An Alternative Agent Approach for Managing Materials Purchasing

The existing agent based inventory management approaches are heavily skewed toward just-in-time (JIT) purchasing. Specifically, a model for comparing the inventory costs of purchasing under the economic order quantity (EOQ) system and the JIT order purchasing system in existing literature concluded that JIT purchasing was virtually always the preferable inventory ordering system especially at high level of annual demand. This paper develops an EOQ-JIT cost indifference point function. The function shows that it is possible for the EOQ system to be more cost effective than the JIT system once the inventory demand approaches the EOQ-JIT cost indifference point. Based on the function, an alternative agent based inventory management system is developed. A case study demonstrates how the equation affects the purchasing approach of a material.