MtT Type Risk Calculations

We assume M+ = 6960, a = 4000, (7 = 5000, Xg = 0, r = 10 and ri = 0.7 for the first candidate supplier S19. A low r value indicates that buyers will be adversely affected as soon as the supplier delivers defective items. A high ri value, on the other hand, models a relatively high tolerance to the amount of defective items before the maximum damage is faced by the buyers. In other words, ri models the level up to which buyers can absorb the particular MtT type risk. Parameters a, c+, and Xg are used to model the impact of defective items within the range [n, ri ]. M+ is the maximum damage that S19 can do to its buyers for this particular risk measure and it is reached once the defective level exceeds ri. 

As mentioned in Section 7.10, Gamma distribution can be used to model the S-type occurrence function. Combining the impact and occurrence functions, we obtain the following S-type risk function (see Yang (2006) for the calculations of other types of risks functions). 

MtT Type Risk Values for Suppliers with 80% Confidence 

MtT type risk calculations for the remaining suppliers selected for Phase 2 are done in a similar way. A summary of calculations is provided in Table 7.21. The data in Table 7.21 are calculated with 80% confidence level. For example, losses due to MtT risk from supplier S19 will not exceed 5426.62 with 80% confidence. Values in Table 7.21 are used in Equation 7.24 of the multiobjective model. 

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