A COMPARISON OF RULES FOR ALLOCATING SETUP-REDUCTION INVESTMENTS IN A CAPACITATED ENVIRONMENT

This paper builds on a recent empirical study of the setup-reduction process that suggests setup-reduction proceeds through three major stages and that each stage is dominated by a particular type of investment function. Specifically, it examines the question of how to best prioritize investments during the stage that emphasizes standardizing setups across a work center. We compare different investment-allocation rules in a multi-item, capacity-constrained, dynamic demand environment under a variety of cost, demand, and investment assumptions. This analysis shows that significant differences in benefits can be achieved depending on the way setup-reduction investments are prioritized.