Automate parcel sorting in Bhiwandi?
Before the decision
Parcel volume doubles during campaign weeks, when error resolution is slowest. The seller’s demonstration used uniform cartons. The real night shift receives bags, fragile goods and boxes with poor labels just before the final truck departs.
The problem
Should the team choose Automated line or Flexible staffing for the next 12 months?
Decision owner: The business unit lead.
The automated line’s quoted rate assumes uniform parcels and no jams.
Option economics
Scroll the table to see all figures.
| Option | Volume (parcels) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Automated line | 8,20,000 | 12 | ₹67 lakh | ₹31.4 lakh |
| Flexible staffing | 7,80,000 | 8 | ₹29 lakh | ₹33.4 lakh |
Make the call
- Calculate net contribution for Automated line and Flexible staffing. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer parcels, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Flexible staffing. It contributes ₹33.4 lakh after fixed costs and leads by ₹2 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Check the bottleneck at the busiest point in the operating cycle. An annual forecast can fit on paper while a peak week still breaks the service promise.
- Calculate both options
Automated line: 8,20,000 parcels × ₹12 less ₹67 lakh in fixed costs gives ₹31.4 lakh. Flexible staffing: 7,80,000 parcels × ₹8 less ₹29 lakh in fixed costs gives ₹33.4 lakh.
- Stress-test the forecast
Flexible staffing leads by ₹2 lakh in the base case. If Flexible staffing delivers 10% fewer parcels (7,02,000) at the same margin and fixed cost, it contributes ₹27.16 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, Flexible staffing needs at least 7,55,000 parcels to match or beat it under the model. Time mixed batches and include maintenance and reject rework in run rates.
The automated line’s quoted rate assumes uniform parcels and no jams. 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 | Automated line | Flexible staffing | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹21.56 lakh | ₹27.16 lakh | Flexible staffing |
| Base assumptions | ₹31.4 lakh | ₹33.4 lakh | Flexible staffing |
| Both gain 10% of volume | ₹41.24 lakh | ₹39.64 lakh | Automated line |
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