Discuss the ideas that managers should consider to make better supply chain network design decisions under uncertainty

What will be an ideal response?

Answer: Managers should consider the following ideas to help them make better network design decisions under uncertainty:
1. Combine strategic planning and financial planning during network design. In most organizations, financial planning and strategic planning are performed independently. Strategic planning tries to prepare for future uncertainties but often without rigorous quantitative analysis, whereas financial planning performs quantitative analysis but assumes a predictable or well-defined future. Decision makers should design supply chain networks considering a portfolio of strategic options–the option to wait, build excess capacity, build flexible capacity, sign long-term contracts, purchase from the spot market, and so forth. The various options should be evaluated in the context of future uncertainty.
2. Use multiple metrics to evaluate supply chain networks. As one metric can only give part of the picture, it is beneficial to examine network design decisions using multiple metrics such as firm profits, supply chain profits, customer service levels, and response times. Often, different metrics will recommend different decisions and by using multiple metrics, the differences between the strategic choices will become clearer. The best decisions can be made when a multitude of metrics are available, because each metric enhances the overall view of the alternatives being considered.
3. Use financial analysis as an input to decision making, not as the decision-making process. Financial analysis is a great tool in the decision-making process, as it often produces an answer and an abundance of quantitative data to back up that answer. However appealing this may be, management should not rely solely on financial analysis to make decisions. Use of this analysis as a large part of the decision-making process is fine, but other inputs into the decision process that are difficult to quantify should be included in the analysis as well. Financial methodologies alone do not provide a complete picture of the alternatives. These impacts should be considered in addition to the raw financial analysis. In the final analysis, management must use other inputs beyond financial analysis in the decision-making process to get the most complete view of the alternatives possible.
4. Use estimates along with sensitivity analysis. Many of the inputs into financial analysis can be difficult, if not impossible, to nail down in a very accurate fashion. This can cause financial analysis to be a long and drawn out process. One of the best ways to speed the process along and arrive at a good decision is to use estimates of inputs when it appears that finding a very accurate input would take an inordinate amount of time. Using estimates is fine when the estimates are backed up by sensitivity analysis. By performing sensitivity analysis on the input's range, managers can often show that no matter where the true input lies within the range, the outcome remains the same. When this is not the case, they have highlighted a key variable to making the decision and it likely deserves more attention to arrive at a more accurate answer. In summary, to effectively make supply chain design decisions, managers need to make estimates of inputs and then test all recommendations with sensitivity analysis.