Optimal inventory models for imperfect and deteriorating items with carbon emissions considerations / Lok Yi Wen

Lok , Yi Wen (2024) Optimal inventory models for imperfect and deteriorating items with carbon emissions considerations / Lok Yi Wen. PhD thesis, Universiti Malaya.

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Abstract

In the pursuit of unprecedented profitability, companies recognise the irrefutable linchpin of effective inventory management. As a symphony of financial capability and operational excellence, this discipline holds the key to bolstering optimal profits while streamlining costs. The Economic Order Quantity (EOQ) model often emerges as an illustrious contributor to the realm of inventory modelling, that is, determining optimal inventory levels and offering invaluable guidance to decision-makers. However, the complexity of inventory management is compounded by the presence of imperfect items, such as defective goods produced during the manufacturing process or damage incurred during transportation or handling. This study addresses this challenge by developing two EOQ models, each grounded in a distinct policy: the first involves rectifying imperfect items through repair, while the second revolves around replacing the imperfect items by procuring new ones from an alternate supplier. The developed models judiciously account for a fixed proportion of imperfect items within order quantity determination. With keen insight, companies are equipped to select the most astute policy that suits their unique circumstances. In addition, the investigation delves into the complexities of managing non-instantaneous deteriorating items, which necessitate timely sales to avert their eventual deterioration. An overabundance in ordering quantity can lead to financial losses should unsold items deteriorate, while an under-stocking runs the risk of unfulfilled market demand. In light of this, this study explores the concept of preservation technology, which prolongs the shelf life of non-instantaneous deteriorating products. Diverging from conventional EOQ models that assume a fixed time interval before deterioration disregards environmental considerations, the proposed model captures the variability of pre-deterioration periods contingent upon preservation levels, which is more realistic to real-world dynamics. Of particular significance is the dependence of deterioration rate on preservation level, and this pivotal relationship enhances the accuracy of the proposed EOQ model in ascertaining optimal order quantities, thereby effectively curbing waste and safeguarding against stockouts. The inclusion of carbon emissions in the developed model reflects our growing concerns about environmental issues and governmental policies that aim to mitigate carbon emissions. Moreover, this study encompasses numerical analyses to support the practical applicability of the models as well as sensitivity analyses to examine the effects of diverse parameter combinations within the models, thus providing incisive management implications to navigate companies towards optimal operational efficiency and contribution to an environmentally sustainable future.

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