JIT PURCHASING VS. EOQ WITH A PRICE DISCOUNT - AN ANALYTICAL COMPARISON OF INVENTORY COSTS

The inventory costs of purchasing under economic order quantity (EOQ) model with a quantity discount is determined and compared to the costs under just-in-time (JIT). It is shown that at low levels of demand, J IT is the preferred method, whereas EOQ has the cost advantage for an item with a high demand. The model also predicts that the higher the v alue of the item, the carrying cost, or the ordering cost associated w ith the EOQ model, and the smaller the quantity discount rate, the wid er will be the range of demand for which JIT remains preferable.