Kryoneriperfume company is considering the followingtwo alternatives for the supply of vetiver oil (an essential oil used inhigh-end perfumes). Alternative one is to use two suppliers locatedin Haiti where half of the world’s vetiver oil comes from. Each has a “unique-event” risk of 5%, and the probability of a “super-event” that would disable both at the same time is estimated to be 15%, due to Haiti’s vulnerability to earthquakes (remember theearthquake in 2010). Alternative 2 is to use two suppliers locatedin Japan (another main producer of vetiver oil) where each has a“unique-event” risk of 1%, and the probability of a “super-event”that would disable both at the same time is estimated to be 2%, dueto Japan’s exceptionally great infrastructure developed after 1995Kobe earthquake. Estimate which alternative seems best?
Kryoneriperfume company is considering the following
two alternatives for the supply of vetiver oil (an essential oil used in
high-end perfumes). Alternative one is to use two suppliers located
in Haiti where half of the world’s vetiver oil comes from. Each
has a “unique-event” risk of 5%, and the probability of a “super-
event” that would disable both at the same time is estimated to be
15%, due to Haiti’s vulnerability to earthquakes (remember the
earthquake in 2010). Alternative 2 is to use two suppliers located
in Japan (another main producer of vetiver oil) where each has a
“unique-event” risk of 1%, and the probability of a “super-event”
that would disable both at the same time is estimated to be 2%, due
to Japan’s exceptionally great infrastructure developed after 1995
Kobe earthquake. Estimate which alternative seems best?
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