Trade-off between Production and Inventory Costs with Respect to a Given Demand Situation

  • Joachim Reese
Conference paper


Modern concepts in production management argue that it would be possibly preferable to instal a production rate which is fully synchronized with those rates of other production stages in the same firm or other firms. Thus, between the supplier and the customer of a finished or semi-finished product no inventory costs have to be taken into account, if the coordination will be perfect and JIT(Just-In-Time)-production takes place. Within a firm the synchronization may be a matter of planning and organization, and the kanban-principle is one possible result, though inventory is not really zero, but there exists always a buffer stock. As soon as two different firms are concerned, there are also different planning processes, and the advantage of the customer may become simultaneously the disadvantage of the supplier.


Production Rate Unit Cost Optimum Rate Setup Cost Inventory Cost 
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© Springer-Verlag Berlin · Heidelberg 1991

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  • Joachim Reese

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