Open a pet food route in Bhubaneswar?
Before the decision
Clinic sampling sparked inquiries for smaller bags and more reliable replenishment. A few customers return to the clinic for the same size bag. Others ask for flavours that the clinic does not plan to stock and may buy their next bag elsewhere.
The problem
Should the team choose Direct retail sales or Vet-clinic wholesaler for the next 12 months?
Decision owner: The business unit lead.
The wholesaler is strong in clinics and weak in independent pet stores.
Option economics
Scroll the table to see all figures.
| Option | Volume (bags) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Direct retail sales | 48,000 | 85 | ₹23 lakh | ₹17.8 lakh |
| Vet-clinic wholesaler | 57,000 | 49 | ₹10 lakh | ₹17.93 lakh |
Make the call
- Calculate net contribution for Direct retail sales and Vet-clinic wholesaler. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer bags, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Vet-clinic wholesaler. It contributes ₹17.93 lakh after fixed costs and leads by ₹0.13 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Separate demand you can reach from demand you can serve reliably. Test reorder behaviour before using the full-year forecast.
- Calculate both options
Direct retail sales: 48,000 bags × ₹85 less ₹23 lakh in fixed costs gives ₹17.8 lakh. Vet-clinic wholesaler: 57,000 bags × ₹49 less ₹10 lakh in fixed costs gives ₹17.93 lakh.
- Stress-test the forecast
Vet-clinic wholesaler leads by ₹0.13 lakh in the base case. If Vet-clinic wholesaler delivers 10% fewer bags (51,300) at the same margin and fixed cost, it contributes ₹15.14 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, Vet-clinic wholesaler needs at least 56,735 bags to match or beat it under the model. Measure reorder mix by outlet type before extrapolating reach.
The wholesaler is strong in clinics and weak in independent pet stores. 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.
Check whether your answer names the trade-off, cites a number from the exhibit and specifies a reversal condition.
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 | Direct retail sales | Vet-clinic wholesaler | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹13.72 lakh | ₹15.14 lakh | Vet-clinic wholesaler |
| Base assumptions | ₹17.8 lakh | ₹17.93 lakh | Vet-clinic wholesaler |
| Both gain 10% of volume | ₹21.88 lakh | ₹20.72 lakh | Direct retail sales |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.