Investment in set-up time reduction with time-varying demand

Abstract

In this paper, a mathematical model is developed to investigate the economic e ¶ ects of set-up time reduction. In this model, the concept of product life cycle and continuous demand are included, with the objective of minimizing the total relative cost while demand is variable over time. Also, budget constraints are added to describe the conditions of limited investment. Following the suggested procedure of deciding investment in set-up time reduction, a manager can conclude if set-up time reduction is economically feasible and allocate the investment optimally. Finally, an example about the declining market demand is provided to demonstrate the application of the model. NomenclatureThe following is a list of notations used throughout this paper. The numerical value which follows a variable is used for calculations in section 4. A the storage space per pallet (ˆ1:2 m 2 /pallet) c a cost per square meter of storage per year (ˆUS$ 3 000 per square metre per year) c f pallet usage cost per pallet per year (ˆUS$ 200/pallet/year) c r rework cost per part (ˆUS$ 5/part) c s scrap cost per part (ˆUS$ 9/part) D…t † demand rate, D…t † 0 H inventory carrying cost for each part per year (ˆUS$ 0.9/part/year) ICC inventory carrying cost