A.9 Zhu Manufacturing is considering the introduction of a family of new products. Long-term demand for the
Question:
• • A.9 Zhu Manufacturing is considering the introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concerned with the risk of choosing a process that is inappropriate.
Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology. Faye won’t be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellent. The following table indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level:
a) Based on expected value, what choice offers the greatest gain?
b) What would Faye Zhu be willing to pay for a forecast that would accurately determine the level of demand in the future?
Step by Step Answer:
Operations Management: Sustainability And Supply Chain Management
ISBN: 9780135225899,9780135202722
13th Edition
Authors: Jay Heizer; Barry Render; Chuck Munson