The multi-item setup-reduction investment-allocation problem with continuous investment-cost functions

In this note, we analyze investment priorities for setup-reduction programs in a multi-product system. We provide an objective function transformation for the model developed by Porteus that permits the use of marginal analysis in both the single- and multiple-item problems. For the multiple-item problem, we show that managers should not reduce the setup for each product to its optimum in sequential order. This is in contrast to recommendations found in the existing literature.