7th IFAC Conference on Manufacturing Modelling, Management,

and Control
International Federation of Automatic Control
June 19-21, 2013. Saint Petersburg, Russia

1913-2013: The EOQ theory and next steps towards sustainability

Alessandro Andriolo, Daria Battini, Mauro Gamberi, Fabio Sgarbossa

and Alessandro Persona

Department of Management and Engineering, University of Padova, Stradella San Nicola 3, 36100, Vicenza, Italy
(e-mail: daria.battini@unipd.it; fabio.sgarbossa@unipd.it; alessandro.persona@unipd.it; andriolo@gest.unipd.it )

Abstract: The paper is divided in two parts. Firstly, we discuss the evolution of the lot sizing theory during one
hundred years of history, starting from the basic model developed by Harris in 1913, up to today. After Harris’
work in fact, several researchers added new conditions attempting to reflect real cases as well as possible. The
evolution of the EOQ theory strongly reflects the evolution of the last century industrial systems. The second
part of the paper is concerned with the discussion of a “Sustainable Inventory Management Framework”, identi-
fying the associated sub-problems, the associated decision variables, and the sources of sustainable achievement.
Two main factors were identified as being significant in turning a benefit in terms of sustainability: the first is
linked with the in-bound logistics area in which material transportation and waste act as a major role to address
system environmental sustainability, the second is linked with the social impact of manual material handling ac-
tivities performed inside the plant (in-house logistics).

Keywords: Economic lot sizing, EOQ, EPQ, theoretical framework, survey, research agenda

1. INTRODUCTION published in the period 1996-2012. Now, to recover the old-

Harris F.W. has undoubtedly provided the earliest and most
important contribution in lot sizing theory. For this reason he
can be considered as the Father of the EOQ theory. In this
work we tried to understand how lot sizing research has been
built on the first Harris model published in 1913. After one
century from the first EOQ model, there is a need to assess
what our collective understanding of lot sizing seems to be at
this point in time, what we don’t understand, and what direc-
tions might be fruitful for future research. We recently ex-
plored how lot sizing research has been built on the Harris
basic model by selecting and analyzing 219 papers published
in relevant peer-reviewed management journals between the
beginning of 1913 and the end of 2012. Due to the large time
window to be analyzed (100 years: 1913-2012), the authors
decided to use different search techniques according to the
different periods of time. In brief, the database Scopus al-
lowed us to find the most important literature from 1996 up
to today, using the keywords “EOQ”, “EPQ”, “Economic or-
der quantity”, “Economic production quantity” in field Title.
We then excluded titles containing the words “Review” or
”Survey” or ”Case study”. We obtained 259 papers that were
subjected to a further analysis of their abstract and content,
and ranked for citation count in Scopus. To consider only the
most relevant works we selected the 95 papers that represent-
ed the 90% of the total count of citations. Then, in order to
identify the most relevant contribution in the recent period
2010-2012, each paper selected by Scopus with the same
keywords has been read and classified according to the “cen-
trality of the EOQ/EPQ construct”. We applied a 4 point
scale evaluation in order to retrieve the most significant pa-
pers. The final output consists of a set of 49 papers published
in 2010-2012, that added to the previous selected works lead
to obtain a set of 144 papers on EOQ and lot sizing theory
est articles, a snowball-approach was performed by checking
articles that were cited in the 144 previously selected works
and where the citation indicated that the paper might be rele-
vant for this review. These papers and their citation counts
were found using the Google Scholar database. In total 219
relevant papers were finally identified after this stage and in-
cluded in the analysis. In this short contribute, to keep the
length of this review within reasonable limits, we will not
discuss all 219 papers in detail in the following, but restrict
ourselves to discussing those papers that are most relevant to
understand future research needs and expectations.
2. CLASSIFICATION OF THE EXISTING LITERATURE
The number of works on EOQ/EPQ models has increased ex-
ponentially over the last years, which highlights the im-
portance researchers attribute to this topic especially in the
current business environment.
The research in this area is fundamentally driven by the first
basic model (the Harris work, 1913) and that incremental
steps have been done from the 1913 up to today in order to
better reflect real industrial problems and constraints. Any-
way, by a practical point of view, the method selected in the
determination of the lot size is not as critical as it is the im-
plementation of a method aimed at optimization. This is the
reason for which the Harris’ basic model is always attractive,
for its simplicity and the minimal amount of data needed and
always applied also today after 100 years from its creation.
Despite the vast amount of literature on lot sizing developed
in the last 100 years, most of the work is concerned with the
total cost function definition by an economical point of view,
following the Harris’ basic approach and by using a Direct
Costing method. The analysis performed in this work clearly
shows how the EOQ literature is a mirror of the last century:
it reflects the evolution of the operation management tech-

