Uncertainty arises from different sources. Most often, we struggle with knowing what will happen in the future, including
- Costs and prices, including uncertainty in future market prices, the cost of production, material costs, and people costs.
- Supplies of materials, people and equipment, rainfall, and raw materials.
- Demand for products and services, including uncertainty in how the market responds to prices.
- Travel times, process yields, system efficiency. and worker productivity.
These are all examples of information that will arrive in the future. But we may not even know the state of the world now! For example
- How much inventory do you actually have on hand?
- What is the status of a piece of equipment?
- Is a power generator operational today?
- Is a truck still being loaded, or has it been dispatched?
In addition, we may not know the nature of relationships (known as "model uncertainty"). For example, we may not know how customers will respond to a change in price today, or the productivity of a process in cold weather.