FloorCare manufactures, packages, and sells floor wax to hospitals. Truck shipments of chemicals are delivered to FloorCare, which then mixes and packages the floor wax in containers of various sizes. FloorCare maintains an average daily inventory of \($500,000\) of one chemical, X7666, which is used in all of the floor waxes. This amount represents a one-half month supply of X7666. At the beginning of each month, the current supplier delivers \($1\) million of X7666 (200,000 liters) to FloorCare. The cost of in-bound freight (paid by FloorCare) is \($2,300.\) To finance its inventory (including in-bound freight), FloorCare borrows money from the bank at 18 percent per year.

A new supplier proposes to make daily just-in-time (JIT) deliveries of X7666. The cost per liter is \($5.03,\) which includes the in-bound freight paid by the new supplier. The quality of X7666 from the new supplier is equivalent to that of the current supplier. The average daily inventory of X7666 with the new supplier’s JIT deliveries is 5,000 liters.

a. Should FloorCare switch to the new supplier?

b. What other factors should FloorCare consider before switching to the new supplier?