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John Deere is deciding whether to implement a single or dual-sourcing strategy for one of the critical components used in production of its excavators at
John Deere is deciding whether to implement a single or dual-sourcing strategy for one of the critical components used in production of its excavators at its facility in Kernesville, NC. John Deere provides you with the following estimates: - The probability that any given supplier fails independently of the others is 4% (e.g. a quality failure) - The probability of a "super-event" which would knock out all of the potential suppliers is 1.3% (e.g. a natural disaster) - If all suppliers are down, John Deere will not be able to meet its orders and this creates an annualized loss of $1700000 per year. - The cost to manage a supplier is $23000 per year. Draw a decision tree to determine the best sourcing strategy for John Deere. Calculate the probability that all suppliers fail if using a dual-sourcing (two supplier) strategy. a. 0.01458 b. 0.10496 c. 0.09300 d. 0.05248 e. 0.00158 f. 0.04016 g. 0.09196 h. 0.00275
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