Cost, Quality, Speed: Balancing the Triple Constraints of Your Supply Chain
An efficient supply chain will allow you to meet customer’s quality expectations and fulfill order demands quickly while delivering the most revenue. However, maintaining a balance between these key supply chain constraints – cost, quality and speed – is a difficult task for many operations.
These three constraints, referred to as the triple constraints, affect the overall success of your business because they determine how well your supply chain functions. They’re also interdependent, meaning if one is altered, then the other two need to adjust accordingly to keep the balance. Having a detailed understanding of the triple constraints and how they affect your supply chain is critical for an efficient and profitable operation.
The team at Digital Telepathy, a UX design agency, created the below gif to better illustrate the relationship between the triple constraints. In this representation, quality is interchanged with scope, but the effects remain the same. You can see that, if you change one side, the other two extend or retract accordingly resulting in a constant push-and-pull effect.
Cost is usually the most inflexible constraint since budgets tend to be fixed. Your budget determines the amount of labor you can hire and the level of sophistication in equipment that you can install. The more resources your operation requires, the more cost you’ll incur. Cost affects the other two constraints because a lower budget likely means limited resources which could result in slower speed or lower quality work. In contrast, a higher budget means you can invest more in labor and equipment for faster turnaround.
Quality is usually the most noticed constraint by customers. Choosing to manufacture a higher quality product will increase the cost per unit and could slow down production time. On the fulfillment side of your supply chain, quality encompasses a few factors. When a worker picks the items for an order, they should ensure the items are in good condition and packaged so they don’t get damaged during transit. The packaging itself should also be optimized so it can safely house the order. Damaged items are likely going to result in returns and decreased customer satisfaction.
If you’re operating a B2C business, then speed is a huge factor when it comes to customer satisfaction. The amount of time it takes an order to be picked, packed and delivered is a crucial component for success. The quicker your delivery promise, the more you’ll need to invest in additional resources to uphold expectations which could result in reduced quality.
The popular notion in supply chain management is that you can only choose two of these constraints to focus on. It’s a game of give and take.
For example, if your business begins to receive more orders but wants to maintain the delivery speed, you’ll likely need to increase your budget. The change in demand will require more money to spend on additional labor that can fulfill the orders without affecting delivery deadlines.
Your plan for prioritizing these constraints will change and evolve as your business grows and the relationship between each constraint should constantly be reevaluated.
While you can adjust cost, quality and speed within your operation in order to maintain balance, you also have to consider external factors that are beyond your control. A few possibilities include:
- Customer expectations
Customers’ expectations are continuously increasing thanks to ecommerce giants that have online shoppers accustomed to extremely fast shipping. Smaller online retailers are feeling the pressure to adjust their shipping strategies in order to compete leading to increased operational costs.
The product release cycle of your competitors is another external factor that can play into how you choose to manage your constraints. If you want to be the first to market with a product, then speed will be your No. 1 priority. However, if you want to have the best quality, then you may choose to wait until your competitor has released their product so that you can improve upon it based on consumer response.
- Technological advancement
Technology is an essential component of supply chain management. The development of cloud-based technology has made it easier and more cost effective than ever for businesses to implement and utilize these systems to increase operational efficiency. However, these technologies are constantly and rapidly advancing making it hard for businesses with budget constraints to stay up to date.
Balancing your supply chain
Your supply chain will always be constrained by cost, quality and speed. Balancing these constraints requires a deep understanding of each and a careful strategy focused on maintaining that balance. Your business’ end goal will help you decide which constraints are the most important to prioritize.
Your strategy will also need to incorporate outside factors that could offset the balance, like evolving customer expectations, competitors’ product release cycles and the constant advancement of technology. The key is to prepare for these impacts and keep tight control over each constraint so your supply chain runs as efficiently as possible.