Application of Inventory Management System Based on Different Demand & Cost Conditions

A buffer of inventory on hand is comforting and costly. If you hold a lot of items in inventory, you're locking away a huge amount of cash unnecessarily. These items can be lost, stolen, or damaged, or they can deteriorate and they can become obsolete, particularly when products are improved or changed often. They occupy space, which could else be devoted to operations. All of this represents financial cost to the business. This study scales to justify Just-in-Time (JIT) operations and by using methodologies to determine boundaries and thresholds under which JIT can be best applied. These Methodologies can be used to determine Quantifiable threshold limits where the application of JIT may be Questionable because JIT may not always be the successful way of Inventory management. This paper's objective is to compare the cost advantages under different demand and cost conditions and helping one to clearly identify where JIT system has a cost advantage over Economic Order Quantity (EOQ) system and under what conditions the EOQ System provides an advantage over the JIT System. Using 3 models Fazel model, Fazel-Fischer-Gilbert Quantity discount model, Schniederjans and Qing model the Economic order Quantity system and Just-in-Time System and compared to find out cost difference at different levels of demand conditions and to determine which Inventory Management System should be adopted.