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Protecting an e-bike maker from a magnet cut-off
The prompt
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. 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. Add 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?
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