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A comparison of just-in-time inventory and the quantity discount model in retail outlets
Abstract
The inventory management system of a discount retail store was examined. A just-in-time inventory management model and a quantity discount model were used to determine the appropriateness of each model for the retail outlet. Based on the calculations performed, it was determined that utilizing a retail just-in-time (JIT) policy is unrealistic. Customer demands constantly change, and shortages due to stock-outs can cause huge losses in profits, especially when customers are lost to competitors. Additionally, the quantity discount model provides the lowest total cost for a retail outlet. Not only are the prices cheaper when inventory is bought in large quantities, but shortages or stock-outs are rare. The optimal solution for a retail store is implementing the quantity discount method.
... Lean manufacturing concept adds value by driving out unwanted variability and waste. Anything that does not add value to the final product is considered waste in the notion (Aghazadeh, 2001). To transit from traditional manufacturing to lean manufacturing, company requires substantial support from the management with resources to build a system that enables the model. ...
Due to increasing popularity of using the Internet to perform businesses, enterprises are now facing tremendous pressure from competitors all over the world. In order to survive in the competitive marketplace, companies must be able to deliver their products at the right time, to the right place, and with the right price. Research studies have shown that decision support system can help enhancing the competitiveness of an enterprise. In general, decision support system technologies and applications are widely used by enterprises to support individual decision-makers, workgroups and virtual partners. This paper proposes a decision support system, which possesses certain intelligent features to support the inventory management. To validate the feasibility of the proposed system, a prototype system has been developed and installed in a local jewellery factory to support the inventory control, thereby helping the factory to maintain an optimal inventory level to match the market demand.
Achieving uninterrupted production, increasing profitability and productivity, protection against stock-outs, and improving customer service levels have been the major benefits of holding inventory. Maintaining inventory levels beyond a certain limit is, however, an undesirable phenomenon. While practitioners and researchers are aiming at minimum possible cost of inventory, many small business owners in India still fail to appreciate fully the true costs of carrying inventory. In this context the present study examines a case of the lock manufacturing industry in the Aligarh district of the state Uttar Pradesh. The investigations reveal that lock manufacturing units, by-and-large, are either unaware of even the fundamental techniques of inventory management or do not practice them for one reason or the other. The case attempts to illustrate how SMEs can reduce their inventory costs, and hence improve profitability, through the application of basic models of inventory management.
Material requirements planning (MRP) systems have become the most effective and widely used inventory control systems across the world. Many operation managers have found the vast knowledge that MRP systems provide is absolutely necessary to effectively and competitively succeed in the current global economy. Although MRP systems have been in existence for almost 25 years, they have had their share of problems and are both challenged and enhanced by new supply chain management techniques and enterprise resource planning (ERP) systems. As the world wide web evolves into a global market of information, the information provided by MRP systems, in particular ERP systems, will be necessary in order for businesses to compete in the global marketplace.
Purpose
Just‐in‐time (JIT) retailers replenish continuously according to the consumer demand. Under unpredictable and seasonal consumer demand, it is essential to coordinate planning and responsiveness with the manufacturers. The purpose of this paper is to study the coordination journey between a toy manufacturer and a JIT retailer, and generates several theoretical propositions on coordination process, behaviours and strategies.
Design/methodology/approach
A one‐year case study to describe the unfolding coordination process between the toy manufacturer and JIT retailer. Rich case data is collected because the researcher is one of the manufacturer's project team members.
Findings
The coordination process followed some generic sequential stages – evaluating, deriving, offering, assessing and implementing of coordination strategies. Furthermore, the physical flow behaviours and the ordering behaviours are found interactively influencing each other. Especially, the speculative and risk‐averse ordering behaviours have created cyclical excess inventory and low shelf‐availability. Under such uncertain conditions, two counter‐productive coordination strategies were implemented. The two parties later realized several effective coordination strategies – accurate response, differentiated responsive, and coordinated responsive. Moreover, the responsiveness of the manufacturer was actually affected by the order behaviours of all other retailers.
Research limitations/implications
There is generalizable limitation to generate theoretical propositions based only one case study on a dyadic toy supply chain.
Originality/value
Low‐responsive supply for unpredictable and seasonal demand leads to irrational ordering and coordination behaviours, which create mismatch of supply and demand. This paper studies an alternate strategy – the JIT retailing. It includes the problems of coordination behaviours, some observed effective coordination process and strategies.
