Approaches for Handling Uncertainty in Decision Making
Uncertainty affects a wide range of decisions managers, engineers, and other decision makers have to make. Uncertainty in price, labor and other production costs, as well as in the availability of needed raw material supplies, complicates the task of a production manager in planning the mix of products to be produced. Uncertainty in future cash flows makes investment decisions in long term projects difficult. Resource allocation decisions in product development projects are affected by the uncertain nature of some of the development tasks (use of new or untested materials, development of new production processes), the response and the growth of the market for the new product, potential future changes in consumer tastes, competitors reactions (through pricing and/or introduction of new products), the emergence of new processing technologies that make the product concept obsolete, and even uncertain macroeconomic conditions (for example, inflationary conditions can affect the purchasing behavior of customers). Facility location decisions are affected by demand uncertainty in the considered location region.
KeywordsDecision Maker Completion Time Planning Horizon Robust Decision Robustness Criterion
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