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Protecting an e-bike maker from a magnet cut-off
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 fictional e-bike maker in the Netherlands makes 120,000 bikes a year, earning EUR 400 of contribution on each. All its motors come from one supplier in China, and the team puts the chance of a three-month cut-off (for example, an export licence delay) at 15 percent a year. Option A: hold three extra months of motors, at EUR 150 each and a holding cost of 20 percent a year. Option B: move 40 percent of volume to a supplier in Japan at EUR 20 more per motor, plus EUR 300,000 a year to qualify and manage it; in a cut-off it keeps 40 percent of output going. Which option creates more value?
2. Answers to clarifying questions
This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.
3. 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.
- Value of a defence = expected loss avoided minus its yearly cost
- Expected loss today: chance x lost contribution
- Option A: buffer stock
- Option B: second supplier
4. 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: Bikes lost in a cut-off
What a strong candidate does: Three months of output.
Bikes lost in three months: 120,000 ÷ 12 × 3 = 30,000
Step 2: Loss if it happens
What a strong candidate does: EUR 400 of contribution per bike.
Loss from a cut-off (EUR): 30,000 × 400 = 12,000,000
Step 3: Expected loss
What a strong candidate does: 15 percent a year.
Expected yearly loss (EUR): 0.15 × 12,000,000 = 1,800,000
Step 4: Option A cost
What a strong candidate does: 30,000 motors at EUR 150, held at 20 percent a year.
Yearly cost of the buffer (EUR): 30,000 × 150 × 0.2 = 900,000
Step 5: Option A net value
What a strong candidate does: The buffer covers the whole three months.
Net value of the buffer (EUR a year): 1,800,000 - 900,000 = 900,000
Step 6: Option B cost
What a strong candidate does: 48,000 motors at EUR 20 more, plus EUR 300,000.
Yearly cost of the second supplier (EUR): 48,000 × 20 + 300,000 = 1,260,000
Step 7: Option B net value
What a strong candidate does: It saves 40 percent of the expected loss.
Net value of the second supplier (EUR a year): 1,800,000 × 0.4 - 1,260,000 = -540,000
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
The e-bike maker should build the three-month buffer now, which is worth about EUR 0.9 million a year, and not yet move volume to the second supplier, which loses about EUR 0.5 million a year on these numbers. First, an expected loss of EUR 1.8 million a year is large next to the buffer's EUR 0.9 million cost. Second, the second supplier costs EUR 1.26 million to avoid only EUR 0.72 million of expected loss. The risk is a cut-off longer than three months, which the buffer would not cover; that is where a second source earns its place. As a next step, qualify the Japanese supplier on a small volume so it can scale up quickly, and link the motor price to the NdPr oxide index.
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.