The Just-In-Time (JIT) was found to be a management philosophy. Two main principles that JIT relies on are the elimination of waste and the complete utilization of capabilities of people. The crucial points will be touched upon and will help determine the advantages along with the disadvantages of the new method. The goals of the method will be examined, comparing the most important to the least. A discussion of companies that have implemented the JIT method will be touched with their results. Examples of how a company may increase their revenue will also be examined. A conclusion of opinions will be added to discuss feeling of how companies can benefit from the JIT method.
The purpose of this article was to identify the steps that need to be taken when choosing an effective third party logistics provider. Based on the research completed, it was determined that third party logistics are beneficial to many companies. The use of third party logistics provides a competitive advantage in today’s business world. The optimal solution for a company choosing a third party logistic provider would be a five-step process.
This paper explores ways of improving logistics and distribution supply chains within the food retail industry. It includes the concepts of logistics and supply chain as well as the new challenges in the food industry. The paper derives that business-to-business and e-commerce are the ways of the future. The paper discusses the successes and failures of the industry. Its results reveal slow progress in accomplishing the goals of leaner supply chains and easier distribution.
Purpose
To explore the business‐to‐business purchase and sale of supplies and services over the internet.
Design/methodology/approach
A case‐based research approach is used to evaluate the internet commodities exchange (ICE) system for ABC Food Markets, the largest grocery chains in Western New York. Two surveys were conducted to measure ICE quality. The first survey was created and sent out to 27 venders. The second survey was performed for 14 department managers that were using the system.
Findings
A set of future recommendations for the ICE system has been constructed based on the surveys.
Research limitations/implications
More data and information should be collected in any future research to investigate further the criteria developed in this paper.
Practical implications
The findings may be used to direct management teams in designing and implementing future generation of ICE.
Originality/value
The ICE system for ABC has been a technological breakthrough in the world of e‐procurement as a whole. Systems like ICE will be used in every business for all buying and selling purposes.
The ‘kanban’, which literally means ‘cards’, is an information aid to harmonious control production and inventory in a ‘just-in-time’ (JIT) system. Detailed description of the just-in-time system has been given in (Monden 1981 a, 1981 b, 1981c, 1981 d, 1983 and Schonberger 1983), among many others. This paper addresses the problem of determining the number of kanbans at each stage of production.
Three problem areas exist in designing and implementing a kanban controlled JIT system: the identification of flow lines problem, the flow line loading problem and the operational control problem. This paper addresses the operational control problem. A general N-stage serial production system is modeled as a discrete time Markov process. Capacity constraints, stochastic machine reliability and demand variability are included. The model is illustrated by a 3-stage system, describing the effects of the number of kanbans, the machine reliability, the demand variability and safety stock requirements on the performance of a kanban controlled pull system.
To determine the number of required kanban, Toyota uses a formula based on the average demand during an order picking cycle, inflated by a constant overplanning factor β. This technical note attempts to characterize the situations where the simplicity of Toyota's formula reconciles with the established operations research paradigm of optimality. The overplanning policy examined in this paper could also be applied to other production inventory control models under uncertainty.
Using Just-in-time (JIT) philosophy is purchasing yields a number of positive results with respect to manufacturing and service organizations. The primary areas of improvement, according to the survey, include inventory reduction, increased quality, and an overall reduction of the total production and inventory stocks. An analysis of these results reduced the importance of previously recognized problems in JIT purchasing, such as the lack of management commitment and poor quality of incoming materials.
This paper derives two formulae to calculate the average inventory yielded by fixed interval withdrawal Kanban and supplier Kanban, respectively, in a just-in-time production system. By using the formulae, another two formulae to determine the minimum number of Kanbans to be required for the fixed interval withdrawal Kanban and the supplier Kanban are also shown. An algorithm to obtain the optimal order interval is proposed to minimize the total operation cost composed of the inventory cost and the withdrawal cost for the Kanban system
In this paper we present a mathematical programming model for the Kanban system in a deterministic multi-stage capacitated assembly-tree-structure production setting. We discuss solution procedures to the problem and address three special cases of practical interest.
Operations Management
- J Heizer
- B. Render
Making more with less: the industry tries to make just-in-time delivery work
- J Milliot
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A case for the simple model: basing small business forecast on the gross national product
- S.-M Aghazadeh
JIT and the balanced scorecard: linking manufacturing control
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Does manufacturing need a JIT revolution
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JIT pruchasing: analyzing survey results”, Industrial Management
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