A revision on EOQ/JIT indifference points

The overall objective of this paper is to present a comprehensive comparison between the EOQ model and JIT system to see either of them under which circumstances is more cost effective. There have been a few researchers dealing with the EOQ/JIT comparison model to guide companies whether or not switch to JIT or EOQ, however, their proposed models could be more realistic by taking some effective factors, such as hidden costs of a JIT system, interest rate, inflation rate, etc., into account. This research, by considering some less seen costs of both EOQ model and JIT system, develops the previous proposals of the EOQ/JIT model. This paper analyzes the impact of increasing or decreasing some determinant factors such as the interest rate, from cost perspective, to help the decision on whether or not to switch the inventory system, however, to make such a decision, companies may also take some other factors into account. A sensible link is created between the EOQ/JIT model and financial management to assure the decision makers that their financial concerns are observed in this model.