This paper investigates the impact of setup cost reduction on an inventory policy for a continuous\r\nreview mixture inventory model involving controllable backorder rate and variable lead time\r\nwith a service level constraint, in which the order quantity, setup cost, and lead time are decision\r\nvariables. Our objective is to develop an algorithm to determine the optimal order quantity, setup\r\ncost, and lead time simultaneously, so that the total expected annual cost incurred has a minimum\r\nvalue. Furthermore, four numerical examples are provided to illustrate the results, and the effects\r\nof system parameters are also included for decision making.
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