Final answer:
Changing to smaller lot sizes can offer flexibility and reduce lead times, but it is essential to conduct a cost-benefit analysis. This includes considering total costs and the effect on production such as machine hours and labor. Historical context, like changes in the 1970s U.S. manufacturing sector, shows that shifts in costs can drive technology choices.
Step-by-step explanation:
When considering whether to reduce the lot size from 60 to two lots of 30, even with a single machine at each station, there are several key factors to contemplate. Firstly, a smaller lot size can improve flexibility and reduce lead times, which can be beneficial in managing inventory levels and responding to market demand. Furthermore, it is important to analyze the total cost implications of such a change, which includes considering both direct costs, such as labor and materials, and indirect costs, like storage and handling.
It is not always the case that a lower number of machines will lead to an increase in labor. In fact, depending on the technology and processes used, it may result in more efficient production flows and labor utilization. If machine cost increases, which is a scenario akin to the United States in the 1970s, firms might indeed shift towards using less capital-intensive technologies. Thus, whether to switch to smaller lot sizes should be determined by a cost-benefit analysis specific to the company's circumstances, evaluating factors like increased machine hours, labor costs, and expected gains in efficiency and market responsiveness.