An integrated economic production quantity model with shortages considering energy utilization in production and warehousing

Abstract

This article presents a mathematical analysis of the effects of shortages in an integrated inventory model that considers energy utilization in manufacturing and warehousing. A Non-Linear Programming model is proposed for the Energy-Economic Production Quantity with Shortages problem. A solution procedure is proposed to minimize total cost by analyzing different shortage policies (full backorder, partial backorder, and full lost sale). Numerical examples illustrate the significance of integrating energy consumption components in inventory modeling, particularly in the context of rising energy prices. Accepting shortages reduces average inventory levels, decreases warehousing energy costs and achieves overall cost minimization. Full backorder policy do not reduce energy consumption in production, highlighting partial backorder policy as the optimal choice from both economic and environmental perspectives. Sensitivity analysis highlights the significant influence of model parameters on total costs and energy components. The impact of energy unit cost is particularly noteworthy given increasing energy demand and supply disruptions. These findings underscore the importance of considering energy consumption and associated costs in supply chain operations, emphasizing the study’s role in addressing these challenges.