The economic order quantity repair and waste disposal model with entropy cost

As markets have become more and more competitive, disorder has become a prevailing characteristic of modern production systems that are operating in complex, dynamic and uncertain environments. Minimizing disorder in these production systems requires stringent control measures by management, with costs that are usually hidden or difficult to estimate. Not accounting for these costs leads to less efficient production systems. This paper postulates that the behaviour of production systems very much resembles that of physical systems. Such a parallel suggests that improvements to production systems may be achievable by applying the first and second laws of thermodynamics to reduce system entropy (or disorder). The applicability of these laws is demonstrated in a simple reverse supply chain context, where products are collected and later repaired at some rate while other products might be disposed outside according to some waste disposal rate. Numerical examples are provided.