978-3-902823-35-9/2013 © IFAC 1708 10.3182/20130619-3-RU-3018.00371

2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia
niques in worldwide industrial systems of the last 100 years.
After the Harris’ work in fact, several researchers added new
incremental conditions attempting to reflect real case prob-
lems as well as possible, putting different emphasis on differ-
ent model conditions and constraints (Fig. 1).
EMPHASIS
LITERATURE FOCUS:
EOQ b asic model 1913
EPQ model
Goods deterioration
1918
1963
Quantity discounts
Inflation
1963
1975
Time varying demand
Variab le lead time
1977
1979
Trade Credits
Process deterioration
Shortages and b acklogging
Remanufacturing
Limited supplier capacity
Imperfect quality items
Environment sustainab ility
Social sustainab ility
Development of simple
mathematical inventory
models
Market variability and
system dynamics
Contraints and
variability in
production
Figure 1. EOQ literature historical evolution in relation to the
aspects and assumptions considered by the authors (analysis
based on the total amount of the 219 papers selected).
Previous work in this area has generally focused on:
1) Developing new cost functions for specific applications;
2) Categorizing new input data and factors to be included in
the analysis;
3) Relaxing traditional and previous constraints;
4) Building new solution approaches and models by which lot
sizing formulas can be designed and developed for various
types of systems in the real setting.
The analysis of the existing literature lead immediately to a
first classification of the models into 3 big sub-systems in re-
lation to the type of input data considered:
− Deterministic models: all the input data are completely
known a priori. Due to the easiness in dealing with
known parameters, the majority of the existing literature
consists of deterministic models. Some of these try to
give an optimal solution of the problem, others give
some heuristic approach in order to gain good results in
practical situations. One of the classic EOQ assumption
is that replenishments happens instantaneously at the
moment in which the retailer places the order. In indus-
trial world indeed, due to limited production capacity of
the production plants, the replenishments are done grad-
ually. To consider this fact, Taft (1918) proposed to
modify the square root formula adding a parameter that
represent the ratio between the demand rate and the pro-
duction capacity in the same period, giving birth to the
classical EPQ model. The assumption of constant de-
mand rate, rarely met in real life situations, has been re-
laxed first by Donaldson (1977), who considered the
case of linear trend in demand. Silver (1979) adapted
Silver-Meal heuristic to developed an approximate solu-
tion procedure for the positive linear trend in an effort to
reduce the computational effort needed in Donaldson's
work. Barbosa and Friedman (1978) gave a complete so-
lution for a power function demand functions. Ritchie
(1984) considered appropriate policies for a linear in-
crease in demand followed by a period of steady de-
mand, and its model was generalized by Hill (1995), who
considered a general power function for demand during
the growth phase, of which linear increase is a special
1985 case. One of the most known work is the dynamic ver-
1986
1987 sion of the economic order quantity, devised by Wagner
1995
1999 and Whitin (1958). The dynamic lot-size model is a gen-
2000
2011
eralization of basic EOQ model but it takes into account
2012
that demand for the product varies over time using the
dynamic programming. The third unreal assumption of
the classical model is that goods can be stored indefinite-
ly to meet future demands. However in many situations
this is not possible because of the effect of deterioration
is so vital in many inventory systems that it cannot be
Constraints disregarded. The earliest work that describes deteriora-
and variability
in purchasing tion problem was proposed by Ghare and Scharder
System (1963). They observed that certain commodities shrink
sustainability
