication Cost &
Utilities
Cost of Capital
Consumable
Operational Cost
Facility Maintenance
Cost of Building Rental
Human Resource
Inbound Transportation Cost
Cost of Procurement
Inventory Shortage
Shortage
Loss Due to Insufficient Inventory
Ordering
When the holding, ordering and shortage costs are split into the sub-components they comprise of, the
generalized equation becomes more sensitive and relevant. It might happen that holding cost for some
products may emit more carbon than transportation for the same might entail, or vice versa. Example, the
refrigerants used in grocery stores account for a larger percentage of store’s greenhouse gas footprint than
its truck fleet. Here, holding the products in grocery store are emitting more carbon, thus, holding carbon
cost will be more than ordering carbon cost. We see that increase in either of the carbon costs in the cost
function can simultaneously affect the Sustainable Economic Order Quantity.
IV. INDIAN PERSPECTIVE
As of 2015, India is world’s 4th largest polluting country and is likely to increase its pollution levels by
6% by 2020. India ratified the Kyoto Protocol in 2002 even while it is still a developing country and is
otherwise not liable to obligatory reductions commitments. India aims to reduce emission level by 3335% relative to 2005 levels by 2030 with increasing the share of non-fossil fuel energy in its total mix to
40%. [18].
The basis of India’s climate policy framework is its 2008 National Action Plan on Climate Change
(NAPCC), which specifies eight national objectives for 2017 that center on improving, respectively,
energy efficiency, solar technology, sustainable habitats, water, Himalayan ecosystems, “green India”,
agriculture, and strategic knowledge.
While India has not yet established a carbon market or carbon pricing policy, it does have in place a
‘Perform Achieve and Trade (PAT), which promotes energy intensity improvement, and a Renewable
Energy Credit (REC) trading system. The interrelationships between the two programs are currently being
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International Journal of Advance Engineering and Research Development (IJAERD)
Volume 3, Issue 3, March -2016, e-ISSN: 2348 - 4470, print-ISSN: 2348-6406
deliberated, and eventually credits from either system may become fungible. For the coming years, the
Indian government has mandated the implementation of pilot emissions trading systems, which will aim
to reduce emissions of particulates, in three states: Tamil Nadu, Gujarat, and Maharashtra. In October
2013, the Pollution Control Board for these regions released guidelines for stationary sources to utilize
Continuous Emissions Monitoring Systems (CEMS) to measure emissions. Accepting an emissions
trading scheme means that India would also have to agree to an emission cap for itself. However, this
might turn out to be counter-productive for India since being a rapidly developing economy with large
incremental rise, its emissions might rise above the cap for which it would have to face severe
consequences. India has viewed climate change as a problem due to developed countries and has
steadfastly refused to accept any mandatory emission reductions. This was a moral stand taken by the
developing nations who participated in the Kyoto protocol that developed countries should first reduce
their own emissions since they were responsible for most of the emissions. India’s cumulative emission is
only 3 per cent, compared with countries such as the U.S. where the emissions are way higher, due to the
American lifestyle.
To implement an ETS effectively, India will need to build its capacity, namely improve its data
collection and its supply of trained manpower. The transition from a PAT system to a well-functioning
ETS will be challenging. For that, the Indian government needs to change its climate priorities away from
increasing energy production, and move towards limiting greenhouse gases. Non-compliance penalties are
relatively weak so they could fail to grant incentives to compliance. Carbon sensitive technologies are
costly to implement and it is not viable for small scale industries and SME’s to alter their production set
ups altogether. The big players, though, have started green practices by altering their supply chain system,
introducing carbon controlling machineries, implementing concepts like Zero Inventory.
V. CONCLUSION
After a detailed literature review of the researches done to formulate such EOQ models which are
sustainable and environmentally responsible, the authors deduce that there are endless opportunities to
formulate new models to obtain a sustainable economic order quantity with other constrained models of
inventory. Amount of inventory held, replenishment rules on inventory system performance, inventory
logistics, inventory storage area design, packaging materials being used to protect inventory, waste
disposal of perishable and unused inventory, energy expended by working staff- all these can be remodeled to become environmentally sustainable. The carbon count at all points can only be handled by
the use of computers and an integrated data-sharing control platform. Future contingent modifications in
software which take carbon footprints into consideration should start from now. Rather than Economic
Order Quantity, Sustainable Economic Order Quantity should be taken into consideration. For the models
suggesting taxation on carbon emissions and assuming infinitely large taxes on carbon emitted beyond a
strict cap, there is a pressing need for a much rational re-assessment of the penalty structure so that the
small vendors who are generally not in a position to implement high end environment friendly solutions
are in a state to welcome the change. If the cap for all industries is same, companies will book losses and
possibly lead to practice false ways to escape the carbon tax and the overall objective behind implementing
the policy would suffer. Hence carbon taxation slabs according to company turnover, scale, maximum
efficiency, product type should be decided over a range of carbon emission value such that the companies
are rationally compelled to pay for the carbon emissions beyond the defined cap. The cost function in cap
and offset method should be expanded in order to get much more accurate and yet sustainable EOQ values.
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International Journal of Advance Engineering and Research Development (IJAERD)
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