JIT vs. WIP-A trade-off analysis

This paper develops a decision rule to enable an a priori classification of a production system that should utilize a JIT- or WIP-type inventory control policy. A two-station deterministic serial production system is analysed. A parameter α-the ratio between WIP and maximum shortage-is defined, and a cost function K=f(α) is modelled. It is shown that α*-an optimum value of α-is a characteristic parameter of the system, can be evaluated a priori based on known parameters, and can serve to identify a production system as JIT type or WIP type. The concept of an OC curve of a system is introduced and it is concluded that JIT is not always favourable over WIP. An extension of the deterministic case shows that α* can be expressed, among others, in terms of MTBF and MTTR. The paper concludes with a numerical example.