Understanding the Concepts of Uncertainty & Risk: Making Decisions with a Payoff Matrix

This article deals with the difference between demand planning under uncertainty versus demandplanning under risk. It aims to define both and argues that demand planning under uncertainty means a planner knowsthe outcomes that might happen after they make planning decisions; yet have no knowledge of the probabilities of thoseoutcomes. In the case of demand planning under risk, a planner knows both the outcomes and their probabilities. It alsopresents a payoff matrix, to facilitate our understanding of different outcomes for a given decision, which should help us todevelop optimal responses to Covid-19 demand ...