Johnson Chemicals is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a “unique-event” risk of 5%, and the probability of a “superevent” that would disable both at the same time is estimated to be 1.5%. Option 2 uses two suppliers located in different countries. Each has a “unique-event” risk of 13%, and the probability of a“super-event” that would disable both at the same time is estimatedto be 0.2%. a) What is the probability that both suppliers will be disruptedusing option 1?b) What is the probability that both suppliers will be disruptedusing option 2?c) Which option would provide the lowest risk of a total shutdown?
Johnson Chemicals is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a “unique-event” risk of 5%, and the probability of a “superevent” that would disable both at the same time is estimated to be 1.5%. Option 2 uses two suppliers located in different countries. Each has a “unique-event” risk of 13%, and the probability of a“super-event” that would disable both at the same time is estimatedto be 0.2%. a) What is the probability that both suppliers will be disruptedusing option 1?b) What is the probability that both suppliers will be disruptedusing option 2?c) Which option would provide the lowest risk of a total shutdown?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section: Chapter Questions
Problem 30P
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Johnson Chemicals is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a “unique-event” risk of 5%, and the probability of a “superevent” that would disable both at the same time is estimated to be 1.5%. Option 2 uses two suppliers located in different countries. Each has a “unique-event” risk of 13%, and the probability of a
“super-event” that would disable both at the same time is estimated
to be 0.2%. a) What is the probability that both suppliers will be disrupted
using option 1?
b) What is the probability that both suppliers will be disrupted
using option 2?
c) Which option would provide the lowest risk of a total shutdown?
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