Question

Lewis Machine Tools is considering reducing lot size to reduce cycle inventory. Which of the following is a change that should be made for lot size reduction to be effective?

a) Increase production batch sizes.
b) Decrease the frequency of ordering raw materials.
c) Implement a just-in-time inventory system.
d) Use a fixed-order quantity model.

Answer 1

Implementing a just-in-time inventory system is the effective change needed for lot size reduction, as it promotes production on demand and minimizes inventory costs.

Step-by-step explanation:

Lewis Machine Tools is evaluating strategies to reduce lot size and consequently lessen cycle inventory. Among the options provided, the most effective change that should be made for lot size reduction is implementing a just-in-time (JIT) inventory system.

Option (c) JIT systems focus on producing or delivering goods on demand, thereby minimizing the need for large inventories and reducing the costs associated with holding excess stock.

The system aligns closely with the goal of reducing cycle inventory through smaller, more frequent batches. In contrast, options (a), (b), and (d) are not aligned with the objective of reducing lot size -- increasing production batch sizes or decreasing the frequency of ordering raw materials would likely have the opposite effect, while a fixed-order quantity model is a reordering system that is not inherently about lot size reduction.