Question

It is important for shipping companies to be clear about the objectives for maintenance and materials management — as to whether the primary focus is on service level improvement or cost minimization. Often when certain systems are set in place, the cost minimization objective and associated procedure become more important than the flexibility required for service level improvement. The problem really arises since cost minimization tends to focus on out of pocket costs which are visible, while the opportunity costs, often greater in value, are lost sight of.
A. Shipping companies have to either minimize costs or maximize service quality. If they focus on cost minimization, they will reduce quality. They should focus on service level improvement, or else opportunity costs will be lost sight of.
B. Shipping companies should determine the primary focus of their maintenance and materials management. Focus on cost minimization may reduce visible costs, but ignore greater invisible costs and impair service quality.
C. Any cost minimization programme in shipping is bound to lower the quality of service. Therefore, shipping companies must be clear about the primary focus of their maintenance and materials management before embarking on cost minimization.
D. Shipping companies should focus on quality level improvement rather than cost cutting. Cost cutting will lead to untold opportunity costs. Companies should have systems in place to make the service level flexible.

• A. A
• B. B
• C. C
• D. D

Hint:

Maintain a balance between quality and cost when managing service level improvement.

Answer 1

The Correct Option is D

The passage emphasizes that companies should focus on service level improvement while still considering cost minimization as a secondary factor. However, it points out the issue that focusing too much on cost minimization may lead to the loss of greater opportunity costs. Therefore, the best option is: \[ \boxed{(4) \ \text{D}} \]