Thirty-Four Sour Pouches
Bihar Dugdh Union runs a milk plant rated at 1.2 lakh litres a day, fed by 180 village dairy cooperative societies. At the monthly review, the information system reports against the annual plan: procurement 78,500 litres a day against a target of 90,000; average fat in received milk 4.1 per cent against a 4.5 per cent standard; chilling-centre downtime 6 per cent of scheduled hours; pouches sour or leaking on arrival, 34 complaints against a norm of 5; packaging film cost ₹0.62 a pouch against a budget of ₹0.55; staff overtime ₹1.9 lakh against ₹1.2 lakh. In the same month the union earned ₹0.9 lakh extra on cattle-feed sales, and stationery came in ₹4,000 under budget. The board meets for two hours. The managing director wants the meeting devoted to what actually threatens the union's licence to operate and its margin, not to a reading of the whole report.
1. Apply critical point control and management by exception. Decide which deviations deserve board time, and justify the inclusions and exclusions.
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Screening test: does the deviation threaten safety or legal standing, customer retention, or unit contribution - and can management actually change it?
For the board:
- 34 sour or leaking pouches against a norm of 5. This is a critical point, not a quality statistic. A food-safety failure risks prosecution, a recall and the brand; the cost of one spoilt consignment dwarfs months of film savings.
- Procurement 78,500 against 90,000 litres and fat 4.1 against 4.5 per cent. Running a 1.2 lakh litre plant at about two-thirds capacity spreads fixed costs over fewer litres, and farmer payout is fat-linked, so weak fat hits both cost and farmer confidence.
- Chilling downtime of 6 per cent. Downtime is upstream of both fat loss and souring - it is the likely root cause, so it is a key point even though it looks like an engineering issue.
Excluded from board time:
- Packaging film at ₹0.62 against ₹0.55 is a 12.7 per cent overrun - real money, but an operating manager's purchasing problem, not a governance one.
- Overtime ₹1.9 lakh against ₹1.2 lakh is largely a symptom of downtime; fix downtime and it shrinks.
- Feed sales ₹0.9 lakh above plan and stationery ₹4,000 under budget are favourable deviations. Management by exception means ignoring them, not celebrating them for ten minutes.
2. The MD wants corrective action, not a post-mortem. Show how you would convert the three critical deviations into corrective action, distinguishing the immediate fix from the root-cause fix.
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Corrective action must attach to a person, a date and a measurable test.
Souring and leakage (immediate): hold and test the affected batch, trace the route from chilling centre to retail, and identify whether failure is microbial, sealing temperature or transport handling. Test the pouch seal strength daily on the first shift. Deadline: 7 days for diagnosis, and the complaint count must fall below 10 by the next review.
Chilling downtime (root cause): downtime of 6 per cent is probably the cause of the fat and souring numbers. Audit the twelve worst-performing chilling centres, classify causes (power, compressor, operator absence, no backup), and fund standby generators or maintenance contracts where power is the cause. Assign the plant engineer, with a weekly downtime log by centre.
Procurement and fat (root cause plus incentive): test-pay differentials, society-level fat testing, and investigation of added water or delayed delivery. Since payout is fat-linked, a farmer who is underpaid for good milk will divert it; verify payment accuracy before blaming farmers.
Then verify: check whether the correction worked. Controlling is a loop - compare the corrected figure against the standard next month, and reset the standard if 90,000 litres was never achievable with the current catchment.
3. The annual plan says 90,000 litres a day, but the plant has not crossed 82,000 in three years. Explain what this implies for standard-setting, and why an unachievable standard makes the whole control system fail.
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A standard has two jobs: to state the intended result and to be a fair basis for comparison. If 90,000 litres has not been reached in three years, the figure has stopped being a target and become a ritual - and a damaging one.
- Deviations lose meaning. When every month shows a shortfall, managers stop investigating the gap; the number is no longer a signal, it is background noise.
- Responsibility becomes blurred. Staff cannot be held accountable for a figure the catchment and chilling network cannot deliver, so the report stops distinguishing poor performance from an impossible plan.
- Motivation erodes. Persistent unattainable targets teach people that measurement is a formality.
- Real causes get hidden. The genuine constraint - perhaps 180 societies can supply only so much, or downtime caps intake - stays unexamined because the answer is always 'we fell short'.
The correct response is to rebuild the standard from evidence: capacity of societies, seasonality, and the intake achieved once downtime is fixed. Set a stretch but attainable figure, with a separate capacity-building plan if 90,000 litres is the strategic goal. Recall that planning supplies the standard and controlling measures it; a standard nobody believes in breaks that link.