Final answer:
To make lot size reduction effective, Lewis Machine Tools should increase the frequency of production runs, which reduces inventory held and aligns with lean manufacturing practices.
Step-by-step explanation:
Lewis Machine Tools is considering reducing lot size to reduce cycle inventory. To achieve effectiveness in lot size reduction, an organization should increase the frequency of production runs. When a company decreases lot sizes, it is effectively opting to produce lesser quantities more often, thus reducing the amount of inventory held at any time.
Therefore, option 1) Increase the frequency of production runs is the correct change that should be made for lot size reduction to be effective. A decrease in lot size usually entails an increase in the number production runs to meet demand without keeping large quantities in inventory, which aligns with lean manufacturing practices to increase efficiency and decrease waste.
An important aspect when considering lot size reduction is to balance the benefits of reduced inventory costs against potential increases in setup costs or changes in production efficiency. It is also worth noting that economies of scale may influence decisions regarding the optimal scale of production. While smaller lot sizes can reduce cycle inventory, larger production scales can decrease the cost per unit due to economies of scale.