Explain the basic trade-off between responsiveness and efficiency for each of the major drivers of supply chain performance

What will be an ideal response?

Answer: The fundamental trade-off when making facilities decisions is between the cost of the number, location, and type of facilities (efficiency) and the level of responsiveness that these facilities provide the company's customers.

The fundamental trade-off when making inventory decisions is between responsiveness and efficiency. Increasing inventory will generally make the supply chain more responsive to the customer. This choice, however, comes at a cost as the added inventory decreases efficiency. Therefore, a supply chain manager can use inventory as one of the drivers for reaching the level of responsiveness and efficiency the competitive strategy targets.

The fundamental trade-off for transportation is between the cost of transporting a given product (efficiency) and the speed with which that product is transported (responsiveness). The transportation choice influences other drivers such as inventory and facilities. When supply chain managers think about making transportation decisions, they frame the decision in terms of this trade-off.

Good information systems can help a firm improve both its responsiveness and efficiency. The information driver is used to improve the performance of other drivers and the use of information is based on the strategic position the other drivers support. Accurate information can help a firm improve efficiency by decreasing inventory and transportation costs. Accurate information can improve responsiveness by helping a supply chain better match supply and demand.