A small machine shop is facing the problem of developing a source of supply for castings needed for cylinder liners for an automobile company. Important factors to be considered are price, quality and regularity of supply. There are three possible sources, but their past records on the three factors are erratic. The company is short of funds and, therefore, cannot afford to carry large inventories to take care of fluctuations in lead-time. Students are required to work out the comparative economic analysis, expected value of rejects, and how many castings to buy to get 1,000 good liners.