Harris in the original 1913 paper on the EOQ model, suggested that “most managers, indeed, have a rather hazy idea as to just what this [setup] cost amounts to.
The Economic Order quantity model- one of the earliest application of mathematics to factory management was the work of Ford W. harris (1913) on the problem of setting manufacturing lot sizes. Altough the original paper was evedently incorrectly cited for many yers. (see Erlenkotter 1989, 1990). Harris's EQQ model has been widely stided and is a staple of virually every intorductory production and operation managemnt textbook.
a) Do you think that setup cost, as defined in the EOQ model, is more easily specified today than in 1913? Why, or why not?
b) Give some examples of costs that might make up this setup cost.
c) What might setup cost in the model actually be serving as a surrogate for in the real system?