Discuss the Economic Order Quantity model (EOQ) and the Just-In-Time model (JIT), and identify the effectiveness of the two models.
EXECUTIVE SUMMARY
It is very important that successful enterprises need efficient stock control management. In reality, we usually use many stock control models such as the Economic Order Quantity model (EOQ) and Just-In-Time model (JIT). Efficiency gains in inventory management can bring significant improvement to overall company financial performance. In this report, rationale of the two models, effectiveness of the two models in practice, and use JIT system in McDonald company will be presented.
Our conclusion that EOQ and JIT models like most management accounting techniques, are not a universal panacea and each company should choose own different stock control model with its own conditions and efficient inventory management can lead to better planning and business control.
TABLE OF CONTENTS
page
EXECUTIVE SUMMARY 1
TABLE OF CONTENTS 2
1.0 INTRODUCTION 3
2.0 THE EOQ MODEL AND JIT MODEL 4
2.1 Definition 4
2.1.1 EOQ Model 4
2.1.2 JIT Model 4
3.0 THE BASIC ECONOMIC ORDER QUANTITY MODEL 4
3.1 Assumptions of EOQ Model 4
3.2 The objective of EOQ Model 5
3.3 Validity of the assumptions and model robustness 5
3.4 Fixed Order Point versus Fixed Order Interval Policy 6
4.0 JUST-IN-TIME PRODUCTION SYSTEM 6
4.1 JIT Logic 7
4.2 Features of JIT production system 7
4.3 JIT Costing 8
4.4 JIT Purchasing 9
5.0 THE EFFECTIVENESS OF EOQ MODEL IN PRACTICE 10
5.1 Examination of EOQ assumptions 10
5.2 EOQ Extension 11
6.0 THE EFFECTIVENESS OF JIT MODEL IN PRACTICE 12
6.1 Typical benefit of JIT 12
6.2 Potential problems in implementing JIT 13
6.3 E-commerce and JIT purchasing 14
7.0 JIT SYSTEM IN MCDONALD COMPANY 14
8.0 CONCLUSION 18
LIST OF REFERENCE 19
1.0 INTRODUCTION
It is very important that successful enterprises need efficient stock control management, especially in manufacturing companies and retail distribution. In business practice, we usually use many stock control models such as the Economic Order Quantity model (EOQ) and Just-In-Time model
It is very important that successful enterprises need efficient stock control management. In reality, we usually use many stock control models such as the Economic Order Quantity model (EOQ) and Just-In-Time model (JIT). Efficiency gains in inventory management can bring significant improvement to overall company financial performance. In this report, rationale of the two models, effectiveness of the two models in practice, and use JIT system in McDonald company will be presented.
Our conclusion that EOQ and JIT models like most management accounting techniques, are not a universal panacea and each company should choose own different stock control model with its own conditions and efficient inventory management can lead to better planning and business control.
TABLE OF CONTENTS
page
EXECUTIVE SUMMARY 1
TABLE OF CONTENTS 2
1.0 INTRODUCTION 3
2.0 THE EOQ MODEL AND JIT MODEL 4
2.1 Definition 4
2.1.1 EOQ Model 4
2.1.2 JIT Model 4
3.0 THE BASIC ECONOMIC ORDER QUANTITY MODEL 4
3.1 Assumptions of EOQ Model 4
3.2 The objective of EOQ Model 5
3.3 Validity of the assumptions and model robustness 5
3.4 Fixed Order Point versus Fixed Order Interval Policy 6
4.0 JUST-IN-TIME PRODUCTION SYSTEM 6
4.1 JIT Logic 7
4.2 Features of JIT production system 7
4.3 JIT Costing 8
4.4 JIT Purchasing 9
5.0 THE EFFECTIVENESS OF EOQ MODEL IN PRACTICE 10
5.1 Examination of EOQ assumptions 10
5.2 EOQ Extension 11
6.0 THE EFFECTIVENESS OF JIT MODEL IN PRACTICE 12
6.1 Typical benefit of JIT 12
6.2 Potential problems in implementing JIT 13
6.3 E-commerce and JIT purchasing 14
7.0 JIT SYSTEM IN MCDONALD COMPANY 14
8.0 CONCLUSION 18
LIST OF REFERENCE 19
1.0 INTRODUCTION
It is very important that successful enterprises need efficient stock control management, especially in manufacturing companies and retail distribution. In business practice, we usually use many stock control models such as the Economic Order Quantity model (EOQ) and Just-In-Time model