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Strategic investment to reduce setup times in the economic lot scheduling problem

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  • Guillermo Gallego
  • Ilkyeong Moon

Abstract

This article considers the Economic Lot Scheduling Problem where setup times and costs can be reduced by an initial investment that is amortized over time. The objective is to determine a multiple‐item single facility cyclic schedule to minimize the long run average holding and setup costs plus the amortized investment. We develop a lower bound on the long run average inventory carrying and setup costs as a function of the setup times, and show that this lower bound is increasing concave on the setup times when the out‐of‐pocket setup costs are zero or proportional to the setup times. We then develop a model that may be helpful in deciding the magnitude and the distribution of a one‐time investment in reducing the setup times when the investment is amortized over time. Numerical results based on randomly generated problems, and on Bomberger's ten item problem indicate that significant overall savings are possible for highly utilized facilities. Most of the savings are due to a significant reduction in the long run average holding cost. © 1995 John Wiley & Sons, Inc.

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  • Guillermo Gallego & Ilkyeong Moon, 1995. "Strategic investment to reduce setup times in the economic lot scheduling problem," Naval Research Logistics (NRL), John Wiley & Sons, vol. 42(5), pages 773-790, August.
    • Handle: RePEc:wly:navres:v:42:y:1995:i:5:p:773-790
    DOI: 10.1002/1520-6750(199508)42:53.0.CO;2-F
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    References listed on IDEAS

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    1. Guillermo Gallego & Robin Roundy, 1992. "The economic lot scheduling problem with finite backorder costs," Naval Research Logistics (NRL), John Wiley & Sons, vol. 39(5), pages 729-739, August.
    2. Evan L. Porteus, 1985. "Investing in Reduced Setups in the EOQ Model," Management Science, INFORMS, vol. 31(8), pages 998-1010, August.
    3. Paul H. Zipkin, 1991. "Computing Optimal Lot Sizes in the Economic Lot Scheduling Problem," Operations Research, INFORMS, vol. 39(1), pages 56-63, February.
    4. Evan L. Porteus, 1986. "Optimal Lot Sizing, Process Quality Improvement and Setup Cost Reduction," Operations Research, INFORMS, vol. 34(1), pages 137-144, February.
    5. Salah E. Elmaghraby, 1978. "The Economic Lot Scheduling Problem (ELSP): Review and Extensions," Management Science, INFORMS, vol. 24(6), pages 587-598, February.
    6. Guillermo Gallego & Ilkyeong Moon, 1992. "The Effect of Externalizing Setups in the Economic Lot Scheduling Problem," Operations Research, INFORMS, vol. 40(3), pages 614-619, June.
    7. Wen-Lian Hsu, 1983. "On the General Feasibility Test of Scheduling Lot Sizes for Several Products on One Machine," Management Science, INFORMS, vol. 29(1), pages 93-105, January.
    8. Earl E. Bomberger, 1966. "A Dynamic Programming Approach to a Lot Size Scheduling Problem," Management Science, INFORMS, vol. 12(11), pages 778-784, July.
    9. Anne M. Spence & Evan L. Porteus, 1987. "Setup Reduction and Increased Effective Capacity," Management Science, INFORMS, vol. 33(10), pages 1291-1301, October.
    10. HSU, Wen-Lian, 1983. "On the general feasibility test of scheduling lot sizes for several products on one machine," LIDAM Reprints CORE 515, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    1. B.C. Giri & I. Moon & W.Y. Yun, 2003. "Scheduling economic lot sizes in deteriorating production systems," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(6), pages 650-661, September.
    2. Khouja, Moutaz & Michalewicz, Zgibniew & Wilmot, Michael, 1998. "The use of genetic algorithms to solve the economic lot size scheduling problem," European Journal of Operational Research, Elsevier, vol. 110(3), pages 509-524, November.
    3. Giri, B. C. & Moon, I., 2004. "Note on an economic lot scheduling problem under budgetary and capacity constraints," International Journal of Production Economics, Elsevier, vol. 91(3), pages 229-234, October.

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