Test a repair guarantee in Tiruchirappalli
Before the decision
Customers want a reliable pickup date more than a small reduction in price. The shop tried promising a date at intake to reduce customer calls. Some repairs need parts the shop cannot inspect until after disassembly, so a guarantee could add refund exposure.
The problem
Should the team choose Fixed turnaround pledge or Usual estimate for the next 12 months?
Decision owner: The business unit lead.
The pledge may attract difficult jobs whose delays create refunds.
Option economics
Scroll the table to see all figures.
| Option | Volume (jobs) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Fixed turnaround pledge | 27,500 | 340 | ₹75.2 lakh | ₹18.3 lakh |
| Usual estimate | 24,200 | 355 | ₹69 lakh | ₹16.91 lakh |
Make the call
- Calculate net contribution for Fixed turnaround pledge and Usual estimate. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer jobs, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Fixed turnaround pledge. It contributes ₹18.3 lakh after fixed costs and leads by ₹1.39 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Specify the eligible population and the outcome before collecting data. Treat the figures as planning estimates. Use comparable groups to measure the effect before rollout.
- Calculate both options
Fixed turnaround pledge: 27,500 jobs × ₹340 less ₹75.2 lakh in fixed costs gives ₹18.3 lakh. Usual estimate: 24,200 jobs × ₹355 less ₹69 lakh in fixed costs gives ₹16.91 lakh.
- Stress-test the forecast
Fixed turnaround pledge leads by ₹1.39 lakh in the base case. If Fixed turnaround pledge delivers 10% fewer jobs (24,750) at the same margin and fixed cost, it contributes ₹8.95 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, Fixed turnaround pledge needs at least 27,092 jobs to match or beat it under the model. Randomise the pledge by counter-day and report refund-adjusted contribution.
The pledge may attract difficult jobs whose delays create refunds. 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 | Fixed turnaround pledge | Usual estimate | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹8.95 lakh | ₹8.32 lakh | Fixed turnaround pledge |
| Base assumptions | ₹18.3 lakh | ₹16.91 lakh | Fixed turnaround pledge |
| Both gain 10% of volume | ₹27.65 lakh | ₹25.5 lakh | Fixed turnaround pledge |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.