Scenario planning is a technique that uses probabilistic models to build explicitly uncertainty into the analysis.
Scenario planning starts by building a dynamic flow model, including a digital flow model for the entire port and related supply chains as a network with inputs, outputs and processing times. Users populate the model with data from existing systems, including historical behaviour and uncertainty factors, such as lead times, capacities, demand, production, vessel and terminal requirements.
“What-if” scenarios are developed considering changes in demand, lead times, market share, supplier disruptions, port equipment disruptions, competitive pricing changes and geopolitical changes. Users can then run simulations across the entire port operational network for the different scenarios. The outcomes normally take the shape of histograms, sensitivity curves with confidence intervals, and probabilities of occurrence, along with risk assessments for each scenario. Scenario outcomes are prioritized based on the probability of occurrence and their associated risk index. The final step is to develop a Risk Response Plan (RPP) for the critical scenarios for a port’s strategic, tactical or operational horizons.
By combining tools, such as probabilistic methods, modeling, and discrete-event simulation, coupled with risk assessments for every scenario, these techniques provide a better understanding and managing risk. This approach to port supply chain risk management can have significant benefits, which have become more accessible with the falling cost of information technologies and data availability. However, the quality of these models is highly dependent on the quality of the data used.
Additional information about scenario planning is available HERE.
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