Which elements are part of a supply chain network design and what are typical trade-offs?

• A. Marketing channels and customer service
• B. Facilities (plants, warehouses), transportation links, inventory positioning, and capacity; trade-offs include cost vs service level, responsiveness vs efficiency, and risk concentration vs diversification
• C. IT systems and cybersecurity concerns only
• D. Branding and packaging design decisions only

Answer: (B)

Supply chain network design focuses on structuring how a network operates—where to locate facilities like plants and warehouses, how goods move between them through transportation links, where inventory should be positioned, and how much capacity the network can support. The trade-offs you’ll navigate include cost versus service level, since expanding capacity and faster shipping boost service but raise fixed and operating costs; responsiveness versus efficiency, where being quick to respond can require more inventory or closer facilities, potentially lowering efficiency; and risk concentration versus diversification, balancing having concentrated locations against spreading risk across multiple sites. For example, adding a regional warehouse can greatly improve service levels and reduce lead times, but it also increases fixed costs and inventory holdings. Other options miss essential design elements—the structural layout of the network, the placement of inventory, and the capacity decisions—and thus don’t capture the key decisions involved in network design.