Decision tools for selecting components for JIT replenishment

This paper describes two decision tools that allow identification of candidate components for cost effective Just-In-Time (JIT) replenishment. The first is a simple and easily interpreted coefficient, based on component cost and demand parameters, which ranks the importance of adoption of JIT replenishment of components. The second is a procedure that can be used by inventory managers to work from the ranking coefficient to an approximate model for profit and return on investment, for a given level of inventory capitalisation, when the highest priority JIT decisions are implemented cumulatively. We illustrate the use of these tools with a case study.