2.1 Cost modelling
Recently, researchers have searched for an economic
quantity model of a production system following
JIT philosophy for ordering raw materials and the
shipping process. There are various kinds of models
that can be utilised for the purpose of ensuring
reduction in the level of cost and risk in case of JIT
systems. For instance, one such model type that can
be utilised for achieving cost effi ciency is the lot size
reduction model. This model emphasises that by way
of ensuring reduction in the lot size, it can become
possible to achieve a reduction with respect to the
level of the cost required in performing the delivery
of fi nished products to fi nal consumers (Yang & Pan,
2004). A higher lot size unnecessarily increases cost
and some components of risk, while reducing others.
As a result, the lot size risk reduction model can be
utilised in order to ensure an optimum lot size and
thereby, effi cient management of risk from the lot
size can ultimately become possible to achieve cost
effi ciencies. In addition, an operation model can also
be used for the purpose of JIT scheduling which
explains each and every process included in the JIT
system. Thus, by way of having identifi cation of the
stages of JIT system, necessary actions can be taken
for the purpose of achieving cost effi ciency in the
operation (Chae & Fromm, 2005).