Towards a more economic production and just-in-time delivery system

The paper studies a system in which a batch production supplier participates in just-in-time (JIT) delivery of its products to a JIT buyer firm. It demonstrates that under certain conditions a small adjustment of previously agreed product selling price can result in a more economic production and JIT delivery system with reduced delivery quantity and hence increased delivery frequency. In the case when both buyer and supplier share equal profit margin, optimal levels of adjustment for price and delivery frequency can be obtained that maximize the profit margin. A numerical example is used to illustrate the results.