Modeling stockout risk and JIT purchasing in ready-mixed concrete batching plants

Min Wu, Qiping Shen, Maozeng Xu and Desheng Wu

International Journal of Production Economics, 2013, vol. 144, issue 1, 14-19

Abstract: A model for comparing the inventory costs of purchasing under an economic order quantity (EOQ) with a price discount system and a just-in-time (JIT) order purchasing system concluded that JIT purchasing is virtually always the preferable inventory ordering system. This claim however contradicts the practices observed in ready-mixed concrete (RMC) batching plants. By expanding the EOQ model and considering the stockout risks, this paper derives new EOQ-JIT cost indifference point equations. We show that it is possible for an EOQ with a price discount system to be more cost-effective than a JIT system when the stockout risks associated with the JIT purchasing system are high or the annual demand is either too low or too high. The case study conducted in the RMC industry in Chongqing, China supports our proposition.

Keywords: Risk; Stockout; Price discount; EOQ-JIT cost-indifference point; Ready-mixed concrete; Chongqing (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527312001132
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:144:y:2013:i:1:p:14-19

DOI: 10.1016/j.ijpe.2012.03.017

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().