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.