with time by a proportion which can be approximated by
a negative exponential function of time. They considered
a constant deterioration rate θ, that describes the situation
in which a constant fraction of the on hand inventory
level deteriorates along the time. In literature many au-
thors deal with the problem of deterioration using a con-
stant deterioration rate. Some examples are Hariga
(1996), Dave and Patel (1981), Ouyang, Chang and Teng
(2005), Bose, Goswami and Chaudhuri (1995). Deterio-
ration rate can also be variable along the time according
to some function θ(t). The most known version was pro-
vided by Covert and Philip(1973) that assumed a two-
parameter Weibull distribution. Philip (1974) generalized
Covert and Philip's EOQ model using a three-parameters
Weibull distribution. Recently many authors have dealt
with the problem of determining the economic lot size
with deteriorating items, using the Weibull distribution.
Some examples are Jalan, Giri and Chaudhuri (1996) ,
Chang and Dye (2000), Wu (2001). In the modern econ-
omy the supplier often offers the retailer a fixed delay
period in paying for the amount of purchasing cost, to
stimulate the demand of his commodities. In this way,
before the end of the trade credit period, the retailer can
sell the goods and accumulate revenue earning interest.
The first work on this topic has been provided by Goyal
(1985). Several interesting papers related to trade credits
extended Goyal’s model in many directions. Some ex-
amples are Aggarwal and Jaggi (1995), Huang (2003),
Chung and Huang (2003). In practice, a supplier is often
willing to offer the purchaser a permissible delay of
payments if the purchaser orders a large quantity which
is greater than or equal to a predetermined quantity
(Chang, Ouyang, and Teng (2003) or Chang (2004)). In
addition, in literature two type of quantity discounts are
treated, in order to describe the common industrial poli-
cies: all-units quantity discounts and incremental quanti-
ty discounts (Tersine and Barman (1991), Khouja and
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2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia
Mehrez (1996)). In the former case the supplier provides
a discount for all the items sold to the customer, if the
quantity purchased exceeds predetermined quantities. In
the latter case the supplier provides a discount only for
the items that exceeds the predetermined level, and he
sell the others at the usual price. The basic assumption
that shortages are not permitted is too restrictive in real
industrial situations. Furthermore the addition of a short-
age cost and the possibility of backlogging lead to a low-
er total inventory cost. The possibility of shortages has
become a common assumption for most researchers.
Grubbstrom and Erdem (1999) derived the EOQ formula
without reference to the use of derivatives, neither for
necessary conditions nor for second-order sufficient con-
ditions and including backlogging. For models where
shortages are allowed, complete backlogging or com-
plete loss of unsatisfied demand are two extreme cases.
Deb and Chaudhuri (1987) modified Silver’s (1979) pro-
cedure by including shortages which were completely
backordered. They followed a replenishment policy that
allowed shortages in all cycles except the final one. Each
of the cycles during which shortages were permitted
starts with a replenishment and stocks were built up for a
certain length of time which was followed by a period of
stockout. Many researchers have turned their attention to
models that allow partial backlogging. Some examples
are Wee (1995), Chang and Dye (1999), Yan and Cheng
(1998). Another relevant aspect is that manufacturing fa-
cility don’t functions perfectly during all the production
run. Therefore, the process deterioration added to other
factors, inevitably generates imperfect quality items.
Some example are Jamal, Sarker and Mondal (2004),
Cárdenas-Barron, (2009), Kevin Hsu and Yu (2009).
− Stochastic models: some input data are described by a
known/unknown probability density function. A stochas-
