Possibilities of replacing trade-off relations with trade-up relations in logistics and production – part 2

On the other hand, the common part of “product quality” and “logistics customer service” may concern, for example, maintaining the quality of transported and stored products in the distribution sphere. The traditional understanding of the relationship between quality assurance costs and product quality is shown in Fig. 3. As quality increases, the costs of ensuring it also increase. This applies to quality in the narrow sense (product quality), both design quality and performance quality. Fig. 3 shows a uniform increase in costs associated with ensuring product quality. However, these costs can also grow progressively, meaning that when quality is already high, large expenditures must be incurred to increase it even further. There is an analogy here with the trade-off relationship between costs and the level of logistics customer service (Fig. 4). Figures 3 and 4 illustrate a typical “something for something” (trade-off) relationship – as quality and the level of logistics customer service increase, costs also rise.

Of course, total costs associated with quality are shaped somewhat differently. It should be remembered that in addition to the costs of ensuring an appropriate level of quality (e.g., prevention and control costs), there are also costs of poor quality (internal – the need for corrections, waste of materials, time, etc., and external – related to complaints, loss of customers, etc.).

It is similar with costs related to logistics customer service – the total costs of logistics customer service are, on one hand, the costs of ensuring an appropriate level of logistics service (transport costs, finished goods inventory maintenance costs, etc.) and, on the other, the costs of a lack of an appropriate level of service. For the supplier, this will be, for example, the loss of a customer; for the recipient, for example, the costs of maintaining safety stocks in case of delivery delays. Costs associated with a lack of quality increase as the number of defects increases. The relationship between the costs of quality assurance and the costs of poor quality often looks as shown in Fig. 5, thus also on a trade-off basis. Consequently, it was previously believed that striving for one hundred percent quality (referring to performance quality) was not profitable because the costs associated with it (e.g., control costs) would at some point exceed the benefits achieved. Currently, however, there is an increasing tendency to strive for the “zero defects” idea, believing that it is the lack of quality that costs too much. The quality assurance cost curve can indeed be shaped differently than in Figs. 3 and 5. These costs can decrease despite an increase in quality. This will be a trade-up relationship. The same can be true for logistics customer service –

there may be situations in which this level increases while costs decrease simultaneously. Both quality costs and logistics customer service costs can therefore be shaped not only on a trade-off basis but also on a trade-up basis.