Megan Shearson & 1 3/18/18 8:29 PM 2184 BUSQOM 1070 SEC1030 OPERATIONS MANAGEMEN
ID: 350609 • Letter: M
Question
Megan Shearson & 1 3/18/18 8:29 PM 2184 BUSQOM 1070 SEC1030 OPERATIONS MANAGEMENT Homework: HW-CH11s Score: 0 of 1 pt Problem S11.5 Save 1 of 4 (1 complete) Hw Score: 596, 0.2 of 4 pt Question Help Bloom's Jeans is searching for new suppliers, and Debbie Bloom, the owner, has narrowed her choices to two sets. Debbie is very concerned about supply disruptions, so she has chosen to use three suppliers no matter what. For option 1, the suppliers are well-established and located in the same country. Debbie calculates the unique even nsk for each of them to be 5%. She est mates the probability of a nationwide event that would knock out al three suppliers to be 22% For option 2, the suppliers are newer but located in three dfferent countres. Debbie calculates the unique event risk for each 0 them to be 21% She estimates t "super-event probability that would knock out all three of these supple s to be 0.5%, purchasing and transportation costs would be $1,050,000 per year us option 1 and $1,060,000 per year using option 2. A total disruption would create an annualized loss of $520,000. a) The probability that all three suppliers will be disrupted using option 1 is (round your response to five decimal places)Explanation / Answer
To be calculated:
Probability that all three suppliers will be disrupted using option 1
Given values:
Option 1:
Unique-event risk = 5% = 0.05
Nationwide event = 2.2% = 0.022
Option 2:
Unique-event risk = 21% = 0.21
Super event = 0.5% = 0.005
Option 1 costs = $1,050,000 per year
Option 2 costs = $1,060,000 per year
Annualized loss = $520,000
Solution:
The probability that all three suppliers will be disrupted using option 1 is calculated as;
Probability of disruption = Disruption due to a nationwide event + Disruption due to a unique event of all three suppliers
Probability of disruption = 0.022 + (0.05 x 0.05 x 0.05)
Probability of disruption = 0.022 + 0.000125
Probability of disruption = 0.022125 = 0.02213 (rounding to five decimal places)
The probability that all three suppliers will be disrupted using option 1 is 0.02213