Economic order quantity (EOQ) versus just‐in‐time (JIT) purchasing: an alternative analysis in the ready‐mixed concrete industry

Abstract

The literature on the use of just‐in‐time (JIT) and economic order quantity (EOQ) purchasing has increasingly favoured JIT in recent years, especially when firms are purchasing to meet high and consistent levels of demand, and the JIT operation can take advantage of inventory physical plant space reduction. The theoretical advantages of JIT purchasing may have been overstated. Two new concepts are developed to underpin the idea that, even if the JIT approach can induce inventory physical plant space reduction, it is possible for EOQ to be more cost effective, as the inventory demand approaches the break‐even point between the function of the annual holding capacity of an inventory facility and the function of the EOQ–JIT cost indifference point. The survey and case study conducted in the ready‐mixed concrete industry in Singapore support this proposition.