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Why is it important to consider uncertainty when evaluating supply chain design decisions?

In today’s world there is much more uncertainty and the supply chain models used previously will not be adequate to support supply chain structures in the future. Leaders within supply chain must make assumptions in order to project the future. However, with the amount of uncertainty in the past several years, there must be an ability to adjust according to current conditions. Based on this, a greater review and weighing of various alternatives against potential uncertainties for the future is required in order to make the best design decisions possible.

One area major area of review and consideration is the supply chain model. When looking at design, it is very important to look at the entire supply chain functions, not just the individual components. In the material by Malik, Niemeyer and Ruwadi, they discuss the importance of moving from the traditional “monolithic” model to “splintering” supply chain models that are more agile and nimble in order to be reacting and respond to organizational needs and market conditions. This means that supply chain leaders need to be able to deal with complex structures which are broken down into smaller more flexible models. By splintering, it allows the supply chain model to assess and react more quickly to changes in: external conditions such as political unrest, global impact on supplies, the examination of its product offerings and demands: and/or its ability to react to new customer opportunities. So when evaluating supply chain design decisions, it is important to identify and define as many relevant factors in order to provide various strategies to mitigate uncertainties so that the best possible decision can be made.

What are the major sources of uncertainty that can affect global supply chain decisions?

Major sources of uncertainty affecting supply chain are fluctuations in price and demand. This is true of both the domestic and global markets. The reasons for these uncertainties could be contributed to: disruptions such as natural disasters or labor disputes; delays such as poor supply quality or inflexibility of supplier; procurement such as currency or exchange rate fluctuations and/or inflation both domestic and foreign; systems such as a lack of system integrations or infrastructure breakdowns; changes in tariffs or trade policies; political uncertainties such as war or terrorist activities; new or existing competitor concerns; securing an adequate and skilled labor force; known and unknown costs such as raw materials and freight or order or invoicing errors. These reasons for uncertainty must be included along with mitigating strategies for each when making supply chain decisions to include both foreign and domestic considerations.

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Uncertainty is worth considering ... View the full answer