Chapter 6 - Designing Global Supply Chain Networks

Forecasting in a Supply Chain
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Forecasting in a Supply Chain
The Importance of Decision Trees
A decision tree is a critical strategy that business people use to analyze the potential impacts, available options, and outcomes of a decision. According to Meindl and Chopre (2016), a decision tree is "a graphical device used to evaluate decisions under uncertainty" (P. 153). This strategic method is so efficient that it helps business organizations to perceive and understand the bigger picture of the available choices and options. Additionally, this approach helps to determine potential rewards and risks, if any, that may arise when a business makes a decision or follows a given path (De Angelis, Howard & Miemczyk, 2018). Moreover, this method is significant because it helps firms and organizations to conceive the potential impacts of specific conditions and criteria. Last but not least, this strategy is especially helpful during brainstorming because it represents problems graphically, which enables operational managers to see precisely and understand the potential cause of their hitches and determine their possible solutions.
Steps in Decision Tree Analysis Methodology
The steps in the decision tree analytical method entail proper identification of the time in which one is attempting to estimate. Secondly, it involves identification of the potential factors which relate to the decision or the problem that one seeks to examine (De Angelis, Howard & Miemczyk, 2018). Some common elements may include but are not limited to currency exchange rates, market demand, and the cost involved in producing a product. The third step requires identification of possible hitches that are likely to emerge when one decides to make a specific decision. The fourth step entails determining the period between each interval. The next step would then involve the definition of a successful transition between each stage and the type of solution for each problem (Yamaguchi, Goto & Kusukawa, 2017). The last step would then entail calculating and comparing the anticipated outcome and flow along each path concerning other routes on the decision tree. The previous stage is conducted by starting the calculation from the end of the period towards the beginning.
Periodic Discount Rate
According to Meindl and Chopra, the regular discount rate for each period is determined by "taking into account the inherent risks associated with the investment. In general, a higher discount rate should apply to investments with higher risk" (2016, p.153).
Three Strategies to Mitigation Risk in Global Supply Chains
The three techniques to help moderate hazard in global supply chains are accomplices with suitable suppliers, utilizing useful instruments that are promptly quantifiable and effective management of time. To start with, picking the correct provider is significant because an organization needs to guarantee that the provider they choose can deal with the interest and unpredictability of t...