Unit 2 Discussion 2 SCM - Why is it important to consider uncertainty when evaluating supply chain design decisions SCM is a tricky business when it

Unit 2 Discussion 2 SCM - Why is it important to consider...

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Why is it important to consider uncertainty when evaluating supply chain design decisions? SCM is a tricky business when it comes down to uncertainty. In fact nothing is truly certain. The best that can be hoped for is to lessen the mitigating factors for the risk that must be undertaken. This is paramount in the decisions regrading the structure and layout of supply chain designs. Mitigation of certain risk factors is something that is used in the insurance industryand has been the basis for risk management and pricing for quite sometime. There are some general parallels that can be made between the two industries when it relates to uncertainty. Forexample, in the insurance industry your home owner's insurance rates from year to year are determined not only based on your own claims but the claims of others in the same geographic area and other factors such as the distance from the nearest fire station. The closer your home to a fire station the higher chance of your homeowners insurance will be lower than a home owner who is farther away. If you live near the coast your home owner's insurance tends to be much higher than someone who does not. As a former insurance underwriter for one of my prior employers managing the risk is the name of the game and everyone is playing rather realize it or not. If you ever wonder why your homeowner's insurance rates go up and your house has not moved and you have had no claims. It is due to the cause and effect of uncertainty. When it comes down to SCM designs and decisions weighing the pros and cons are a must and a constant
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