Suppose that underage costs are $7 per unit and overage costs are $2 per unit. Further suppose that you have paid a perfectly reliable supplier $4.5 ($0.1 per unit) to provide you with up to 45 units in the case of underage at the additional cost of $1 per unit. Event Probability Supplier 1 (Cost-Effective Supplier) Fulfillment 0.05 0 units 0.05 40 units 0.85 60 units 0.05 65 units Event Probability Supplier 2 (Reliable Supplier) Fulfillment 0.00 0 units 1.00 Up to 45 units Assuming that 60 units will be needed to satisfy the demand, the following supplier strategies are considered: Cost-effective supplier strategy (working with Supplier 1 only), or Dual supplier strategy (working with both Supplier 1 and Supplier 2).

10. Which supplier strategy is better? A. Cost-effective supplier strategy B. Dual supplier strategy C. There is no difference between them