tic approach is more efficient to deal with certain situa-
tions that involve random variables. One of these is the
EOQ with imperfect quality, where the production pro-
cess produces a fraction of defective items. The fraction
of the defective items can be modeled using a probability
density function, that can be known or unknown
(Porteus, 1986). Salameh and Jaber, (2000) considered a
production/inventory situation where items received or
produced, were not of perfect quality with a known den-
sity function.
− Fuzzy models: Fuzzy models are based on the assump-
tion that the parameters are uncertain. This uncertainty is
modeled using a possibility distribution called the mem-
bership function (Zadeh 1965), thus fuzzy set theory is
used in a wide range of domains in which information is
incomplete. Vujosevic et al. (1996) considered trapezoid
fuzzy inventory costs, providing four ways of determin-
ing the EOQ in the fuzzy sense. Yao and Lee (1998) in-
vestigated a computing schema for the EPQ with fuzzy
demand rate and fuzzy production quantity. Chang
(2004) presented a model with fuzzy defective rate and
fuzzy annual demand. Chen, Wang and Chang (2007)
1710
proposed a Fuzzy Economic Production Quantity model
with imperfect products that could be sold at a discount
price. Wang, Tang and Zhao (2007) investigated an EOQ
problem with imperfect quality items, where the percent-
age of imperfect quality items in each lot was character-
ized as a fuzzy variable. Halim, Giri and Chaudhuri
(2008) investigated an Economic Order Quantity (EOQ)
model that considered stochastic demand, partial back-
logging, and fuzzy deterioration rate.
3. CITATION NETWORK ANALYSIS
By examining the citation patterns between the papers se-
lected it’s possible to fully understand the EOQ literature
structure. One of the characteristics of a well-defined com-
munity of researchers is a net-literature work of citations
among their papers that centers on a core set of papers de-
lineating the constructs, theories, and methodologies shared
by the community (Garfield, 1979; Kuhn, 1970; Merton,
1973). We suggest that the less tightly a paper is linked into a
research community’s citation network, the greater the risk is
that the authors are deviating from the community’s norms
regarding its core construct and, hence, the greater the risk is
that the construct is being reified. We analyzed those who
have been the central contributors to that research and how
tightly interlinked our set of 219 paper is. Figure 2 represents
the citation network derived from the relative citations among
the 219 selected papers. Each of the 219 selected paper is
represented by a node, and each of the 1296 relations among
the papers is represented by a directional arrow. This network
is built using the PAJEK software. In order to identify imme-
diately the importance of each paper, the size of the nodes is
proportional to the number of citation received in the net-
work. Additionally we divided the century in five equally dis-
tributed period and we assigned them five different colours.
Observing the network we can identify a great connection
among the nodes but we can also notice a few clusters con-
centrated around some relevant works. These clusters are
densely woven and it is difficult to identify clearly all the re-
lations. By deepening the analysis of the network we identify
four main groups focusing on four different modelling as-
pects:
GROUP 1: papers focused on “imperfect quality items” is-
sues- this cluster incorporates among others Porteus (1986),
Rosenblatt and Lee (1986) and Salameh and Jaber (2000);
GROUP 2: papers focused on “permitted delay in payment”
issues- Goyal (1985), Aggarwal and Jaggy (1995), Jamal et
al.(1997) are included;
GROUP 3: papers focused on “deteriorating items” issues-
next to Ghare and Shrader (1963) and Covert and Philips
(1973), we find Mishra (1975) and Dave and Patel (1981);
GROUP 4: papers focused on “time varying demand” prob-
lems- in this cluster we find Donaldson (1977), Silver (1979)
and Ritchie (1984)
2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia

