The manufacture of products with different characteristics incurs two categories
of supply chain costs: production costs (Cooper, 1990) and market mediation costs
(Fisher, 1997). Production costs include material, labor, manufacturing, overhead
costs, and production technology investments (Randall&Ulrich, 2001).Mediation
costs occur due to market variability (Randall & Ulrich, 2001). Mediation costs
include inventory holding costs, product mark-down costs, and opportunity costs
for not having the right products to meet the demands. Production and mediation
costs can be influenced by the choice of supply chain strategy as noted by Fisher
(1997) and examined in the work of Randall and Ulrich (2001).