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From EOQ Towards ZI

Author

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  • Willard I. Zangwill

    (Graduate School of Business, University of Chicago, Chicago, Illinois 60637)

Abstract

Zero Inventory (ZI) is a new and powerful concept to improve production efficiency. Underpinning ZI is set up reduction and this paper examines what eventuates when set up costs are cut. The folklore is that set up reduction lowers inventory and costs. We obtain results contrary to that. Reducing set up costs need not reduce inventory, for example. Likewise lowering set up costs need not necessarily lower total production and inventory costs. Furthermore, most investments produce marginally decreasing returns. Set up cost reduction prompts the opposite; it produces marginally increasing (not decreasing) returns. A parametric algorithm that calculates the benefit of set up cost reduction is provided. Most presentations of ZI have been descriptive with very few mathematical models of it yet untaken. By modeling certain ZI concepts mathematically, we scrutinize their validity and sometimes invalidity.

Suggested Citation

  • Willard I. Zangwill, 1987. "From EOQ Towards ZI," Management Science, INFORMS, vol. 33(10), pages 1209-1223, October.
    • Handle: RePEc:inm:ormnsc:v:33:y:1987:i:10:p:1209-1223
    DOI: 10.1287/mnsc.33.10.1209
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    Cited by:

    1. Bagchi, Tapan P. & Gupta, Jatinder N.D. & Sriskandarajah, Chelliah, 2006. "A review of TSP based approaches for flowshop scheduling," European Journal of Operational Research, Elsevier, vol. 169(3), pages 816-854, March.
    2. Hofmann, Christian, 1998. "Investments in modern production technology and the cash flow-oriented EPQ-model," International Journal of Production Economics, Elsevier, vol. 54(2), pages 193-206, January.
    3. Meller, Russell D., 1995. "The impact of multiple stocking points on system profitability," International Journal of Production Economics, Elsevier, vol. 38(2-3), pages 209-214, March.
    4. Darwish, M.A., 2008. "EPQ models with varying setup cost," International Journal of Production Economics, Elsevier, vol. 113(1), pages 297-306, May.
    5. Sarker, Bhaba R. & Coates, Eyler Robert, 1997. "Manufacturing setup cost reduction under variable lead times and finite opportunities for investment," International Journal of Production Economics, Elsevier, vol. 49(3), pages 237-247, May.
    6. Suerie, Christopher, 2006. "Modeling of period overlapping setup times," European Journal of Operational Research, Elsevier, vol. 174(2), pages 874-886, October.
    7. Fazel, Farzaneh & Fischer, Klaus P. & Gilbert, Erika W., 1998. "JIT purchasing vs. EOQ with a price discount: An analytical comparison of inventory costs," International Journal of Production Economics, Elsevier, vol. 54(1), pages 101-109, January.
    8. Matsuyama, Keisuke, 1995. "Inventory policy with time-dependent setup cost," International Journal of Production Economics, Elsevier, vol. 42(2), pages 149-160, December.
    9. White, Richard E. & Prybutok, Victor, 2001. "The relationship between JIT practices and type of production system," Omega, Elsevier, vol. 29(2), pages 113-124, April.
    10. Diaby, Moustapha, 1995. "Optimal setup time reduction for a single product with dynamic demands," European Journal of Operational Research, Elsevier, vol. 85(3), pages 532-540, September.
    11. Jans, R.F. & Degraeve, Z., 2005. "Modeling Industrial Lot Sizing Problems: A Review," ERIM Report Series Research in Management ERS-2005-049-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    12. Nye, T. J. & Jewkes, E. M. & Dilts, D. M., 2001. "Optimal investment in setup reduction in manufacturing systems with WIP inventories," European Journal of Operational Research, Elsevier, vol. 135(1), pages 128-141, November.
    13. Diaby, Moustapha, 2000. "Integrated batch size and setup reduction decisions in multi-product, dynamic manufacturing environments," International Journal of Production Economics, Elsevier, vol. 67(3), pages 219-233, October.
    14. Denizel, Meltem & Erenguc, Selcuk & Benson, Harold P., 1997. "Dynamic lot-sizing with setup cost reduction," European Journal of Operational Research, Elsevier, vol. 100(3), pages 537-549, August.
    15. Leung, Kit-Nam Francis, 2007. "A generalized geometric-programming solution to "An economic production quantity model with flexibility and reliability considerations"," European Journal of Operational Research, Elsevier, vol. 176(1), pages 240-251, January.
    16. Hoesel, C. P. M. Van & Wagelmans, A. P. M., 2000. "Parametric analysis of setup cost in the economic lot-sizing model without speculative motives," International Journal of Production Economics, Elsevier, vol. 66(1), pages 13-22, June.
    17. Hong, Jae-Dong & Kim, Seung-Lae & Hayya, Jack C., 1996. "Dynamic setup reduction in production lot sizing with nonconstant deterministic demand," European Journal of Operational Research, Elsevier, vol. 90(1), pages 182-196, April.
    18. Chandrashekar, Ashok & Callarman, Thomas E., 1998. "A modelling study of the effects of continuous incremental improvement in the case of a process shop," European Journal of Operational Research, Elsevier, vol. 109(1), pages 111-121, August.
    19. Stadtler, Hartmut, 1996. "Mixed integer programming model formulations for dynamic multi-item multi-level capacitated lotsizing," European Journal of Operational Research, Elsevier, vol. 94(3), pages 561-581, November.
    20. Banerjee, Avijit & Pyreddy, Vijay R. & Kim, Seung Lae, 1996. "Investment policy for multiple product setup reduction under budgetary and capacity constraints," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 321-327, August.
    21. Yucesan, Enver & de Groote, Xavier, 2000. "Lead times, order release mechanisms, and customer service," European Journal of Operational Research, Elsevier, vol. 120(1), pages 118-130, January.
    22. Williams, William W. & Tang, Kwei & Gong, Linguo, 2000. "Process improvement for a container-filling process with random shifts," International Journal of Production Economics, Elsevier, vol. 66(1), pages 23-31, June.
    23. Samaddar, Subhashish & Hill, Craig A., 2007. "Controlling adverse effect on work in process inventory while reducing machine setup time," European Journal of Operational Research, Elsevier, vol. 180(1), pages 249-261, July.

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