Figgure 2. EOQ Citation

C netwoork based on thhe 219 selecteed paper

4 NEXT STEP
4. PS TOWARD
DS SUSTAINA
ABILITY: NE
EW incorrporating envvironmental im mpact by tak king into accoount
METHHODOLOGIC
CAL FRAMEEWORK the fixed
f and varriable carbon emission cossts. Battini ett al.
(2012) provided a “Sustainablee EOQ model”” that incorporate
Todday modern societies
s havve started to consider envviron-
and investigate byy an econom mic point of view
v the envirron-
meental and soccial aspects nearby
n economic and finaancial
menttal impact off transportationn and invento ory. In particuular
goaals. The increeasing concernn on socio-ennvironmental prob-
interrnal and externnal transportattion costs, ven ndor and suppplier
lemms stresses thhe need to treeat inventory management deci-
locattion and the different
d freigght vehicle utiilization ratio are
sioons as a wholee by integratinng economic, environmentaal and
conssidered in ordder to providee an easy-to-u use methodoloogy.
soccial objectivess. Thus, it’s always
a more necessary to work
In litterature, sociaal aspects are rarely includeed into inventtory
towwards a Respoonsible Inventory Managem ment, both in thheory
models. In the laast three yearr to our know wledge, only two
andd in practice. Despite the vast
v amount of o literature on
o lot
work ks have incorpporated sociall sustainability y into Lot Sizzing
sizing, most of thhe work is conncerned with the total cost func-
models. Arslan annd Turkay (20010), revised th he standard EOQ
E
tionn definition by an economiical point of view,
v followinng the
model to incorporrate environm mental and soccial sustainabiility
Haarris’ basic appproach and byy using a Direcct Costing meethod.
conssiderations in addition to the conventiional econom mics.
Environmental and a Social im mpacts of invenntory and purrchas-
Theiir model is prrobably the fiirst attempt to owards the soocial
ingg decisions arre difficult too quantify wiith traditional eco-
sustaainability direection. They consider as social
s metric the
nom mical approaaches. Howevver, research on environm mental
work king hours foor the employyees according g to the Interrna-
susstainability haas considerablly enriched operations
o mannage-
tionaal Labour Orgganization (IL LO). In order to assess the so-
meent literature in the last thhree years, with
w new inveentory
cial performance of an organiization, they considered man- m
moodels that are able to incluude environmental aspects from
hourrs required too perform thee inventory co ontrol operatiions
thee beginning off the analysis. Benjaafar et al. (2010) incorpo-
usingg direct accouunting and dirrect cap appro oaches. Bouchhery
rateed carbon em mission constrraints on singgle and multi--stage
et al. (2012) reforrmulated the cclassical econo omic order quuan-
lot--sizing modells with a cosst minimizatioon objective. They
tity model as a multi-objectiv
m ve problem in ncluding envirron-
connsidered fourr different poolicies based respectively on a
menttal and sociall sustainabilityy. They consiidered a structture
striict carbon capp, a tax on thee amount of emissions,
e thee cap-
simillar to the claassical EOQ formula to quantify
q envirron-
andd-trade system m and the posssibility to invvest in carbonn off-
menttal and social impacts but they didn’t su uggest any poossi-
sets to mitigate carbon caps. Hua et al. (22011) extendeed the
ble metric
m in ordeer to describe the social imppact. Finally they
t
EOOQ model takking carbon em missions into account undeer the
a interactive procedure thaat allows the decision
use an d makeer to
capp and trade syystem. Bonneey and Jaber (2011) discussed a
identtify the best option
o amongg the set of efficient solutiions
rannge of inventoory problems that
t are not coonsidered apprropri-
(the so-called Parreto optimal ssolutions). In table 1 some ex-
ateely in traditionnal inventory models, for example
e the effects
amplle of the facttors considereed in the Lot Sizing literatture
on the environm ment of packagging choices, location of stores,
are summed
s up. They
T t three sustain-
are subddivided into the
andd waste. Theyy focused theirr attention on environmentaal im-
ability measures: economic, ennvironmental, social. Envirron-
pacct of logistic operations, annd they outlinned a hierarchhy of
menttal and sociall aspects havee been consid dered only in the
thee players invoolved in inveentory managgement. Theyy also
mostt recently puublished workks. Anyway, even if envirron-
sugggested some metric categoories that could be used to assess
a
menttal impacts linnked to goodss transportatio on and warehoous-
invventory perforrmance relateed to the enviironmental im mpact.
ing can
c be quantittatively investtigated by thee use of formuulas,
In the last part of
o their paper, they formulaated a model called
c
the social
s impactt of different inventory management
m d
deci-
“Ennviro-EOQ”, that considerss environmenttal costs of veehicle
sionss is still vaguee and not reallly deepened.
emmissions and prrovides a clossed-form soluttion for the opptimal
vallue of the lot size. Wahab et al. (2011) provided a model m
forr a two-level supply
s chain that
t determinees the optimall pro-
ducction–shipmennt policy for items
i with imp
mperfect qualityy and

