# 6.8.1 Exercise: Operation Time versus Operation Cost, or the Effect of Varying Setup Time and Batch Size

### Intended learning outcomes: Explain the need to find a balance between short lead time, and low cost, for any operation. These two factors are determined by setup time and batch size.

This exercise will help to illustrate the need to find a balance between (1) short lead time, and (2) low cost, for any operation. These two factors are determined by setup time and batch size. You will find the effect of setup time and batch size on

1. The operation time, which is a measure of the lead time of the order.
2. The operation time per unit (that is, operation time divided by batch size), which is a measure of the cost of the operation and therefore of the cost of the production or procurement order.

(0) First, suppose a setup time of 200, a run time per unit of 100, and a batch size of 4. Calculate the operation time and the operation time per unit.

Solution:       Operation time: 600; operation time per unit: 150.

(1) If batch size is increased to 20, what are the effects on operation time and operation time per unit? In your opinion, what effects are positive or negative?

Solution:   Positive: operation time per unit clearly reduced to 110.
negative: operation time very much extended to 2200.

(2) Suppose that because of the hard work of the process engineers (e.g., by applying SMED measures), setup time could be reduced to 100. What is the effect of this, if the batch size is maintained at 20?

Answer:   Positive: operation time per unit slightly reduced to 105.
negative: operation time only very slightly reduced to 2100.

(3) To what extent can the batch size be reduced after the reduction of set¬up time to 100, so that the operation time does not exceed the original operation time of 600? What will the operation time per unit be?

Answer :   Batch size = 5; operation time per unit = 120.

(4) To what extent can the batch size be reduced after the reduction of setup time to 100, so that the operation time per unit does not exceed the original time per unit of 150? What will the operation time be?

Answer:   Batch size = 2; operation time = 300.

You can view the animated solution here:

Try out different values for setup time, run time per unit, and batch size.