Find the leak in a Nashik cold store
Before the decision
Meter readings increased even though occupancy records appeared flat. The store uses a shared electric meter across chambers. Its supervisor remembers more short withdrawals but cannot tell from invoice totals which customers needed frequent access.
The problem
Should the team choose Retrofit cooling controls or Change customer mix for the next 12 months?
Decision owner: The business unit lead.
Some customers open loading bays more often, so occupied tonnes mask power intensity.
Option economics
Scroll the table to see all figures.
| Option | Volume (tonne-weeks) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Retrofit cooling controls | 44,000 | 180 | ₹48 lakh | ₹31.2 lakh |
| Change customer mix | 39,000 | 226 | ₹35 lakh | ₹53.14 lakh |
Make the call
- Calculate net contribution for Retrofit cooling controls and Change customer mix. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer tonne-weeks, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Change customer mix. It contributes ₹53.14 lakh after fixed costs and leads by ₹21.94 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
Retrofit cooling controls: 44,000 tonne-weeks × ₹180 less ₹48 lakh in fixed costs gives ₹31.2 lakh. Change customer mix: 39,000 tonne-weeks × ₹226 less ₹35 lakh in fixed costs gives ₹53.14 lakh.
- Stress-test the forecast
Change customer mix leads by ₹21.94 lakh in the base case. If Change customer mix delivers 10% fewer tonne-weeks (35,100) at the same margin and fixed cost, it contributes ₹44.33 lakh. Holding the other option constant, the stressed result still leads. 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, Change customer mix needs at least 29,293 tonne-weeks to match or beat it under the model. Match door-open minutes and temperature recovery to invoiced customer lots.
Some customers open loading bays more often, so occupied tonnes mask power intensity. 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 | Retrofit cooling controls | Change customer mix | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹23.28 lakh | ₹44.33 lakh | Change customer mix |
| Base assumptions | ₹31.2 lakh | ₹53.14 lakh | Change customer mix |
| Both gain 10% of volume | ₹39.12 lakh | ₹61.95 lakh | Change customer mix |
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