PURCHASING AND INVENTORY MANAGEMENT IN SCENCE-BASED INDUSTRIES

Abstract

Inventory Management has been widely discussed in the literature. Recently, the so called "Just in Time” method received extensive publicity and was claimed to be one of the major factors of the Japanese industrial success. This, in turn, promoted a large campaign in the rest of the industrialized world, to adopt and imitate the "Just in Time” (JIT) policy. Corporate and plant managers focused attention and set up goals as to reach as closely as possible the Japanese inventory levels. Quite often, adoption of JIT disregarded the totally different nature of the business their companies engaged in, relative to Japanese industry. This paper clarifies the differences between two different industrial models: The "Assembly Lines” model versus the Hi-Tech Job Shop "Science Based” model and prescribes the inventory strategy appropriate for each of those models. It is shown that a fully automated Assembly Line type factory requires a “Just in Time” (minimal holding costs) inventory strategy, while the Science Based type should follow a more elaborate “optimal Penalty” type of policy.