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Economic/ financial Environmental as- Social aspects ing future researches to find the best way to couple the total
aspects pects cost function quantification with the emission function analy-
sis according to a multi-objective optimization approach.
Ordering and hold- Emissions due to Number of working
ing cost (Harris 1913, process setup hours involved 2) IN-HOUSE LOGISTICS DECISION: once we have de-
Camp 1922, Wagner (Benjaafar et al. 2010) (Arslan and Turkay fined the most sustainable purchasing lot size in the previous
and Whitin 1958) 2010)
Emissions due to step, it’s then necessary to design the most sustainable pack-
Setup cost (Taft transportation tasks Theoretical approach aging unit to move on inside the plant. In this case, social cri-
1918) (Benjaafar et al. 2010, - the social aspect to
teria directly linked with manual material handling need to be
Shortage cost (Deb Hua et al. 2011, be considered is not
Bonney and Jaber defined (Bouchery,
assessed by applying specific approaches not always based
and Chaudhuri 1987,
2011, Wahab, 2011) 2012) on a mathematical computations of quantitative variables. In
Wee 1993)
Emissions due to Fatigue of workers
this context, new research efforts are requested in linking er-
Deterioration in
stock holding tasks involved in MMH gonomics aspects with lot sizing decisions, both in produc-
stock (Ghare and
Scharder 1963, Covert (Benjaafar et al. 2010, tasks and recovery tion than in purchasing. Ergonomics aspects, in fact, are re-
and Philip 1973) Hua et al. 2011) times (Andriolo et al, lated to the material handling/lifting activities usually per-
Imperfect production Emissions due to in press) formed by humans in many production systems, and even to-
cost (Rosenblatt and transportation, hold- day they are often not considered in EOQ/EPQ models, or
Lee 1986, Salameh ing and waste re- simply included in the cost of re-order. Risk factors related to
covering (Battini et al.
and Jaber 2000) the development of musculoskeletal disorders; risks of acci-
2012)
Inflation effect dents particularly related to loss of balance and falls from
(Buzacott 1975) heights; and impacts on productivity and quality of service
Transportation cost offered to customers in the form of time wasted and stock
(Zaho et al. 2004) losses should be considered in this stage. With relation to the
Table1: Responsible inventory models: factors considered in product and casing characteristics it is necessary to observe
Lot Sizing literature that high values of weight handled determines great exertions
and fatigue, therefore the need of rest arises. On the other
hand, small bins and Stock Keeping Units reduce the load
Figure 3 illustrates the methodological framework here pro- weight to be handled but it increase the number of handling
posed to assess the sustainable lot sizing design, according to operations needed. Besides the determination of maximum
a Responsible Inventory Management paradigm. It shows the load limits, many ergonomics studies have focused on the de-
main decision variables involved. The procedure proposed termination of the rest allowance subsequent to physical exer-
consists of two different kind of Lot Sizing decisions: one tions. These studies dealt with the intuitive principle accord-
dedicated to the Lot Sizing problem concerning the purchas- ing to which when a physical effort is performed, muscles
ing of in-bound materials coming from external suppliers and become fatigued and a rest is inevitably necessary. Thus, as
involving external transportations, one is dedicated to the lot an alternative to the injury risk, also the “recovery time” of
sizing issue linked with the material handling inside the plant. the operator during handling activity should be used as a “so-
In this last case, product features such as weight, volume and cial-sustainable” decision variable. As graphically explained
packaging characteristics usually strongly affect manual ma- by the framework in Fig. 3, the Lot sizing problem with sus-
terial handling efficiency and safety. tainability considerations is a typical example of multi-
1) IN-BOUND LOGISTICS DECISION: according to the objective optimization (MO) problem. MO plays an impor-
framework proposed it’s possible to reconsider our inventory tant role in engineering design, management, and decision
management concepts and provide new EOQ models able to making in general, on the ground that a decision maker needs
include environmental aspects right from the beginning of the to make tradeoffs between conflicting design objectives, in
analysis. The future models must design responsible inven- this case economic and sustainability goals. These tradeoffs
tory systems (according to Bonney and Jaber 2011), i.e. sys- occur when improvement of one objective comes at the ex-
tems that reflect the needs of the environment. In this case pense of another objective. For example the packaging cost
it’s necessary to analyze right from the beginning of the lot arises when the item quantity contained in a single Stock
sizing problem the amount of CO2 put into the atmosphere Keeping Unit decreases, but the ergonomic level of the man-
caused by deliveries, warehousing, waste disposal/recycling. ual handling activity might be improved. A Pareto point is
In this context, of course the impact of transportation activi- defined as a solution where no feasible solutions exist that
ties has a significant influence not only by an economic point yield a better objective while keeping the other objective
of view, but also for the environmental impact. Battini et al. fixed. On the contrary a non-Pareto solution implies that it is
(2012), investigate internal and external transportation costs possible to find a better solution that entails no tradeoff. The
according to the vendor and supplier position and the differ- set of all Pareto points in this system form the Pareto set or
ent freight vehicle utilization ratio in order to provide an Pareto Frontier. This class of solutions is central to multi-
easy-to-use methodology for sustainable lot sizing. Since in objective optimization (Pareto 1964, 1971; Grandhi and
most cases the cost and emission functions yield different op- Bharatram 1993). Hence, the solution that achieves the opti-
timal solutions, thus the cost tradeoffs are different from the mal balance between tradeoffs can be searched in a limited
emission tradeoffs. The limits of a direct accounting method space (Pareto frontier) without considering the full range of
when externalities need to be quantified are actually becom- all possible parameters. In the following theoretical frame-
ing evident in the recent literature (Battini et al, 2012), push- work (Fig. 3) we give two example of Pareto frontier in the

