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  • Balax 1234

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    Xiaotian Geng, president of Shanghai Manufacturing Corp., wants to balance costs and risks by creating a portfolio of motor suppliers for her company's products. While a single supplier reduces costs and improves quality control, it also risks catastrophic disruption if that supplier's plant has fires or natural disasters. Based on historical data, Xiaotian estimates a 0.5% probability of an event disrupting all suppliers simultaneously, and a 4% probability of any individual supplier facing disruption. She must determine the optimal number of suppliers to minimize expected losses from disruptions, given management costs of $10,000 per supplier and potential losses of $10,000,000 if all suppliers are disrupted.

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    Balax case study solution

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    Xiaotian Geng, president of Shanghai Manufacturing Corp., wants to balance costs and risks by creating a portfolio of motor suppliers for her company's products. While a single supplier reduces costs and improves quality control, it also risks catastrophic disruption if that supplier's plant has fires or natural disasters. Based on historical data, Xiaotian estimates a 0.5% probability of an event disrupting all suppliers simultaneously, and a 4% probability of any individual supplier facing disruption. She must determine the optimal number of suppliers to minimize expected losses from disruptions, given management costs of $10,000 per supplier and potential losses of $10,000,000 if all suppliers are disrupted.

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    78 visualizzazioni1 pagina

    Balax 1234

    Caricato da

    Bala
    Xiaotian Geng, president of Shanghai Manufacturing Corp., wants to balance costs and risks by creating a portfolio of motor suppliers for her company's products. While a single supplier reduces costs and improves quality control, it also risks catastrophic disruption if that supplier's plant has fires or natural disasters. Based on historical data, Xiaotian estimates a 0.5% probability of an event disrupting all suppliers simultaneously, and a 4% probability of any individual supplier facing disruption. She must determine the optimal number of suppliers to minimize expected losses from disruptions, given management costs of $10,000 per supplier and potential losses of $10,000,000 if all suppliers are disrupted.

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    © All Rights Reserved
    Scarica in formato DOCX, PDF, TXT o leggi online su Scribd
    Segnala contenuti inappropriati
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    Xiaotian Geng, president of Shanghai Manufacturing Corp.

    , wants to create a
    portfolio of suppliers for the motors used in her company's products that will
    represent a reasonable balance between costs and risks. While she knows that the
    single-supplier approach has many potential benefits with respect to quality
    management and just-in-time production, she also worries about the risk of fires,
    natural disasters, or other catastrophes at supplier plants disrupting her firm's
    performance. Based on historical data and climate and geological forecasts,
    Xiaotian estimates the probability of a "super-event" that would negatively impact
    all suppliers simultaneously to be 0.5% (i.e., probability = 0.005) during the supply
    cycle. She further estimates the "unique-event" risk for any of the potential
    suppliers to be 4% (probability= .04). Assuming that the marginal cost of managing
    an additional supplier is $10,000, and the financial loss incurred if a disaster caused
    all suppliers to be down simultaneously is $10,000,000, how many suppliers should
    Xiaotian use? Assume that up to three nearly identical suppliers are available.

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