Assignment:
How you can use the materials and information in your workplace and in what areas
What is involved in a trade off analysis?
Discussion:
Kristopher, Understanding the tradeoffs in a supply chain are essential to the success of a and how to meet customer's demands by leveraging locational assets accordingly, to provide better customer service. If a supply chain only maintains one distribution center for all their customers, this places larger demand on it, but it is consolidated and easier to control, along with having lower operation costs. But when a business incorporates multiple smaller distribution centers across the geographical sales area, the lead time for delivery decreases, but now creates a more diverse and complex supply chain, but significantly increases complexity, product coordination concerns, and financial costs. This is when a supply chain needs to determine which tradeoffs will satisfy the intent of the business, by leveraging between customer service and financial revenue. Since customer service has many dimensions like service time, service level, product variety, returnability, and order visibility, this makes it difficult to determine which trade-offs are the least detrimental to the customer service factor and the overall effectiveness of the supply chain (Mani, 2016). Then the customer service tradeoffs are leveraged against financial requirements of transportation, facility, and inventory costs, that are considered the major components of a supply chain network (Mani, 2016).
Therefore, supply chain design needs to determine what tradeoffs are acceptable to create the balance between customer service and associated costs, creating an effective balance between the two. For example, Amazon has utilized the United States Postal Service to deliver their packages at a particular rate, but the associated cost paying a third-party vendor was traded off to meet the demands of the customers wanting their products delivered when needed. I have noticed this myself over my recent Amazon purchases by using Amazon Prime, I can accept ordering items and patiently wait the two days before receiving it. To me and many others, the two-day time span is now an acceptable trade-off for the lower price and availability of products. Each supply chain needs evaluations that encompasses all current and potential customers, and the levels of customer service they are willing to accept. Then the tradeoffs can be considered through the development of a supply chain network to reach the equilibrium between customer service and total costs of operations.
References:
Axsater, Sven. (2015). Inventory Control. (3rd ed.). New York: Springer.
Mani, Baidhurya. (February 24, 2016). Understanding Tradeoffs in Supply Chain Decision Making.
Jason, A trade-off is giving up one thing in return for another which means every complex decision requires that you accept having less of one thing in order to get more of something else (Brady, 2011). When a company incorporates trade-offs into their inventory it is usually in the best interest of the customer meaning the decisions should be related to operational efficiency and customer service (Cheng, 2013). So when performing an analysis these are two areas that need to be taken into consideration. In addition to the customers satisfaction they will also have to contemplate the profits that could be made or lost by the trade-offs.
One of the strategies a company will have to contemplate when figuring out what trade-off to give up is inventory costs. An example would be if the holding costs are hindering the company and it costs more money to store assets then the total value of the items they will have to either be sold, shipped to a distribution center, or disposed of. Another cost to consider is the shipping costs for items. A trade-off for that would be if a cooperation is traditionally using aircraft to ship cross country and the price of fuel rises then sending the items by truck or other ground transport should be an option to consider.
Reference:
Brady, S. (2011, August 7). How to: Completing a tradeoff analysis.
Cheng, L. (2013). Tradeoff Analysis for Optimal Multiobjective Inventory Model.