There is always a trade-off or opportunity cost in decisions about resources. This point was driven home to my colleagues and me as undergrads in a business logistics course.  During the semester, we each teamed up with 2 other students and played a game.  Called by the professor, BULOGA, it was a business logistics game (simulation, if you will) that even dealt with procurement of raw materials and managing production runs of factories.  As the physical distribution of products is such a significant cost to large manufacturing companies, reducing these expenses contributes much to overall company profitability.  And, sometimes, business decisions as to production levels of plants are made (somewhat in a backwards fashion) based on optimizing the costs of the warehousing and shipping of final products.

 

 

The game required us students to make decisions about current operations and future, planned operations for a manufacturing company.  This is how the “game” taught us about trade-offs in decisions about resources (including capital, dollars, as a resource) and about lead times.  If we did not order in sufficient raw materials in time, the factories could not produce the optimal number of finished products each week.  As well, we needed to manage the throughput of warehouses and control shipping costs of products.  We played this game for several weeks and got results from a computer printout each week based on our input decisions.  At the end of the game, we were graded not just on the profitability we achieved for the several weeks played, but we were also evaluated on how we left the company.  For example, if we had ordered fewer raw materials late in the game to boost current profits at the cost of leaving the future weeks’ production runs in jeopardy, we were penalized.

Stephen Covey addressed this concept as well in his books (one of which we read at one of my employers many years later). There is production (P) and productive capacity (PC).  In business, plant managers can opt to maximize current profits by running their plant at full capacity and postponing routine maintenance. (This assumes, of course, that the company’s marketing dept. can sell all units produced by the plant.)  But, this is a short-sighted approach that leads to costly plant shutdowns when machines, not being maintained, break down prematurely. A more balanced approach is not to rob production capacity in the long run for short term, unsustainable increases in current production.  Routine maintenance is done on time.  Plant expansions are planned in advance and built out proactively rather than reactively.

Of course, there are other examples that come to mind of balancing future requirements against current needs.  Farmers may choose to leave some of their land fallow each year so as not to wear out the soil in the fields.  The farmer has chosen to forego current profits so as to preserve the productivity of his farm in future years.  During prosperous times for a company, engineering departments are working on developing future products to sell in a few years’ time.  Waiting until the company is experiencing declining sales revenue is having waited too long to act.  Engineering budgets reduce current profits but help to insure future profitable years for the enterprise.

What the above is touching upon are the twin concepts of conservation and stewardship.  Stewardship and conservation are old concepts.  We can develop our natural resources in an environmentally and socially responsible way.  We have the means (current technology) to do so.  We can raise standards of living in the world without trashing the planet for future generations.  We ought not take an extreme “eco-fanatic” position and oppose or resist any and all development.  Such an extreme viewpoint that opposes all change to the environment would have us leave prospective farmable lands idle even though millions worldwide are starving to death or suffering severe malnourishment.

Protecting the environment (including wildlife), conservation of resources (avoiding waste and excess depletion) and progress can all be achieved for the benefit of the present generation while leaving a productive planet intact for future generations.

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