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Should the appliance maker add a second compressor supplier?

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.

The appliance maker buys 240,000 compressors a year from one supplier at INR 4,000 each. A second supplier would take 30 percent of the volume at INR 4,200 each. Qualifying (approving) and managing it costs INR 0.6 crore a year. The team estimates a 10 percent chance each year that the main supplier stops for two months. Each lost washing machine costs INR 5,000 of contribution. The plant makes 20,000 machines a month. With a second supplier, half of the lost output could be saved. The main supplier has also offered a 2 percent price cut on its remaining volume if a second supplier is added. Is dual sourcing worth it?

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.

Net value of dual sourcing = risk reduction + price tension saving minus extra cost
- Extra cost: price premium on 30 percent + management cost
- Risk: chance x lost contribution, before and after
- Price tension: 2 percent on the main supplier's volume

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: Price premium
What a strong candidate does: 30 percent of 240,000 is 72,000 compressors at INR 200 more, in crore.
Price premium (INR crore a year): 72,000 × 200 ÷ 10,000,000 = 1.44
Step 2: Total extra cost
What a strong candidate does: Add the INR 0.6 crore to qualify and manage.
Extra cost of dual sourcing (INR crore a year): 1.44 + 0.6 = 2.04
Step 3: Loss if the supplier stops
What a strong candidate does: Two months of output is 40,000 machines at INR 5,000 each.
Loss from a two-month stop (INR crore): 40,000 × 5,000 ÷ 10,000,000 = 20
Step 4: Expected loss today
What a strong candidate does: A 10 percent chance each year.
Expected yearly loss, single source (INR crore): 0.1 × 20 = 2
Step 5: Risk reduction
What a strong candidate does: The second supplier saves half of the loss.
Risk reduction (INR crore a year): 2 × 0.5 = 1
Step 6: Price tension saving
What a strong candidate does: 2 percent off INR 4,000 on 168,000 compressors.
Price tension saving (INR crore a year): 168,000 × 4,000 × 0.02 ÷ 10,000,000 = 1.34
Step 7: Net value
What a strong candidate does: Benefits minus extra cost.
Net value of dual sourcing (INR crore a year): 1 + 1.344 - 2.04 = 0.304

The recommendation to listen for

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

The appliance maker should add the second supplier, but only because of the price cut. The net gain is about INR 0.3 crore a year. First, the risk reduction alone (INR 1 crore) does not pay for the INR 2.04 crore of extra cost. Second, the 2 percent cut from the main supplier, worth about INR 1.34 crore, tips the answer. The risk is that the cut is a one-off; if it disappears next year, dual sourcing loses about INR 1 crore a year. As a next step, write the price into a multi-year contract and check whether a cheaper buffer stock would cover a two-month stop.

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.

Next: another case in Partner mode

Swap roles and run the next case, so you both practise answering and scoring.

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