Maximizing local profit or minimizing cost in a supply chain is best described as what?

Maximizing local profit or minimizing cost in a supply chain is best described as local optimization. This concept focuses on improving efficiency and performance at a specific node or segment within the supply chain, such as a single department, facility, or business unit. Local optimization strategies often prioritize individual goals and metrics, which can lead to increased efficiency in one area. However, these efforts may not account for the entire supply chain's performance and can potentially create inefficiencies elsewhere.

For example, if a manufacturer finds a way to reduce costs significantly in production but neglects the impact on distribution or inventory levels, the overall supply chain may suffer. While local optimization can lead to short-term gains at specific points, it does not ensure that such gains contribute to the overall effectiveness and profitability of the entire supply chain.

In contrast, global optimization encompasses a broader perspective, considering the entire supply chain's performance rather than focusing on individual components. Supply chain integration refers to the coordination and collaboration among various stakeholders across the supply chain. Cost leadership is a competitive strategy aimed at becoming the lowest-cost producer in an industry but does not specifically address the focus on maximizing profit at a local level within the supply chain.