1. An Engineering Management Special Free Bonus*
JIT meets EOQ
Great! Another math model.
An Engineering Management Special
Free Bonus*
*limited time offer

2. Objective
Determine production lot size for a manufacturing cell under JIT
Minimize set-up costs + final product holding cost + work-in-process holding cost
Assume batch arrivals of raw material to the cell with a production order for Q units.
Find cell batch quantity - Q!

3. Variable Definitions M = raw material unit cost ($/unit)
C = finished component manufacturing cost per unit
C – M = unit value added in manufacture
D = annual demand rate (units)
A = set-up cost ($/setup)
s = set-up time in hours
m = manufacturing cell hours per unit
R = cost of cell time ($/hour)
i = annual inventory carrying cost percent
b = production hours per year

4. Cycle Time TL = production lead-time in hours
TL = s + mQ TL m s
Q = lot size

5. On-hand Inventory Positions
quantity 2Q
finished goods Q
WIP
time TL

6. The Cost Model set-up finished goods cost cost average value added
cycle time in yrs
cycles/yr
WIP holding cost
= i x (material cost/ cycle + avg cell cost/cycle) x cycle time x cycles/yr

7. The Cost Model Solution
Basic EOQ
marginal unit
production cost
WIP inventory
cost

8. The End
Can we have a little problem to solve where we could use this wonderful model?