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A Model of Supplier Responses to Just-In-Time Delivery Requirements

Author

Listed:
  • John R. Grout

    (Cox School of Business, Southern Methodist University)

  • David P. Christy

    (The Mary Jean and Frank P. Smeal College of Business Administration, The Pennsylvania State University)

Abstract

When buyers provide incentives for suppliers to deliver just-in-time, suppliers can respond by choosing to hold additional inventory, reducing the variance of flow time to facilitate just-in-time production, or both. A model characterizing the supplier's optimal response to incentives for JIT delivery is presented. The model shows a situation where the optimal action of the supplier is to hold more inventory. When incentives for on-time delivery are increased, the supplier responds by decreasing the variance of flow time and by increasing the lead time allowance. However, the lead time allowance increases more quickly than the variance is reduced, resulting. in a net increase in the amount of inventory that must be held by the supplier. The result is that inventory is pushed upstream. This paper does not suggest that inventory is always pushed upstream in JIT purchasing. Rather, it provides a counter-example to those who presume that holding more inventory is always a non-optimal response to buyer's requests for JIT delivery.

Suggested Citation

  • John R. Grout & David P. Christy, 1999. "A Model of Supplier Responses to Just-In-Time Delivery Requirements," Group Decision and Negotiation, Springer, vol. 8(2), pages 139-156, March.
    • Handle: RePEc:spr:grdene:v:8:y:1999:i:2:d:10.1023_a:1008634008759
    DOI: 10.1023/A:1008634008759
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    Citations

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    Cited by:

    1. Sang M. Lee & Seong-Bae Lim & Domingo Ribeiro Soriano, 2009. "Suppliers’ Participation in a Single Buyer Electronic Market," Group Decision and Negotiation, Springer, vol. 18(5), pages 449-465, September.
    2. Lee, Jun-Yeon & Schwarz, Leroy B., 2007. "Leadtime reduction in a (Q,r) inventory system: An agency perspective," International Journal of Production Economics, Elsevier, vol. 105(1), pages 204-212, January.
    3. Shnaiderman, Matan & Ben-Baruch, Liron, 2016. "Control and enforcement in order to increase supplier inventory in a JIT contract," European Journal of Operational Research, Elsevier, vol. 250(1), pages 143-154.
    4. Xiaobo, Zhao & Xu, Deju & Zhang, Hanqin & He, Qi-Ming, 2007. "Modeling and analysis of a supply-assembly-store chain," European Journal of Operational Research, Elsevier, vol. 176(1), pages 275-294, January.

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