Trade Studies

What is a Trade Study?

One of the best definitions of a trade study is this:

"Trade Studies is the System Engineering (SE) element that multidisciplinary teams use to identify the most balanced technical solutions among a set of proposed viable solutions. It is a key tool in developing designs that meet stakeholder requirements in the most cost-efficient manner possible. The application of Trade Studies prevents program/project management from committing too early to a design that may not be cost effective or meets all system requirements. Through Trade Studies, desirable and practical alternatives that better combine cost and effectiveness may be identified, resulting in beneficial selections among the alternatives." ( FAA, System Engineering Manual Version 3.1, Section 4.6, Trade Studies, Federal Aviation Administration, 2006)

General use of trade studies

While the above definition is a systems engineering perspective, the approach applies to any situation where a decision needs to be made on which option to select by trading benefits and penalties for each solution.

Some typical examples of situations that benefit from performance of trade studies are:

• Choosing a technical solution (performance, cost, risk, etc)

• Choosing a supplier source (performance, cost, risk, delivery schedule, continuity, etc)

• Choosing a financing source (interest rate, establishment fees, termination, risk, etc)

• Contract amendment proposal (eg, cost/benefit, probability of success, contract implications, etc)

The trade parameters are more often quantifiable as numbers (cost/price, risk probability, performance, etc). Some trade parameters will be qualitative and need to have a numeric value ascribed to them (eg, supplier reliability, damage/benefit to company, etc)

Ultimately, the purpose of the trade study is to select the most balanced solution in terms of cost/price, schedule, quality/performance, risk, and qualitative factors, from a set of viable alternatives using a set of defined criteria.

Trade Study approach

The FAA, System Engineering Manual Version 3.1, Section 4.6, Trade Studies, Federal Aviation Administration, 2006 provides an excellent description of the process and you are referred to that for an in-depth description.

A Case Study

A good way to describe the trade study process is to do it using a simple case study (note that trade studies can become much more complicated than this simple example):

Case: Your company has sought tenders for a 250kVA power generator it urgently needs as an emergency backup for a mission critical operation. Three bids received from Companies A, B, and C. Select the preferred bidder.

The following table shows a summary of the three bids:

Table 1. Characteritics of the three received bids

Weighting Factor

Make a comparative, value assessment for each charcateristic. In other words allocate a weighting factor of importance against each characteristic. For our example, see Table 2.

Table 2. Weighting Factors

Normalization

Define a set of normalised values for each characteristic in Table 1 as shown in Table 3A and 3B. Note that although this tends to be subjective process, the rationale is based on the value placed on each characteristic.

Table 3A. Normalised Values

Table 3B. Normalised Values

Weghted Comparison

Combine all the data as shown in Table 4.

Note that for each characteristic, Total point score = x-Factor x Normalised value

Table 4. Final Trade Table

As seen from Table 4, Bidder A has the highest score based on the weighting factors and Normalisation spread used. Clearly manipulating the these two factors could produce different results, however selection of a prudent rationale is a key factor in choosing realistic weighting factors, and selecting characteristic spread judiciously results in arealistic trade outcome.

In Summary

The above example was used to demonstrate a simple, but effective type of trade study where a complex analysis is undesirable. For an in depth trade study analysis, refer to the above referenced FAA, System Engineering Manual Version 3.1, Section 4.6, Trade Studies, Federal Aviation Administration, 2006).

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