A Quantity Discount Pricing Model to Increase Vendor Profits in a Just - in - Time (JIT) Environment

Abstract

Just-in-Time is one of the many improvement techniques that is in vogue such as World Class Manufacturing, Total Quality Management (TQM). The principle feature of JIT approach concerns the management of inventories. It aims to create a zero or low inventory operating system. The primary objective quality and productivity through the elimination of waste. Waste is defined as anything other than the minimum amounts of equipment, materials and workers that are absolutely essential for production. Today, a level of interest has been exhibited to the models pertaining to sales, forecasting and inventory control. Most of the inventory problems assume a given price structure and very less has been researched on the relationship between the two. Here, in this paper, inventory problem has been studied under the pricing structure for a Just-in-Time (JIT) system. The supplier offers the buyer a price discount, which the buyer finds beneficial to him and hence, orders more frequently. This allows both the buyer and the supplier to have less amount of inventory and thus, both minimize the cost. An analysis of how the supplier structures the terms and conditions of an optimal quantity schedule is discussed here.