Manufacturing setup cost reduction under variable lead times and finite opportunities for investment

Previously, economic order quantity (EOQ) and economic manufacturing quantity (EMQ) models were extended to include the option of investing in setup cost reduction where the setup costs vary as a function of capital expense. Most of the earlier research on this issue has assumed that demand and lead times are deterministic. Recently, there have been investigations into an EOQ model which considers setup cost reduction in the variable lead time environment. This paper extends the previous research in two areas. First, the EOQ model with setup cost reduction in the variable lead time environment has been extended to the EMQ model which increases the applicability tremendously. Second, most of the previous research with setup cost reduction assumes that there is some form of continuous relationship between the amount of investment and the reduction in setup costs. This paper investigates a more realistic situation where there is only a finite number of opportunities for setup cost reduction investment.