How far should JIT vendor-buyer relationships go?

In pull production management systems such as JIT, deliveries must be made on an as-needed basis only, and production begins only when requested. It is supposed to match customer demand, i.e., producing only enough to replenish what the customer has used or sold. In this work, we argue that there should be a certain degree of independence between successive links of the supply chain, to allow flexibility in production management in individual links. We attempt to identify the degree of independence and level of flexibility in terms of lot sizing and delivery scheduling in a single-vendor-single-buyer system. Toward this aim, appropriate two-sided vendor-buyer inventory-production models are formulated, some interesting conclusions from their analysis are drawn, and a numerical study, which compares relevant policies, is discussed. It shows that imposing a lot-for-lot production on the JIT supplier is strikingly un-economical. On the other hand, delivery on demand can be met without intervening in the supplier's operations, and where deviation from the optimal of the resulting joint total costs is tolerable. (C) 2002 Elsevier Science B.V. All rights reserved.