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Where should a Gulf online retailer put its next warehouse?
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
A Dubai-based online home-goods retailer serves the UAE and Saudi Arabia from one warehouse in Dubai, which will be full in two years. Should it expand in Dubai or open a new warehouse in Riyadh?
Format note: Candidate-led: you set up a cost-to-serve comparison and ask for the costs; the interviewer answers what you ask.
2. Answers to clarifying questions
Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.
If asked: Where are the customers?
Answer: About 1.5 million orders a year in the UAE and 2 million in Saudi Arabia, and Saudi orders are growing faster.
If asked: Where are we today?
Answer: One warehouse in Dubai serves both countries.
If asked: What matters most: cost or delivery speed?
Answer: Cost first, but Saudi customers complain about four-day delivery.
3. The hypothesis a strong candidate states
Listen for an early, testable guess like this one. It does not need to match word for word.
Shipping every Saudi order across the border adds trucking and customs cost to each order. My hypothesis is that a Saudi warehouse lowers cost to serve enough to cover its fixed cost, and also speeds up delivery.
4. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- Cost to serve Saudi orders from each locationThis comes from cost per order = warehouse handling + delivery for each site; a new site needs enough orders to break even on its fixed cost.
- Per-order cost: warehouse handling plus delivery
- Key: Fixed cost of a new site and break-even orders
- Payback of the setup cost
- Speed and resilience
5. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Serve Saudi from Dubai
What a strong candidate does: Candidate: "What does a Saudi order cost us today?" Interviewer: "Handling in Dubai is AED 12 an order, and cross-border trucking plus customs is AED 28."
Cost per Saudi order from Dubai (AED): 12 + 28 = 40
Step 2: Serve Saudi from Riyadh
What a strong candidate does: Interviewer: "A smaller Riyadh site would cost AED 15 an order to handle, and local delivery AED 10."
Variable cost per order from Riyadh (AED): 15 + 10 = 25
Step 3: Yearly cost from Dubai
What a strong candidate does: 2 million Saudi orders at AED 40.
Yearly cost, Dubai option (AED): 2,000,000 × (12 + 28) = 80,000,000
Step 4: Yearly cost from Riyadh
What a strong candidate does: Candidate: "What does the Riyadh site cost to run?" Interviewer: "AED 18 million a year in rent, staff, and systems."
Yearly cost, Riyadh option (AED): 2,000,000 × (15 + 10) + 18,000,000 = 68,000,000
Step 5: Break-even orders
What a strong candidate does: The Riyadh site saves AED 15 an order, so it needs this many Saudi orders a year to cover its fixed cost. Today's 2 million is well above it.
Break-even Saudi orders a year: 18,000,000 ÷ ((12 + 28) - (15 + 10)) = 1,200,000
Step 6: Payback
What a strong candidate does: Interviewer: "Setting up Riyadh costs AED 30 million one time." Candidate: "At AED 12 million saved a year, that pays back in two and a half years."
Payback (years): 30,000,000 ÷ (80,000,000 - 68,000,000) = 2.5
Step 7: Upside from faster delivery
What a strong candidate does: Candidate: "Would one-day delivery sell more?" Interviewer: "Tests suggest about 10 percent more Saudi orders, at AED 45 of contribution each." Candidate: "I will treat that as upside, not as part of the case."
Extra contribution from faster delivery (AED a year): 2,000,000 × 0.1 × 45 = 9,000,000
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
Open a warehouse in Riyadh rather than expanding in Dubai. First, it cuts the cost of a Saudi order from AED 40 to AED 25, saving about AED 12 million a year after its AED 18 million of running costs. Second, it breaks even at 1.2 million Saudi orders a year, well below today's 2 million, and pays back its AED 30 million setup in about two and a half years. Third, one-day delivery could add about AED 9 million a year of contribution, and a second site makes the business less exposed to a single warehouse or border crossing. Keep the Dubai site for UAE orders, which frees space there.
Risks a strong answer names: Saudi order growth could slow, although the site covers its costs down to 1.2 million orders; Licensing and hiring in a new country may delay the opening; check current rules; Handling costs at a new, smaller site may start higher than planned.
Next steps: Shortlist three sites in Riyadh and get rent and labor quotes; Confirm the current licensing steps for a Saudi warehouse with local advisers; Plan which products to stock in Riyadh first.
Strong versus weak
A strong answer
Compared the full cost to serve from each location, found the break-even volume and payback, and kept the speed benefit as upside rather than relying on it.
A weak answer
Chose to expand in Dubai because handling there is cheapest per order, ignoring the AED 28 of cross-border cost on every Saudi order.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?
Total
0 out of 25
Score all five criteria to see the band and the feedback template.