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Question: zhu manufacturing is considering the introduction of a family of...

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Zhu Manufacturing is considering the introduction of a family of new products.​ Long-term demand for the product group is somewhat​ predictable, so the manufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom​ manufacturing, or she can invest in group technology. Zhu​ won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four​ compartments: poor,​ fair, good, and excellent. The table below indicates the payoffs​ (profits) associated with each​ process/demand combination, as well as the probabilities of each​ long-term demand​ level:

Poor Fair Good Excellent Probability 0.10 0.40 0.20 0.30

Batch -$200,000 $1,000,000 $1,100,000 $1,200,000

Custom $100,000 $300,000 $700,000 $800,000

Group technology -$1,250,000 -$500,000 $22,000 $2,100,000

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