Setup Time Reduction is an important aspect of the Just-in-Time(JIT) and Zero Inventory(Zl) Concepts since it supports reductions in manufacturing lead times and inventories. It also enables small lot sizes and kanban systems implementation for material flow - achieving major improvements in production floor management. One concept fundamental to the pursuit of JIT production in Japan and other countries is adoption of a setup time reduction. This paper looks at the necessities of setup time reduction and the relations to machine utilization. By using an EOQ model for evaluate the effect of setup time reduction, we get the results that over 75 % reduction in setup time is obtain the desired results in the lot size reduction.