Deriving an exergetic economic production quantity model for better sustainability

• An EPQ model based on the laws of thermodynamics is developed.
• Model employs exergy to improve efficiency.
• Focuses on the three pillars of sustainability and computes their costs.
• Uses the amount of consumed exergy as a sustainability indicator.
• A sustainable strategy can be profitable.

Businesses strive to be sustainable because of internal and external pressures. To examine sustainability, firms may use different methods of analysis. Extended Exergy Accounting (EEA) - a resource based evaluation method - is such a tool used to examine environmental, social, and economic sustainability. This paper re-examines the economic production quantity (EPQ) model, in an attempt to reflect the needs of sustainability. The paper uses EEA and the laws of thermodynamics to measure the sustainability of a production-inventory system and finds that in some situations sustainability can be profitable. EEA measures the value of a commodity, based on the consumption of the natural and physical resources as opposed to the classical EPQ model, which uses monetary cost. Measuring the exergy consumed during the production of a commodity shows that the exergetic model developed can deliver better sustainability and profitability than the classical EPQ. This should further encourage companies to move towards sustainable strategies. The results suggest that governments, individuals and other organizations should encourage companies to move towards sustainable strategies.