Dynamic setup reduction in production lot sizing with nonconstant deterministic demand

We examine three production policies under nonconstant, deterministic demand and dynamic setup cost reduction, where a decision to invest in setup reduction is made at the beginning of each period of a planning horizon. The three production policies are the reorder point, order quantity (s, Q) policy; the fixed production cycle, variable order quantity (t, Q_i) policy; and the variable production cycle, variable order quantity (t_i, Q_i). We study the behavior of the total relevant cost and develop a lot sizing and an investment solution procedure. Numerical examples are provided and dynamic setup cost reduction is compared with static setup cost reduction, where the decision to invest in setup reduction is made only at the initial setup.