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KNOWLEDGE LIBRARY

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27Jun

Warehouse Occupancy Percentage

Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...

02Jun

Efficient Procurement Inventory

Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...

02Jun

Inventory Carrying Rate

The inventory carrying rate (ICR) is the percent of the unit inventory value used to...

26Jun

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When...

27Jun

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and...

Setup Cost

Setup cost (SUC) is the cost to setup (prepare or changeover) a machine or production line to make a production run for a particular item or change between items. It is sometimes referred to as changeover cost (COC). Setup or changeover costs include:

Labor to prepare for and execute the changeover.

Training of typically highly skilled labor.

Lost production capacity during the changeover.

Material lost before, during, and just after the changeover.

Tools required for executing high-speed changeovers.

Computer hardware and software to plan and execute changeovers.Setup costs vary more widely than purchase order costs. We have encountered setup costs with our clients ranging from $100 to $10,000 per setup. The most expensive component is typically the opportunity cost of lost production time. Parallel processing, early tool preparation, point-of-change tool placement, optimized changeover sequencing, comprehensive and repeated changeover practice sessions, dedicated lines, and focused factories techniques and investments should be evaluated to optimize setup and changeover costs and their related production lot sizes.

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