An economic order quantity model for an imperfect production process with entropy cost

Among the assumptions of the classical economic order quantity (EOQ) model is that all units that are purchased (or produced) are of perfect quality. However, this is frequently unrealistic since production processes deteriorate resulting in the production of defective products requiring rework. Some recent studies suggest that production systems performance might be improved by applying the first and second laws of thermodynamics to reduce system entropy (or disorder). This paper applies the concept of entropy cost to extend the classical EOQ model under the assumptions of perfect and imperfect quality. Mathematical models are developed and numerical examples illustrating the solution procedure are provided. Accounting for entropy cost suggests that order quantities should be larger than the figures derived from the classical EOQ model.