Manufacturing setup cost reduction

Abstract

Previously, economic order quantity (EOQ) models were extended to include the option of investing in setup cost reduction where setup costs varies as a function of investment. Most of the earlier research on this issue has assumed that demand and lead times are deterministic. Recently, there has been investigations into an EOQ model which considers setup cost reduction in the variable lead time environment. This paper extends the previous research in two areas. First, the EOQ model with setup cost reduction in the variable lead time environment has been extended to the EMQ model which increases the applicability. Second, instead of the usual assumed continuous relationship between the amount of investment and the reduction in setup costs, this paper investigates a more realistic situation where there is only a finite number of opportunities for setup cost reduction investment.