How can both the JIT and EOQ inventory theories effectively be reconciled?
A) They can't. A firm must choose either one or the other.
B) by using MRP
C) by considering the setup cost as a variable instead of a parameter
D) by applying Kanban cards to the EOQ system
E) by assuming a finite production rate

Question

Quizplus · Accepted Answer

Both JIT and EOQ inventory theories aim to minimize inventory costs while ensuring that adequate inventory levels are maintained. JIT is focused on reducing lead times and implementing a just-in-time approach to inventory management, while EOQ is focused on determining the optimal order quantity to minimize inventory holding costs and ordering costs.

One way to effectively reconcile these two theories is by considering the setup cost as a variable instead of a fixed parameter in the EOQ model. In traditional EOQ models, the setup cost is assumed to be a fixed amount per order, regardless of the order quantity. However, in reality, the setup cost may vary with the order quantity, and its variation can affect the optimal order quantity. By accounting for the setup cost as a variable, a firm can better align its production and inventory management practices with JIT principles, such as reducing batch sizes and reducing setup times, while still maintaining optimal inventory levels.

How Can Both the JIT and EOQ Inventory Theories Effectively