Setup Cost Reduction in (Q, r) Policy with Lot Size, Setup Time and Lead-Time Interactions

Moncer A. Hariga

29 citations0/0 files storedJournal of the Operational Research Society

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Supply Chain and Inventory Management Management and Optimization Techniques Operations Management Techniques

Abstract

It is often assumed in most deterministic and stochastic inventory models that lead-time is a given parameter and the optimal operating policy is determined on the basis of this unrealistic assumption. However, the manufacturing lead-time is made up of several components (moving time, waiting time, setup time, lot size, and rework time) most of which should be treated as controllable variables. In this paper the effect of setup cost reduction is addressed in a stochastic continuous review inventory system with lead-time depending on lot size and setup time. An efficient iterative procedure is developed to determine the near optimal lot size, reorder point and setup time. Furthermore, a sensitivity analysis is carried out to assess the cost savings that can be realised by investing in setup.

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References

1999Inventory management and production planning and scheduling 1964Analysis of Inventory Systems.1983Japanese Manufacturing Techniques: Nine Hidden Lessons in Simplicity 1987Lot Sizes, Lead Times and In-Process Inventories 1985Investing in Reduced Setups in the EOQ Model 1987THE CLASSIC ECONOMIC PRODUCTION QUANTITY MODEL WITH SETUP COST AS A FUNCTION OF CAPITAL EXPENDITURE*1990Setup cost reduction in an inventory model with finite-range stochastic lead times 1986Investing in new parameter values in the discounted EOQ model

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