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Differences Between The Just In Time (JIT) Methodologies And The Economic Order Quantity (EOQ) (Term Paper Sample)


I was tasked to compare just in time (JIT) and economic order quantity (EOq) inventory management techniques. attached is the sample paper.


Annual demand = 400000
Annual carrying cost rate = 15% of 48
Product cost = $48/unit
Product ordering cost = $28
Carrying cost per order = 15% of 48 = 7.2
The Economic Order Quantity (EOQ) is thus calculated as:
Or 15% of 48=7.2
Square root (2 * Quantity * Cost per Order / Carrying Cost per Order)
SQRT (2*400,000* 28/7.2)
2*400000 = 80000
80000*28 = 2240000
2240000/7.2 = 311111
SQRT (311111.111) =?
EOQ= 1764 units
The total cost at the EOQ is thus;
F=fixed cost, c = cc per unit,
= (400000/1764)*(28)
= 6349.2
Total cost = 6349.2
How much would the TC increase if the order quantity is 1000?
Annual carrying cost:
= 882
Thus ACC= (882)*(7.2) =6350.4
TC at EOQ is 6349.2 + 6350.4 =12699
Annual ordering cost:
EOQ/2 = 1000/2
= 500
Therefore at 1000 of order quantity, the Total Cost =
Differences between the Just In Time (JIT) methodologies and the Economic Order Quantity (EOQ)
The Economic Order Quantity (EOQ) and Just in Time (JIT) are considered two ways in which businesses can manage inventory. The EOQ involves the establishment of the amount of inventory that needs to be ordered with the sole aim of reducing the overall cost of transporting and purchasing. The Just in Time techniques relies on the making of supplies more accessible on how and when needed immediately to satisfy the efficiency motivation as well as the customer. The EOQ can be assessed to make sure that costs are minimized to the last bit whereas JIT goes further to make them almost zero (Farzaneh, 1997). The JIT increases the level of efficiency and zeros in on waste by a process of taking products/goods only at a time when they are strictly needed in the process of production. This makes sure that inventory costs are reduced considerably. The JIT process and model therefore requires that the manufacture/producer is keen and aware to forecast demand in the most accurate manner.
The EOQ model is a technique that first originated in the United States of America from an American production engineer known as Ford Whiteman Harris. It purposes to keep the amount of material at a level that is optimal at minimal cost. Just in time on the other hand is a management philosophy that originated from the Japanese that is aime

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