Question

Try to explain and compare the "idea of JIT inventory management" and "the idea of EOQ inventory management", and use examples to clearly explain your ideas.（450 word) thanks

Answer 1

The idea of ECONOMIC ORDER QUANTITY inventory :-  The economic order quantity is the idead level of quantity which should be order at a time to minmise the inventory cost of holding and ordering cost. EOQ merely used where the holding cost and ordering cost remain constant.

Formula  

For example:- If the annual demand is 16000 units Holding cost is $2 per quantity per annum and ordering cost is $10 per order find EOQ.

EOQ = 400 Units

At the level of 400 units the ordering cost and the holding cost is minimum.

JIT (Just In Time ) - It is a management strategy for manufacturing the products through inrease the efficiency and decrease the wastage by receiving goods only when they need them for the production purpose. Just-in-time (JIT) manufacturing is also known as the Toyota Production System (TPS) because the car manufacturer Toyota firstly adopted the system in the 1970s.

For Example - Toyota car manufacturing use this inventory method means as when it receive the order at the same time it purchase all the spare parts and prepare the car on the same time. this concept is very much imprtant for saving the inventory and effiency.

COMPARISION IN EOQ & JIT -

EOQ basically means to maintain a fixed amount and make the reorder level so that avoid shortage and extra inventory while JIT basically focuses on meeting customer demand with using quality and quantity and without wastage of resources.