Samsung needs your assistance determining whether to source a critical component from outside Korea using either one, two, or three suppliers.

• Samsung estimates the probability of a super-event which would knock out all of the potential suppliers (e.g. a natural disaster or global pandemic) to be 2%
• Samsung estimates the probability that any given supplier fails independently of the others (e.g. due to a quality or yield failure) to be 10%
• The cost to manage a supplier is $78000 per year.
• A total disruption of the order would create an annualized loss of $3402000 per year.

Draw a decision tree to determine the best sourcing strategy for Samsung. (time permitting)

Rounding instructions:

• Enter and carry the calculated probability rounded to at least the nearest thousandth of a percent, e.g. 0.03418 or 3.418%. Carry all other calculations to at least 3 decimal places.
• Enter your final answer in dollars rounded to the nearest dollar.

1.a Enter the probability that all suppliers fail if using a single-sourcing (one supplier) strategy.

1.b Calculate the total expected cost if Samsung follows a single-sourcing (one-supplier) strategy.

1.c. Calculate the probability that all suppliers fail if using a dual-sourcing (two supplier) strategy.

1.d Calculate the total expected cost if Samsung follows a dual-sourcing (two-suppliers) strategy. 1.e Calculate the probability that all suppliers fail if using a triple-sourcing (three supplier) strategy.

1.f Calculate the total expected cost if Samsung follows a triple-sourcing (three-suppliers) strategy.

1.g Enter the total expected cost associated with the best strategy.

2. Suppose that Samsung has decided to use a dual-sourcing (two suppliers) strategy and is considering whether to pursue cross-country diversification. With cross-country diversification, the probability of a super-event which would knock out all of the potential suppliers is only 1% but the cost to manage a supplier increases to $136500 per year. Assume the other parameters remain constant.

• Samsung estimates the probability that any given supplier fails independently of the others (e.g. due to a quality or yield failure) to be 10%
• A total disruption of the order would create an annualized loss of $3402000 per year.

Calculate the total expected cost if Samsung follows a dual-sourcing (two-suppliers) strategy with cross-country diversification.

• Carry the calculation for the probability that all suppliers fail to the nearest thousandth of a percent, e.g. 0.03418 or 3.418%. Carry all other calculations to at least 3 decimal places. Enter your final answer in dollars rounded to the nearest dollar.