Transition to just‐in‐time purchasing : Handling uncertain deliveries with vendor‐purchaser co‐operation

The transition from a traditional purchasing system to a JIT purchasing system can be a slow process or even unattainable, because of unreliable suppliers. The purchaser tries to co‐operate with the vendor, with the goal of receiving smaller, more frequent deliveries, on time, with the quality and quantity required. Often the vendor is ready to co‐operate, but is unable to fulfil these requirements. Provides simple models and methods to aid purchasers in this transition state. Gives simple approximate formulas for the minimum safety stock necessary to ensure the required service level of supply. Considers the case of random delays in shipments, random yield and uncertain demand, which are typical characteristics during the transition period. This safety stock depends on the order quantity and the number of shipments. Provides a simple method to find the order quantity, the number of shipments and safety stock, which minimize the joint total cost of the vendor and purchaser and ensure the required level of supply. Analyzes the savings provided by this method and the sensitivity of the models, in detail.