Question: A Supply Chain manager needs to make a decision on whether to build large or small warehouse. If the manager builds a large warehouse, there
A Supply Chain manager needs to make a decision on whether to build large or small warehouse. If the manager builds a large warehouse, there is a probability of for high demand and a probability of for low demand. If manager decides to build a small warehouse, there is a probability of for high demand while for low demand. The payoff for the high demand scenario for a large warehouse is $ and $ for a small warehouse. If the manager decides to build a large warehouse and the low demand scenario occurs, he she can reduce prices and that would result in a payoff of $ while a payoff of $ results if heshe did nothing. If a low demand scenario occurs and manager had decided to go with a smaller warehouse, she he can reduce prices and achieve a payoff of $ while a payoff of $ results if manager did nothing all payoffs are in K Perform the foldback procedure and advise the manager on which option shehe should take large or small warehouse a payoff, Small Warehouse b payoff, Large Warehouse payoff, Large Warehouse payoffSmall Warehouse
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