This paper considers the control of a single-server tandem queueing sy
stem with setups. Jobs arrive to the system according to a Poisson pro
cess and are produced to order. A single server must perform a number
of different operations on each job. There is a setup time for the ser
ver to switch between different operations. We assume that there is a
holding cost at each operation, which is nondecreasing in operation nu
mber (i.e., as value is added to a job, it becomes more expensive to h
old). The control problem is to decide which job the server should pro
cess at each point in time. We formulate this control problem as a Mar
kov-Decision Process. We partially characterize the optimal policy, de
velop an exact analysis of exhaustive and gated polling policies, and
develop an effective heuristic policy. The results of a simulation stu
dy, which tests the performance of the policies considered, are report
ed. These computational results indicate that our heuristic is effecti
ve for a wide variety of cases.