Forty Diyas, Six Broken: Pricing and Packing for a Repeat Order
A craft unit of Divyang trainees receives an order for 40 coconut-shell diyas from a shop for Diwali, quoted at Rs 110 each. The shells were donated, but each diya uses Rs 4 of sandpaper, Rs 6 of natural lacquer, Rs 1.50 of wick and Rs 1 of cotton thread, with 8 per cent wastage on these consumables, and Rs 10 of packing material. Each diya takes 45 minutes; the three trainees are paid a stipend of Rs 50 per hour. The unit's monthly overhead of Rs 600 is shared so that this order carries 20 per cent of it. Delivering the lot to the shop costs Rs 250. The shop sent a tempo, and six diyas reached it broken or cracked. The shop wants a free replacement of six and is asking for a repeat order of 60 pieces at the same rate. The unit has no drop-test routine and no written terms of trade.
1. Prepare the cost sheet and state the true profit at Rs 110 with and without the broken pieces. Then say whether the repeat order should be taken at Rs 110.
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Cost per diya
| Item | Amount (Rs) |
|---|---|
| Consumables: 4 + 6 + 1.50 + 1 = 12.50 | 12.50 |
| Wastage 8 per cent | 1.00 |
| Labour 45 min at Rs 50/h | 37.50 |
| Overhead share 20 per cent of 600 = 120 for the lot | 3.00 |
| Packing | 10.00 |
| Transport 250 / 40 | 6.25 |
| Total | 70.25 |
Without breakage: revenue 40 x 110 = Rs 4 400; cost 40 x 70.25 = Rs 2 810; profit Rs 1 590 (36 per cent of revenue).
With six broken: replacement cost 6 x 70.25 = Rs 421, plus a second delivery Rs 250, so extra Rs 671. Profit = 4 400 - 2 810 - 671 = Rs 919 (21 per cent). The breakage has eaten 42 per cent of the profit, because the six replacements carry labour and transport but no revenue.
Decision on the repeat order: do not repeat blindly at Rs 110. Either (a) hold the price but add a packing charge and written terms, or (b) raise the price to about Rs 125. Reasoning: the margin is real but thin enough that one more bad delivery wipes it out, and 60 pieces will need about 45 hours of trainee time that could go to other orders. A price rise of Rs 15 on 60 pieces adds Rs 900, which pays for proper packing and still leaves the shop a fair deal.
2. Redesign the packaging within Rs 8 per piece and justify it with a test you can run in the workshop.
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Why the current packing failed: Rs 10 was probably spent on a single carton or paper wrap, so diyas touched each other and the shell edges took the shock. Coconut shell cracks from a local impact at the rim, and a tempo ride gives repeated small drops.
New pack, per diya
- Individual wrap: one sheet of newspaper or waste corrugated offcut wrapped around the shell, taped, Rs 1.
- Cell: a corrugated grid of 5-ply offcut board, 12 mm high, one cell per diya, Rs 2.50. The grid stops neighbour-to-neighbour contact.
- Base cushion: 10 mm shredded paper or textile offcut from the unit's own waste, Rs 1.
- Outer carton: one 5-ply carton for 20 diyas, cost shared at Rs 2.50 per piece.
- Tape and label: Rs 1. Total about Rs 8, so it fits the budget, and it uses the unit's own rag and board waste, which is also the sustainability argument.
Test (drop test, no equipment needed)
- Pack 20 diyas as above and seal.
- Drop the carton from 900 mm onto a hard floor, once on each of the six faces and once on a corner. Justify 900 mm as roughly waist height, which is how a tempo load is handled.
- Open and inspect: pass means no crack, no chip at the rim and no loose wick; one broken piece in 20 is a fail and the cell height or cushion is increased.
- Repeat on a second carton before the order is packed, so the result is not a lucky sample.
Point out to the trainees that the grid is made from the unit's own offcuts: good packing is a design task, not a purchase.
3. Draft the terms you will put in writing for the repeat order of 60 pieces, and explain what each term protects.
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Quotation and terms
- Price: Rs 125 per piece, ex-works, valid 15 days. Protects against quoting from an old cost sheet after material or labour costs move.
- Packing: Rs 8 per piece shown as a separate line, mandatory. Protects the margin and makes clear that breakage prevention is a paid item, not something the unit absorbs silently.
- Delivery and risk: the buyer's vehicle collects; risk passes at handover, and the buyer's representative signs the count and condition at loading. Protects against the argument about six broken pieces after the tempo leaves.
- Advance: 50 per cent with the order, balance on delivery. Protects cash flow, because trainee stipends and consumables are paid weekly regardless of when the shop pays.
- Replacement policy: the unit replaces pieces broken in transit only if the unit's own sealed cartons are unopened at the shop and the loss is reported within 24 hours with photographs; otherwise replacements are charged at cost. Protects against open-ended claims.
- Specification: shell size range, lacquer finish, wick length, no crack at rim, and the packing used. Protects both sides by making acceptance objective, and it is the same checklist the students already use for quality control.
- Timeline: 60 pieces in 18 working days, allowing 45 minutes per piece and drying time. Protects against promising a date that forces unsafe short cuts.
Explaining it to the students: each term answers a question that has already cost the unit money - price, breakage, timing and payment. A written order is not distrust; it is what makes a self-employment unit bankable for the next order.