Johnson Chemicals is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a “unique-event” risk of 5%, and the probability of a “super-event” that would disable both at the same time is estimated to be 1.5%. Option 2 uses two suppliers located in different countries. Each has a “unique-event” risk of 13%, and the probability of a “super-event” that would disable both at the same time is estimated to be 0.2%.a) What is the probability that both suppliers will be disrupted using option 1?b) What is the probability that both suppliers will be disruptedusing option 2?c) Which option would provide the lowest risk of a total shutdown?
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
Johnson Chemicals is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a “unique-
event” that would disable both at the same time is estimated to be 1.5%. Option 2 uses two suppliers located in different countries. Each has a “unique-event” risk of 13%, and the probability of a “super-event” that would disable both at the same time is estimated to be 0.2%.
a) What is the probability that both suppliers will be disrupted using option 1?
b) What is the probability that both suppliers will be disruptedusing option 2?
c) Which option would provide the lowest risk of a total shutdown?
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