Considering the introduction of family of new products

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Reference no: EM132283499

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

Reference no: EM132283499

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