Flexibility improvement in continuous-review (s,Q) systems

In recent years, many researchers and practitioners have studied the Japanese approach to production and inventory control, commonly known as the Just-in-Time (JIT) philosophy. One of the important aspects of JIT is to have small lot sizes. This is impossible to achieve unless the machine setup time and cost are drastically reduced. Recognizing this principle, many authors have treated setup cost as a decision variable rather than a fixed parameter, and extended the traditional lot sizing models to allow for capital investment in order to reduce setup time and cost. This paper extends the work to the case where demand is stochastic. The authors limit their attention to continuous-review (s,Q) inventory systems in which an order of size Q is placed each time the inventory position reaches the reorder point, s.