I think that this article was very informative. With "lean manufacturing" so popular, many companies these days implement JIT inventory systems, and I think that this article did a good job of pointing out that JIT might not always be the optimal choice for all companies.
Using the JIT system, many costs can be eliminated, such as storage, capital, insurance, ordering, and transportation costs. If every company and their suppliers used JIT, JIT would be the optimal choice for inventory every time. However, because we do not live in an ideal world, suppliers typically hold inventory. This could be due to a number of factors, such as procurement of materials overseas, or perhaps they are afraid of stock-outs and being charged by the company (as is the case in auto-manufacturing), etc. Therefore, many costs are hidden in the purchase price for companies that use JIT. According to the article, this results in an annual demand level at which JIT is no longer the preferred method; thus, making EOQ the optimal choice at that level.
I think it is very important to evaulate each situation in order to determine whether JIT is actually the preferred method. This article even suggests using a mixed method of both JIT and EOQ, and I have to agree. While JIT is certainly a good choice for some, it is not suited for all.
Laura Sitko
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I like that you focused on the fact that JIT is only right in certain circumstances. You also stated reasons that companies might be apprehensive about using JIT. I would think that most companies are apprehensive about using JIT just because of the policy changes that have to be made and how much of an overhaul of the system it would require. What do you think? -Mark
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