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2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia
objective space, that highlight the tradeoffs between the eco-
nomic objective and the sustainability objective for the prob-
lem under examination.
SUSTAINABLE LOT SIZING OF INCOMING GOODS
IN‐BOUND LOGISTICS
GOALS:  GOALS:  Bonney, M., and M.Y. Jaber (2011). “Environmentally responsible inventory models: Non-classical models for a non-
1) ENERGY: reduce  energy 1) ENERGY: reduce  energy  Bose, S., Goswami, A., and K.S. Chaudhuri (1995). “An EOQ model for deteriorating items with linear time-dependent
consumption during goods
transportation and warehousing
2) COMMUNITY: reduce waste  2) COMMUNITY: minimize risk of  Chang, C.-., Ouyang, L.-., and Teng, J.-. (2003). “An EOQ model for deteriorating items under supplier credits linked to
production and optimize the use  disorders/injuries  during manual  ordering quantity”, Applied Mathematical Modelling, vol. 27, no. 12, pp. 983-996.
and reuse  of resources
Example decision variables:
‐ TOTAL  COSTS
‐ EMISSIONS
Emissions
Total Costs
ORDER QUANTITY
Efficient frontier
Emission [TonCo2/Year]
ORDER
QUANTITY
Total costs [Euro/Year]
Figure 3. Sustainable Lot Sizing framework for incoming ma-
terials.
For each Lot size the two values for the objectives (total cost
vs Emissions, packaging cost vs injury risk) are computed,
and the corresponding point is represented in the space of
feasible solutions. Then the non-Pareto solutions are removed
in order to provide only the efficient frontier. Depending on
the specific shape of the Pareto frontier we obtain in a spe-
cific real case it’s then possible to define positive or non-
positive settings. We will find a positive setting in case it’s
possible to reduce total annual emissions by increasing the
purchasing lot size without significantly increasing cost. This
occurs when the region around the cost-optimal solution is
relatively flat. Otherwise, when the emission-optimal solution
asks the firm to spend too much and it’s always less cost-
optimal, only Legislation and Direct Cap or a Cap-and-Trade
approaches (that means Governmental actions) can force
companies in a sustainable direction. The same concepts can
be extended to the In-house Logistics case, in which is al-
ways the shape of the Pareto frontier that can support or not
support a sustainable packaging choice of incoming materi-
als. The methodological framework proposed in Fig.3 needs
to evolve and be re-defined and refined thanks to future re-
IN‐HOUSE LOGISTICS
consumption during  automated  Bouchery, Y, Ghaffari, H., Jemai, Z., and Y. Dallery (2012). “Including sustainability criteria into inventory models”,
material handling activities
material handling  activities
Example decision variables:
‐PACKAGING  COSTS
‐ INJURY RISK
Packaging Costs
Injury risk
PACKAGING  QUANTITY
Efficient frontier
PACKAGING  Harris, F.W. (1913). “How Many Parts to Make at Once”, Factory, The Magazine of Management, vol. 10, pp. 135-136,
Injury Risk [%]
QUANTITY
Packaging costs [Euro/Year]
1713
search efforts. Actually, it aims to provide a first step towards
a sustainable Lot Sizing theory.
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