a. Would be using an order interval other than every six weeks to reduce costs? If so, what order interval would be best, and what order size would that involve?
b. Would you recommend changing to the optimal order interval? Explain.
UPD Manufacturing produces a range of health care appliances for the hospital as well as for home use. The company has experienced a steady demand for its products, which are highly regarded in the health care field. Recently the company has undertaken a review of its inventory ordering procedures as part of a larger effort to reduce costs. One of the company’s products is a blood pressure testing kit. UPD manufactures all of the components for the kit in-house except for the digital display unit. The display units are ordered at six- week intervals from the supplier. This ordering system began about five years ago because the supplier insisted on it. However, that supplier was bought out by another supplier about a year ago, and the six- week ordering requirement is no longer in place. Nonetheless, UPD has continued to use the six-week ordering policy. According to purchasing manager Tom Chambers, “Unless somebody can give me a reason for changing, I’m going to stick with what we’ve been doing. I don’t have time to reinvent the wheel.”