EOQ, JIT and fixed costs in the Ready-mixed concrete industry

Wu, M. and Low, S.P. (2006) EOQ, JIT and fixed costs in the Ready-mixed concrete industry. International Journal of Production Economics, 102 (1). pp. 167-180. ISSN 0925-5273 doi: 10.1016/j.ijpe.2005.03.002

Abstract/Summary

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. Despite existing studies that directly compare the costs between the EOQ and JIT purchasing systems, this decision is, however, still difficult to be made, especially when price discount has to be considered. 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 objective of this study is to expand on a classical EOQ with a price discount model to derive the EOQ–JIT cost indifference point. The objective was tested and achieved through a survey and case study conducted in the ready-mixed concrete industry in Singapore.