Phillip Witt, president of Witt Input Devices, wishesto create a portfolio of local suppliers for his new line of keyboards.As the suppliers all reside in a location prone to hurricanes,tornadoes, flooding, and earthquakes, Phillip believes thatthe probability in any year of a " super-event" that might shutdown all suppliers at the same time for at least 2 weeks is 3%.Such a total shutdown would cost the company approximately$400,000. He estimates the " unique-event" risk for any of thesuppliers to be 5%. Assuming that the marginal cost of managingan additional supplier is $15,000 per year, how many suppliersshould Witt Input Devices use? Assume that up to three nearlyidentical local suppliers are available.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
icon
Related questions
Question
Phillip Witt, president of Witt Input Devices, wishes
to create a portfolio of local suppliers for his new line of keyboards.
As the suppliers all 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 3%.
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
an additional supplier is $15,000 per year, how many suppliers
should Witt Input Devices use? Assume that up to three nearly
identical local suppliers are available.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps

Blurred answer
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.