Trade-offs and their effects and the Bullwhip effect
Trade-Offs and the Bullwhip Effect
A trade-off refers to any situation that entails losing an aspect or quality of an item in return for achieving another aspect. In the corporate context, the term is majorly used in cases where there is the need to get rid of some things in return for other better things (Khayum, 2003). There are a number of trade-offs that impact the operations of business organizations.
Inventory Transportation Costs Inventory transportation costs refer to the costs of delivering unsold products from the producer to the business premises. This trade off would imply that the cost of transporting the products is reduced for the purpose of achieving other operations (Keeney, & Raiffa, 2003). The impact of this trade off would be the reduction in price of the inventories soon they are sold out in the market. It is prudent that the costs of transporting inventories from the producers to the business premises and later to the market are reflected on the final cost of sale of the products. Thus a reduction in this cost would have the implication of reducing their selling price.
Cost-customer Service
In some cases, organizations have opted to reduce almost all costs associated with the preparation of goods and services. For instance, the reduction of the cost of customer service has been a major step that some of the organizations are making. This trade-off has the impacts of limiting the kind of customer services that the organizations give to their clients. Such a case would eventually lead to poor public relations, thus, lacking proper communication methods between the organizations and the clients (Khayum, 2003). Admittedly, the reduction of the cost of customer service has the implication of poor quality services.
Lead Time Transport Costs Lead time transport costs refer to the cost of transportation of goods within the period that elapses since they are produced till they are sold to the market. Efforts to get rid of this cost
A trade-off refers to any situation that entails losing an aspect or quality of an item in return for achieving another aspect. In the corporate context, the term is majorly used in cases where there is the need to get rid of some things in return for other better things (Khayum, 2003). There are a number of trade-offs that impact the operations of business organizations.
Inventory Transportation Costs Inventory transportation costs refer to the costs of delivering unsold products from the producer to the business premises. This trade off would imply that the cost of transporting the products is reduced for the purpose of achieving other operations (Keeney, & Raiffa, 2003). The impact of this trade off would be the reduction in price of the inventories soon they are sold out in the market. It is prudent that the costs of transporting inventories from the producers to the business premises and later to the market are reflected on the final cost of sale of the products. Thus a reduction in this cost would have the implication of reducing their selling price.
Cost-customer Service
In some cases, organizations have opted to reduce almost all costs associated with the preparation of goods and services. For instance, the reduction of the cost of customer service has been a major step that some of the organizations are making. This trade-off has the impacts of limiting the kind of customer services that the organizations give to their clients. Such a case would eventually lead to poor public relations, thus, lacking proper communication methods between the organizations and the clients (Khayum, 2003). Admittedly, the reduction of the cost of customer service has the implication of poor quality services.
Lead Time Transport Costs Lead time transport costs refer to the cost of transportation of goods within the period that elapses since they are produced till they are sold to the market. Efforts to get rid of this cost
References: Dyckhoff, H., Lackes, R., & Reese, J. (2004). Supply chain management and reverse logistics. Berlin; Springer, Springer Science & Business Media. Keeney, R. L., & Raiffa, H. (2003). Decisions with multiple objectives: Preferences and value Trade-Offs. Cambridge [England]; Cambridge University Press, Cambridge University Press. Khayum, M. (2003). Contemporary economic issues in developing countries. Westport, CT: Greenwood Publishing Group. Kook, T. (2013). The bullwhip effect: Grin Verlag.