Re‐modelling EOQ and JIT purchasing for performance enhancement in the ready mixed concrete industries of Chongqing, China and Singapore

Abstract

Purpose

To develop just‐in‐time (JIT) purchasing threshold value (JPTV) models for ready mixed concrete (RMC) suppliers to decide whether or not to switch from an economic order quantity (EOQ) approach to a JIT purchasing approach for the purchase of their raw materials, when a price discount is offered.

Design/methodology/approach

The existing economic order quantity (EOQ) with a price discount versus the JIT purchasing cost comparative models neglect some important cost components under the inventory management systems, for example, the out‐of‐stock costs and the impact of inventory policy on product quality and production flexibility. In addition, these models do not empirically study the capability of an inventory facility to hold the EOQ‐JIT cost indifference point's amount of inventory. These models suggest that the JIT purchasing approach is always preferred to the EOQ approach when the JIT purchasing approach can capitalize on physical plant space reduction. The JPTV models developed in this study overcome the two limitations of the existing EOQ and JIT purchasing cost comparative models.

Findings

By developing the JPTV models, this study suggests that the theoretical advantages of JIT purchasing may have been overstated.

Originality/value

The field studies conducted in the RMC industries in Chongqing, China and Singapore supported the propositions in this study. The JPTV models, if adopted, would help to enhance performance in the RMC industries in other cities as well.

Citation

Min, W. and Sui Pheng, L. (2005), "Re‐modelling EOQ and JIT purchasing for performance enhancement in the ready mixed concrete industries of Chongqing, China and Singapore", International Journal of Productivity and Performance Management, Vol. 54 No. 4, pp. 256-277. https://doi.org/10.1108/17410400510593811