The growing use of Cost Risk Assessment models in public projects has raised some public concerns about its costs and the models ability to reduce cost overruns and correctly predict the projects final cost. We have in this article shown that the models are neither reliable nor valid, by calculating the probabilities of the projects final costs.
Multiple sources of risk are a fact of life. Only rarely will decisions concerning various risks be neatly separable. Intuitively, even when risks are statistically independent, bearing one risk should make an agent less willing to bear another.
The introduction of uncertain supply has shown that profit can still be maximized however the profit will be reduced by increased costs both in lost sales and in excess inventory. But most important, profit variability will increase raising issues of possible other strategies.
We have thus shown through Monte-Carlo simulations, that the benefits of pooling will increase with the number of locations and that the benefits of risk pooling can be calculated without knowing the closed form of the demand distribution.
Good inventory management is essential to the successful operation for most organizations both because of the amount of money the inventory represents and the impact that inventories have on the daily operations.
Normally we would expect both the budget and the actual EBITDA to fall somewhere in the region of the expected value.