When evaluating several possible supply chain options, a firm considering the minimal total cost should:

When evaluating supply chain options with a focus on minimizing total cost, it is crucial to consider the combined costs of acquiring, holding, and transporting inventory, as well as servicing customers. This comprehensive approach ensures that all relevant cost factors are included in the decision-making process, leading to an optimized supply chain strategy. Simply focusing on keeping inventory levels low or placing buffer inventory in low-cost locations does not capture the full scope of total costs. Balancing these factors is essential to minimize the total cost while maintaining desired service levels.

References:

Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies. McGraw-Hill.

Christopher, M. (2016). Logistics & Supply Chain Management. Pearson.