Set-up reduction and inventory turnover rate

Abstract

This paper contains an analysis of the impact of set-up time reduction and lot sizing decisions on the inventory turnover rate. An analytical expression of the turnover rate is derived, including work-in-process as well as finished goods inventory. The turnover rate is analysed when set-up time is changed. Different decision rules for lot sizing are considered. They are classified according to how the lot sizes should be adjusted to set-up changes. Three general cases can be distinguished. This paper gives insights into the relationships among lot sizes, inventory turnover rate, set-up time and set-up cost. It also contributes to the understanding of the importance of adjusting lot sizes when reducing set-ups.