Investment policy for multiple product setup reduction under budgetary and capacity constraints

This paper investigates the impact of setup cost and time reduction on production batch sizes and the schedule in a batch manufacturing system, producing multiple products. It is assumed that the system's operating environment is deterministic and there are budgetary and capacity constraints. The schedule feasibility of the embedded economic lot scheduling problem is attained by using the common cycle approach. The extent of setup reduction attained is treated as a function of capital investment in technology. The problem of simultaneously determining the lot sizes, as well as the investments made in setup reduction for the different products, with the objective of minimizing the total relevant cost, is formulated as a non-linear, constrained optimization model. A solution algorithm using the generalized Lagrangian approach is developed to solve this problem. A heuristic approach is also suggested for cases where the optimization procedure becomes computationally cumbersome. The concepts developed are illustrated through a numerical example.