Telecomp, a computer manufacturer with a global supply chain, is adding a new su

Question

Telecomp, a computer manufacturer with a global supply chain, is adding a new supplier ofr some of its component parts, and the suppliers it's considering are in Chins, India, Thailand, and the Philippines. As part of its risk management program Telecomp wants to assess the possible impact of a supplier shutdown in the event of a natural disaster, such as a flood, fire, or an earthquake. The ofllowing payoff table summarizes Telecomp's losses (in millions of dollars) ofr supplier shutdowns given different levels of event severity. Determine the best decision using each of the ofllowing criteria. Minimin Minimax Equal likelihood Minimax regret Telecomp in Problem S1-9 estimates that the probabilities of the severity of events in each of the countries are as ofllows: Determine the best decision ofr Telecomp using expected value.

Explanation / Answer

Solution to Question 10 (1-10) (as asked in the question)

Expected value of losses in China = P1*L1 +P2*L2 + P3*L3

Expected value of losses in China = .43*8+.45*11+.12*21 = $10.91 Million

Expected value of losses in India = .56*6+.33*7+.11*14 = $7.21 Million

Expected value of losses in Thailand = .37*3 + .41*12 + .22*17 = $9.77 Million

Expected value of losses in Philippines = .47*5 + .46*9 + .07*15 = $7.54 Million

As per the above calculations, expected value of losses is in India that is $7.21 Million. This, it will be the best decision to opt for India.

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