Lot sizing with permissible delay in payments and entropy cost

Lot sizing with permissible delay in payments and entropy cost

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Article ID: iaor20072174
Country: Netherlands
Volume: 52
Issue: 1
Start Page Number: 78
End Page Number: 88
Publication Date: Feb 2007
Journal: Computers & Industrial Engineering
Authors:
Keywords: lot sizing, economic order
Abstract:

Although the lot size problem (i.e., the economic order quantity model) has been widely accepted and used by researchers and practitioners, it has also been criticized by others on the grounds that not accounting for some of the hidden costs in inventory systems often leads to poor results. This paper postulates that estimating these hidden costs may be attained by applying the first and second laws of thermodynamics to reduce system entropy (or disorder) at a cost. The applicability of this concept is demonstrated for the economic lot size problem with permissible delay in payments. Mathematical models are developed with numerical examples provided and results discussed.

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