An Interesting Reading "A comparative analysis of inventory costs of JIT and EOQ purchasing"

The latest reading assignment in OM523 (University of Alabama) contained an article of interest, "A comparative analysis of inventory costs of JIT and EOQ purchasing". While the article develops "a mathematical model to compare the annual cost of inventory for JIT and EOQ purchasing", I can't help but think if this article easily applies to the real world.

It is hard for me to find application for this article for two reasons. First, the article tells me that I am going to underestimate the costs with either holding inventory or not holding inventory, yet the mathematical model that is developed either uses the underestimated cost or does not even account for it (as is the case for not having inventory). Second, the conclusion states "The benefits associated with the proper implementation of a JIT system usually surpass the mere savings in inventory costs." If this is the case, then why would I even consider inventory
costs at all.

In addition to the problems of finding application stated above, I question the statement in the conclusion:


"The model establishes an upper limit for the purchase price of any item under JIT, above which JIT will be more costly than EOQ. Determination of this price level provides valuable information for companies when negotiating a delivery price with their JIT suppliers."

If I have implemented JIT, where am I going to keep the EOQ inventory if all of sudden I am no longer going to use JIT. I assume I am going to rent it, and then pay another trucking company to drop it off at my door. Assuming that I can find space close to my facility which should limit my additional transportation costs enough to make the new h potentially feasible (since I will include the costs of renting and shuttling in my inventory holding costs), am I supposed to do this analysis for every product every time I am negotiating price? This seems like a lot of work, and are the cost benefits worth me spending my time? Probably in some cases, but not any in what I have seen around here.

As with a lot of articles, I do not believe that taken alone any additional insight is provided for a company executive to make decisions concerning annual cost of inventory. I believe the article does a good job of providing a model to evaluate and compare JIT vs. EOQ inventory costs, however, this model must be used in conjunction with a lot of other information that is not provided.

Finally, it seems to me that the article is trying to advise a shift not to JIT, but to Lean. There is a difference, a Lean company has a lean culture, meaning that it is continuously striving to eliminate waste. When this company tries to eliminate the waste of inventory the result is JIT. One of the reasons companies do not successfully implement JIT, is because they do not make the corporate cultural change to lean.