Recover margin at an Ahmedabad dyehouse
Before the decision
Small rush orders interrupt long runs and trigger repeated machine wash-downs. A large customer asks the sales team to keep accepting emergency batches. Operators point out that the jobs interrupt colour sequences and delay shipments already promised to other accounts.
The problem
Should the team choose Batch scheduling or Rush-order surcharge for the next 12 months?
Decision owner: The business unit lead.
Rush orders may contribute to retention for large customers despite their standalone costs.
Option economics
Scroll the table to see all figures.
| Option | Volume (batches) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Batch scheduling | 21,000 | 680 | ₹27 lakh | ₹115.8 lakh |
| Rush-order surcharge | 19,200 | 760 | ₹19 lakh | ₹126.92 lakh |
Make the call
- Calculate net contribution for Batch scheduling and Rush-order surcharge. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer batches, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Rush-order surcharge. It contributes ₹126.92 lakh after fixed costs and leads by ₹11.12 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Start with price, volume, mix and cost. Reconcile the gap at the transaction or batch level before treating a forecast as an explanation of past performance.
- Calculate both options
Batch scheduling: 21,000 batches × ₹680 less ₹27 lakh in fixed costs gives ₹115.8 lakh. Rush-order surcharge: 19,200 batches × ₹760 less ₹19 lakh in fixed costs gives ₹126.92 lakh.
- Stress-test the forecast
Rush-order surcharge leads by ₹11.12 lakh in the base case. If Rush-order surcharge delivers 10% fewer batches (17,280) at the same margin and fixed cost, it contributes ₹112.33 lakh. Holding the other option constant, the stressed result falls behind. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, Rush-order surcharge needs at least 17,737 batches to match or beat it under the model. Link urgent work to account-level contribution and record changeover minutes.
Rush orders may contribute to retention for large customers despite their standalone costs. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | Batch scheduling | Rush-order surcharge | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹101.52 lakh | ₹112.33 lakh | Rush-order surcharge |
| Base assumptions | ₹115.8 lakh | ₹126.92 lakh | Rush-order surcharge |
| Both gain 10% of volume | ₹130.08 lakh | ₹141.51 lakh | Rush-order surcharge |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.
Practise this case as an interview