Process of sensitivity analysis

The analyst uses the technique and data from the previous activity to evaluate logistics strategic and tactical alternatives. The process of analysis includes

a) Define analysis questions

This involves defining specific analysis questions concerning alternatives and the range of acceptable uncertainty. The questions build on research objectives and constraints by identifying specific operating policies and parameters. For e.g.: In the case of inventory analysis questions might focus on alternative service and uncertainty levels.

b) Complete and validate baseline analysis

The second task completes the baseline analysis of the current logistics environment using the appropriate method or tools. Results are compared with validation data collected previously to determine the degree of fit between historical and analytical findings. The comparison should focus on identifying significant differences, determining sources of possible errors and identifying and correcting them.

c) Complete alternative analysis

An evaluation of systems alternatives should be accomplished either manually or electronically to determine the relevant performance characteristics of each alternative.

d) Complete sensitivity analysis

In this phase uncontrollable factors like demand, factor cost or competitive actions are varied to assess the ability of potential alternatives to operate under a variety of conditions. Sensitivity analysis in conjunction with an assessment of potential scenario probabilities is then used in a decision tree to select the best alternative.