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Safety stock for a spare part in Dubai

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

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A fictional distributor in Dubai sells an air-conditioner part. It sells 400 units a day on average, with a standard deviation of 120 units a day. It buys from a factory in China with a lead time of 25 days by sea. Each unit costs AED 150 and the holding cost is 25 percent a year. How much safety stock does it need for 95 and for 99 percent service, what does the extra reliability cost, and what would a supplier with a 9-day lead time save?

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.

Safety stock = z x daily standard deviation x square root of lead time
- Variation over the lead time
- Safety stock at 95 and 99 percent
- Holding cost of the difference
- Key: Effect of a shorter lead time

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: Variation over 25 days
What a strong candidate does: The square root of 25 is 5.
Standard deviation over the lead time (units): 120 × 5 = 600
Step 2: Safety stock at 95 percent
What a strong candidate does: z is 1.65.
Safety stock at 95 percent (units): 1.65 × 600 = 990
Step 3: Safety stock at 99 percent
What a strong candidate does: z is 2.33.
Safety stock at 99 percent (units): 2.33 × 600 = 1,398
Step 4: Cost of the extra reliability
What a strong candidate does: The extra units, times AED 150, times 25 percent a year.
Extra holding cost for 99 percent (AED a year): (1,398 - 990) × 150 × 0.25 = 15,300
Step 5: Reorder point at 95 percent
What a strong candidate does: 25 days of average demand plus safety stock.
Reorder point at 95 percent (units): 400 × 25 + 990 = 10,990
Step 6: Safety stock with a 9-day lead time
What a strong candidate does: The square root of 9 is 3.
Safety stock at 95 percent, 9-day lead time (units): 1.65 × 120 × 3 = 594
Step 7: Stock in transit saved
What a strong candidate does: 16 fewer days on the water at 400 units a day, valued at AED 150 and 25 percent a year.
Holding cost saved on goods in transit (AED a year): (25 - 9) × 400 × 150 × 0.25 = 240,000

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The distributor should stay at 95 percent service unless customers will pay for more, and should seriously price a nearer supplier. First, moving from 95 to 99 percent needs 408 more units, costing about AED 15,300 a year. Second, a 9-day supplier would cut safety stock from 990 to 594 units and, much more important, remove 6,400 units from the sea, saving about AED 240,000 a year in holding cost. The risk is that a nearer supplier charges more per unit, so compare the full landed cost. As a next step, ask for quotes from suppliers in India or the Gulf and compare landed cost per unit.

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?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.