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Designing Supply Chains for New Product Development by Antonio Arreola-Risa, Barry Keys

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Chapter 7

Risk as a Measure of Total Cost of Ownership

So the product specifications have not been solidified, design changes are still occurring, and the boss wants to know, “How do I show that the supply-chain strategy that has been developed is the lowest cost strategy and results in the lowest total cost of ownership for the product?” Wow! No problem, right? Perhaps we should try answering this question by performing some qualitative assessments with regard to risk.

What is risk? Dictionary definitions include “effect of uncertainty on objectives,” “someone or something that creates or suggests a hazard,” and “a factor, thing, element, or course involving uncertain danger: a hazard.” More importantly, how are risks mitigated? Through insurance. ...

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