Final answer:
The EOQ model is not suitable for managing bedplate orders when demand is non-constant and follows a normal distribution. It is necessary to consider other inventory management models that can handle variable demand.
Step-by-step explanation:
The statement that the EOQ model remains a suitable approach for managing bedplate orders, regardless of demand variability, is false. The Economic Order Quantity model is based on certain assumptions, including constant demand and predictable usage rates. When the demand for a product follows a normal distribution and is non-constant, it introduces variability and uncertainty that the traditional EOQ model does not account for. In such situations, inventory management techniques that can handle variable demand, such as just-in-time (JIT) ordering or safety stock inventory methods, might be more appropriate.
This understanding can be linked to the concept of oligopolies in the market. For instance, the quantity demanded in the market being two or three times the quantity needed to produce at the minimum of the average cost curve implies the existence of few large firms in the industry due to economies of scale and market demand, creating a barrier to entry, as seen in the Boeing-Airbus duopoly for large passenger aircraft. The same principle of adapting to market demands applies to inventory management in businesses.
Therefore, Elversberg Manufacturing should consider other inventory management models that explicitly account for demand variability and the associated risks to maintain efficiency and cost-effectiveness in their operations.