EOQ with a price discount versus JIT purchasing: An alternative analysis in the ready-mixed concrete industry

Abstract

The successful implementation of just-in-time (JIT) purchasing policy in many industries has prompted many companies that still use the economic order quantity (EOQ) purchasing policy to ponder if they should switch to the JIT purchasing policy. This is, however, a difficult decision, especially when price discount has to be considered and despite existing studies that directly compare the costs between the EOQ and JIT purchasing systems. JIT purchasing may not always be successful even though plants that adopted JIT operations have experienced or can take advantage of physical space reduction. Hence, the objectives of this study are to expand on two new concepts that focus on, namely, the annual holding capacity of an inventory facility, and the break-even point between the annual holding capacity of an inventory facility and the EOQ-JIT cost indifference point. The objectives were tested and achieved through a survey and case study conducted in the ready-mixed concrete industry in Singapore. © World Scientific Publishing Company.