Port Closure and a Sole-Source Chassis Supplier
NorthBridge Medical manufactures mobile clinical carts in Leeds. Its only chassis supplier, based in Ningbo, produces 12,000 units a month; NorthBridge currently orders 10,500. The chassis is moulded to a proprietary design and the supplier owns the tooling. Ocean transit is six weeks, and NorthBridge holds four weeks of safety stock. A forecast for the next quarter shows demand rising 22% after a major hospital framework win. In week two of the quarter, a dockworkers' strike closes Ningbo for at least three weeks; the supplier says it can hold finished goods but cannot guarantee bookings. Airfreight would cost $18 a unit versus $2 by sea and add two weeks of internal validation for a new route. The company has a £4.5m revolving credit facility, with £1.2m headroom, and a covenant test in 60 days. The sales director wants to promise full delivery; operations wants to cut the forecast.
1. Recommend the immediate response for the next 72 hours. Show the trade-offs you would weigh and the decision criteria.
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Decision criteria should be patient safety and contractual service, cash, total cost, and reversibility. Demand at +22% is about 12,810 units a month against 12,000 capacity, so there is already an 810-unit monthly gap before the strike. Four weeks' safety stock (about 10,500 units) covers roughly 3.3 weeks at the higher run-rate, but a three-week port closure plus six-week ocean transit creates a replenishment gap of around nine weeks. Do not promise full delivery.
In 72 hours: (1) freeze the unconstrained sales promise and segment orders by hospital go-live, penalty exposure and revenue; (2) instruct the supplier to hold and evidence finished goods, book the earliest alternate port or rail option, and provide daily booking proof; (3) authorise airfreight only for priority SKUs where stock-out cost clearly exceeds the $16-a-unit premium; (4) run a cash sensitivity with finance and pre-agree covenant headroom; (5) issue a customer communication with transparent allocation rules. Avoid airfreighting low-margin standard carts and avoid panic buying. Escalate to the framework customer if service levels are at risk. This is a risk-allocation decision, not a purchasing optimisation.
2. How should NorthBridge redesign its supply chain over 12 months? Specify sourcing, inventory, contract and metrics choices, and explain the risks of each.
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Over 12 months, qualify a second source, ideally a UK or EU contract moulder, for 25-30% of volume. NorthBridge should own or control the tooling and have a licensing and access agreement. Keep Ningbo for scale but require capacity reservation and dual-port shipping. Change Incoterms where it improves control, for example from FOB to FCA or DAP, and add a port-disruption playbook, finished-goods buffer and pre-approved airfreight clause.
Inventory should be segmented by SKU margin and clinical criticality: perhaps six to eight weeks for critical components, two to three weeks for standard items, plus supplier-held buffer. Implement S&OP with forecast accuracy and capacity review. Metrics should include OTIF, days of supply, lead-time variability, airfreight as a percentage of COGS, supplier concentration and cash-to-cash cycle.
Risks: dual sourcing raises unit cost and duplicates tooling; buffers consume £1-2m of cash; a new supplier needs about six months of validation. Recommend stage-gated investment and a pilot, not a wholesale shift. The aim is resilience at a known cost, not zero risk.