Discussion question DQ2 Chapter 4 of designing and managing the supply chain of simchi levi 3rd edition. Manufacturer Sells electricity for $20. They can buy it from 1 of 2 suppliers. Supplier 1 is a fixed contract and sells to the Manufacturer for $10. Supplier 2 is an option contract with $6 reservation price and $6 once product is delivered. Assume 6 months before demand is realized a contract must be signed. Contracts are assigned in February and Demand is realized in 10 weeks starting in August. There are 0 inventory costs and unsold items after 10 weeks have 0 value. What is the Best Procurement Strategy?
Probability Table
Demand 800 1000 1200 1400 1600 1800
Prob 0.11 0.11 0.28 0.22 0.18
0.1