Johnson chemicals is considering two options for its supplier portfolio option one uses to local supplier such a unique event risk of 5% the probability of a super event that would disable both at the same time is estimated to be 1.5% option to use it to suppliers located in different countries each has a unique event list of 13% the probability of a super event that would disable both at the same time is estimated to be 0.2% what is the probability that both suppliers will be disrupted using Option 1 what is the probability that both suppliers will be disrupted using option 2 which option would provide the least risk of a total shutdown
To determine the probability that both suppliers will be disrupted using Option 1, we need to calculate the probability of a super event occurring and disabling both suppliers simultaneously.
According to the information provided, the probability of a super event occurring for Option 1 is 1.5%. Therefore, the probability of both suppliers being disrupted under Option 1 is 1.5%.
To determine the probability that both suppliers will be disrupted using Option 2, we need to calculate the probability of a super event occurring and disabling both suppliers simultaneously.
According to the information provided, the probability of a super event occurring for Option 2 is 0.2%. Therefore, the probability of both suppliers being disrupted under Option 2 is 0.2%.
To assess which option provides the least risk of a total shutdown, we compare the probabilities of both suppliers being disrupted under each option.
Option 1 has a probability of 1.5% for total shutdown, while Option 2 has a probability of 0.2% for total shutdown. Since the probability of a total shutdown is lower under Option 2, it provides the least risk in terms of a total shutdown.
Therefore, Option 2 would be the recommended choice for Johnson chemicals if they want to minimize the risk of a total shutdown.