An importer must decide on sourcing from producers in Japan or Madagascar. She prefers to get products
Question:
An importer must decide on sourcing from producers in Japan or Madagascar. She prefers to get products faster in order to fill the customer orders quickly. The Japan-producer nominally takes 21 days, early takes 14 days, and late takes 30 days. For the Madagascar-producer it is 21 days nominally, 18 days for early, and 28 days for late. Assume the likelihood of early, nominal and late arrivals are 0.3, 0.2, and 0.5, respectively.
a. Using the Bayes (EV) criterion, determine the preferred source.
b. What is the most time that could be saved with any amount or type of information?
c. You have the ability to get a shipping forecast, which forecasts early or late correctly 80% of the time, and is noninformative (equal likelihood) for nominal. Determine the time saved with the forecast information.
d. Explicitly write all of the decision strategies (given the forecast information), and clearly identify the optimal strategy among these.