Economic Trade Off
Economic trade-off refers to the concept of giving up one thing in order to gain something else. In business, this often involves making decisions about allocating resources, such as time, money, and labor, to achieve the best possible outcome. Understanding and managing trade-offs is essential for businesses to make informed choices and optimize their operations.
3 Key excerpts on "Economic Trade Off"
eBook - ePubProject Management
A Systems Approach to Planning, Scheduling, and Controlling
- Harold Kerzner(Author)
- 2009(Publication Date)
- Wiley(Publisher)
...16 Trade-off Analysis in a Project Environment “When we try to pick out anything by itself, we find it hitched to everything else in the universe.”—MUIR’S LAW 16.0 INTRODUCTION PMBOK ® Guide, 4th Edition Triple-Constraint Definition Successful project management is both an art and a science and attempts to control corporate resources within the constraints of time, cost, and performance. Most projects are unique, one-of-kind activities for which there may not have been reasonable standards for forward planning. As a result, the project manager may find it extremely difficult to stay within the time-cost-performance triangle of Figure 16-1. The time-cost-performance triangle is the “magic combination” that is continuously pursued by the project manager throughout the life cycle of the project. If the project were to flow smoothly, according to plan, there might not be a need for trade-off analysis. Unfortunately, this rarely happens. FIGURE 16-1. Overview of project management. Trade-offs are illustrated in Figure 16-2, where the Δs represent deviations from the original estimates. The time and cost deviations are normally overruns, whereas the performance error will be an underrun. No two projects are exactly alike, and trade-off analysis will be an ongoing effort throughout the life of the project, continuously influenced by both the internal and the external environment. Experienced project managers have predetermined trade-offs in reserve, recognizing that trade-offs are part of a continuous thought process. Trade-offs are always based on the constraints of the project. Table 16-1 illustrates the types of constraints commonly imposed. Situations A and B are the typical trade-offs encountered in project management. For example, situation A-3 portrays most research and development projects. The performance of an R&D project is usually well defined, and it is cost and time that may be allowed to go beyond budget and schedule...
eBook - ePub- Raymond S. Nickerson(Author)
- 2002(Publication Date)
- Psychology Press(Publisher)
...However, establishing costs and benefits, in any but the most superficial of senses, must take human values and preferences into account. The measurement of human values and preferences, especially as they pertain to characteristics of the environment that contribute to the quality of life, is a psychological problem of considerable complexity. Presumably human behavior is motivated by basic human needs and desires. Behavior that is intended to accomplish a specific objective is not necessarily the only, or even the best, way that that objective can be realized. Often the benefits, especially the immediate benefits, that derive from a specific type of behavior are much more apparent than its costs especially its long-term costs. We need more effective ways to quantify the costs and benefits of proposed approaches to realizing objectives, as well as to identify what alternative approaches are possible and quantify the costs and benefits of them as well. TRADE-OFF ANALYSES Closely associated with cost-benefit analysis is the concept of trade-offs. The idea is that, to realize or increase one good, one must be willing to forego or decrease another. An illustration of the need to understand trade-off s better relates to energy consumption. Perhaps most people would agree that the rate of growth of energy use worldwide should be slowed at least so long as energy is produced and used in ways that have detrimental environmental effects. Yet how to achieve a sustainable level of energy consumption remains an open question, especially in view of the enormous disparity in current use across nations and the understandable desire of less-developed countries to approach the standard of living of the more developed ones. The simplistic idea that energy conservation and the enhanced use of renewables could solve the world’s sustainability and environmental problems, particularly those of the developing countries, by the year 2020 is entirely unrealistic...
eBook - ePubProject Management
A Systems Approach to Planning, Scheduling, and Controlling
- Harold Kerzner(Author)
- 2013(Publication Date)
- Wiley(Publisher)
...The time and cost deviations are normally overruns, whereas the performance error will be an underrun. No two projects are exactly alike, and trade-off analysis will be an ongoing effort throughout the life of the project, continuously influenced by both the internal and the external environment. Experienced project managers have predetermined trade-offs in reserve, recognizing that trade-offs are part of a continuous thought process. FIGURE 16–2. Project management with trade-offs. Trade-offs are always based on the constraints of the project. Table 16–1 illustrates the types of constraints commonly imposed. Situations A and B are the typical trade-offs encountered in project management. For example, situation A-3 portrays most research and development projects. The performance of an R&D project is usually well defined, and it is cost and time that may be allowed to go beyond budget and schedule. The determination of what to sacrifice is based on the available alternatives. If there are no alternatives to the product being developed and the potential usage is great, then cost and time are the trade-offs. TABLE 16–1. CATEGORIES OF CONSTRAINTS Most capital equipment projects would fall into situation A-1 or B-2, where time is of the essence. The sooner the piece of equipment gets into production, the sooner the return of investment can be realized. Often there are performance constraints that determine the profit potential of the project. If the project potential is determined to be great, cost will be the slippage factor, as in situation B-2. Non–process-type equipment, such as air pollution control equipment, usually develops a scenario around situation B-3. Performance is fixed by the Environmental Protection Agency...
