Optimal investment in setup reduction for finite horizon periodic review inventory system under deterministic time varying demand

This paper examines the impact of setup reduction on a finite horizon, periodic review inventory system, under deterministic time varying demand. A total relevant cost function is developed for such systems. Using this, the impact of setup reduction is examined under various forms of setup reduction cost functions that have been suggested in the literature. The operating characteristics and optimization of the various scenarios are discussed. Our analysis shows that the effects of setup reduction in a periodic review system are similar to those in a reorder point system. Our results are likely to help practitioners who use similar periodic review systems towards decreasing total inventory related costs by investing in setup reduction.