ABSTRACT
Corresponding to the demand characteristics, the supply side requires numerous setup operations for diversified production and small lots. If demand allows for anticipatory production, small lots can be combined into larger ones, thus reducing the number of setups. In traditional manufacturing operations, efficient setup changes require two things: Knowledge and Skill. Large-lot production in response to large orders is fine, but most large-lot production in fact results from combining repeated orders for small volumes of goods, giving rise to excess anticipated production. Setup operations have traditionally demanded a great deal of time, and manufacturing companies have long suffered from the extreme inefficiency this causes. When demand takes the form of repeated diversified, low-volume orders, lot sizes can be increased by combining several orders and producing in anticipation of demand. There is no doubt that the concept of economic lot size is entirely correct in theory.
