What term describes the risk of optimizing a single component of the supply chain at the expense of overall system performance?

What term describes the risk of optimizing a single component of the supply chain at the expense of overall system performance?

• A. Sub-optimization
• B. Lock-in
• C. Pareto improvement
• D. Total quality management

Answer: (A)

Sub-optimization happens when you tune one part of the supply chain to be as good as possible without considering the effects on the whole system. In a network of interdependent activities, improving a single component can create new bottlenecks, unnecessary costs, or degraded service elsewhere, so overall performance declines even though that part looks better. For example, pushing production to operate at maximum speed can cut unit costs or increase throughput locally, but it often raises work-in-process inventory, longer lead times, and higher total cost, hurting reliability and responsiveness across the supply chain. Because the goal is to optimize the entire system rather than one isolated part, this term best captures the described risk. The other options describe different ideas: lock-in is about being stuck with a system due to switching costs, Pareto improvement is about making someone better off without making others worse off, and total quality management is a broad quality-boosting approach, not the specific risk of harming overall system performance by local optimization.

Sub-optimization happens when you tune one part of the supply chain to be as good as possible without considering the effects on the whole system. In a network of interdependent activities, improving a single component can create new bottlenecks, unnecessary costs, or degraded service elsewhere, so overall performance declines even though that part looks better. For example, pushing production to operate at maximum speed can cut unit costs or increase throughput locally, but it often raises work-in-process inventory, longer lead times, and higher total cost, hurting reliability and responsiveness across the supply chain. Because the goal is to optimize the entire system rather than one isolated part, this term best captures the described risk. The other options describe different ideas: lock-in is about being stuck with a system due to switching costs, Pareto improvement is about making someone better off without making others worse off, and total quality management is a broad quality-boosting approach, not the specific risk of harming overall system performance by local optimization.