- The model is used to examine the effect of shortage penalty on the optimal lot size,
- when the model reflects job queuing dynamics arising from the lot size decision.
- A coordinated policy of safety stock adjustment and lead time reduction through lot size adjustment is shown be more efficient than responding to changes in the shortage penalty parameter solely through adjustment of safety stock.
-Since the introduction of the venerable EOQ model, the study of process lot sizing has been conducted under a paradigm of trade-offs between process setup costs vs. inventory carrying costs.
the primary issue related to setup frequency is not so much a matter of setup cost, but rather, consumption of available process time.
The basic motivation is that the marginal cost of an additional setup is often quite small, if the setup is consuming what would
otherwise be idle time for the process in question.
In contrast, when setup frequency increases to the point where an additional setup cuts into production time for a process operating at or near full utilization, the cost of an additional setup is quite significant or even prohibitive.