Business
Business, 28.05.2020 02:09, nahimi

Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of suppliers for his new line of keyboards. Suppose that Phillip is willing to use one local supplier and up to two more located in other territories within the country. As the suppliers reside in a location prone to hurricanes, tornadoes, flooding, and earthquakes, Phillip believes that the probability in any year of a "super-event" that might shut down all suppliers at the same time for at least 2 weeks is 0.5%. Such a total shutdown would cost the company approximately $400,000. He estimates the "unique event" risk for any of the suppliers to be 5%. Assuming that the marginal cost of managing supplier 1 is $15,000 per year. However, due to increased distance, the annual costs for managing each of the distant suppliers (2nd and 3rd) would be $25,000 per year. Assuming that the local supplier would be the first one chosen, how many suppliers should Witt Input Devices use now? Solve the problem using a decision tree. Show results with POM-QM.

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Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of suppliers for his new...

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