Suppose that the manager of a company has estimated the probability of a super-event sometime during the next three years that w
ill disrupt all suppliers as 2%. In addition, the firm currently uses four suppliers for its main component, and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next three years to be 20%. Supplier management costs during this period are $50,000 per supplier. The financial cost incurred if all four suppliers are disrupted at the same time is estimated to be $10,000,000. What is the expected monetary value (i.e., cost) of the current supplier diversification arrangement? Show the results by drawing the decision tree in POM-QM.
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