Machado Construction is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a "unique-event" risk of 8%, and the probability of a "super-even" that would disable both at the same time is estimated to be 2.5%. Option 2 uses two suppliers located in different countries. Each has a "unique-event" risk of 18%, and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%. (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?
Machado Construction is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a "unique-event" risk of 8%, and the probability of a "super-even" that would disable both at the same time is estimated to be 2.5%. Option 2 uses two suppliers located in different countries. Each has a "unique-event" risk of 18%, and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%. (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?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Machado Construction is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a "unique-event" risk of 8%, and the probability of a "super-even" that would disable both at the same time is estimated to be 2.5%. Option 2 uses two suppliers located in different countries. Each has a "unique-event" risk of 18%, and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%.
(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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