Determining the replenishment policy under JIT procurement system

Pao Yue-kong Library Electronic Theses Database

Determining the replenishment policy under JIT procurement system

 

Author: Chow, James
Title: Determining the replenishment policy under JIT procurement system
Degree: M.Sc.
Year: 1996
Subject: Inventory control
Just-in-time systems
Hong Kong Polytechnic University -- Dissertations
Department: Multi-disciplinary Studies
Pages: iii, 82 p. : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1231328
URI: http://theses.lib.polyu.edu.hk/handle/200/2737
Abstract: Just in time system is the recent trend in the inventory management system. It is a demand driven system to reduce the inventory level to the lowest. Traditional economic order quantity (EOQ) inventory model is usually deterministic in nature and the optimal solution is finally derived from the trade-off between the re-ordering cost and the holding cost. This kind of inventory model is no longer sufficient in a just-in-time environment. Recently, the companies are also interested to strengthen their logistics management system and it is popular to integrate the inventory control with the logistics management. Hence, the logistics subfunctions, like ordering process, materials receiving, handling, storage, and transportation, are considered to be embedded into the inventory model. The breakdown of the re-ordering cost and holding cost into sub-functions is of advantage of identifying the significance and impact of each subfunction to the overall total cost and a continuous improvement process should be established to alleviate each subfunction with the goal of reducing the inventory level, order size and the overall total cost under the just-in-time system. This dissertation presents an inventory model with identification of the logistics subfunction costs in just-in-time procurement. The model adopts a probabilistic approach and the costs are the expected values. Besides, the inventory model can cope with the prevalent inventory problem of having an uncertain demand and uncertain supply lead time. The practical solution can be to allow an appropriate amount of safety stock in the just-in-time environment. However, in the long run, the company should strive to reduce the uncertainties and should eliminate the allowance of safety stock in the just-in-time system. Furthermore, the replenishment rule is not simply to determine the optimal order size to minimize the total expected cost. In this study, a joint calculation of the order size and the re-order point is adopted because they are inter-dependent in relationship. Finally, the prevalence of having the quantity discounts in practice are considered and this discount factor is incorporated in the inventory model with respect to the order quantity.

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