A plant manager and her controller were discussing the plant's inventory control policies one day. The controller

Question:

A plant manager and her controller were discussing the plant's inventory control policies one day. The controller suggested to the plant manager that the ordering policies needed to be reviewed because new technology had been implemented in the plant, including installation of
(1) Computerized inventory tracking,
(2) Electronic data interchange capabilities with the plant's major suppliers,
(3) In-house facilities for electronic fund transfers.
a. As technology changes, why should managers update ordering policies for inventory?
b. Write a memo to the plant manager describing the likely impact of the changes made in this plant on the of material input.

Economic Order Quantity
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...