The sensitivity of set-up cost estimation on the problem of joint lot sizing and scheduling

The determination of lot sizes and production schedules of multiple products in multiple periods is difficult when sequence-dependent set-up costs are present. By using an initial set-up cost estimator (ISCE) the joint problem can be divided and solved sequentially. A search of the literature reveals that, while there is considerable research on the individual problems of lot sizing and scheduling, there is a dearth of study on either the joint problem or on the effect of ISCE selection on the total cost solution. Using a variety of data sets, this paper evaluates the sensitivity of ISCE selection on the solution to the joint problem. Results of the study demonstrate that the choice of an ISCE can have a significant effect on the final lot sizes and schedules. Additionally, the research shows that ‘common sense’ a priori assumptions about ISCE performance may lead to the selection of an inappropriate ISCE.