MULTIPRODUCT ECONOMIC LOT-SIZE MODELS WITH INVESTMENT COSTS FOR SETUP REDUCTION AND QUALITY IMPROVEMENT - REVIEW AND EXTENSIONS

There is a rapidly growing literature on modelling the effects of investment strategies to control givens such as setup time, setup cost, quality level. Recently, Hwang et al. (1993) studied the multiproduct economic lot size models in which setup reduction and quality improvement can be achieved with one-time initial investment. The aim here is to review and extend their work. First, we point out that their algorithms can produce irrelevant solutions, and clarify the cause of the problem. Second, we provide a complete formulation and analyse for the general investment functions using the Lagrangian method. The algorithm to find an optimal solution is provided, and an example problem is solved to illustrate the algorithm.