Fifteen Hundred Kilos of Festival Mixture
Mohan Sweets has one shop in Kota and sells mithai through the year, but makes most of its money in the ten days before Diwali. Last year it made 1,200 kg of its festival mixture. Of this, 700 kg was sold at ₹320 per kg before Diwali, 300 kg was sold afterwards at a 25 per cent discount, and 200 kg spoiled and was thrown away. Raw material costs ₹200 per kg and labour and packing ₹40 per kg, so the whole exercise ended with a contribution of barely ₹8,000.
Sales in the three previous festivals were 520 kg, 640 kg and 700 kg. This year a franchise sweet chain is opening two kilometres away. The shop has no cold storage, can make at most 250 kg a day, has ₹4 lakh to spend on raw material, and relies on family labour. Mohan's son has drawn up a one-page “Diwali plan” that says: “Make 1,500 kg and sell fast.”
1. Was last year's loss a failure of forecasting or a failure of planning? Use the numbers to support your judgement, and state which limitation of planning the case illustrates.
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Both, but the planning failure is the larger one.
The forecasting failure. The three-year trend is 520 → 640 → 700 kg, roughly 10–12 per cent growth a year. A defensible forecast was 750–800 kg. Producing 1,200 kg exceeded even the best previous year by 71 per cent, and there was no new demand reason for it. So the premise on which production was decided was simply wrong.
The planning failure, and the bigger one. Forecasting is one step of planning, not planning itself. There was no stage-wise production schedule, no written trigger for when to discount, and no spoilage control. The arithmetic shows the cost: the 500 kg that did not sell at full price consumed ₹1,00,000 of raw material and ₹20,000 of labour, which is why a festival that should have earned a healthy margin closed at ₹8,000 contribution.
The limitation illustrated. “Planning does not guarantee success” - plans can fail for reasons outside the planner's control, and here the shop also faces a new competitor. But this loss was largely self-made, not imposed by the environment. Planning failed at the stage of setting the plan into action and reviewing it, not at the stage of dreaming up a target.
2. Draft the Diwali plan for this year. Give specific quantities, tranches and triggers, and say which parts are standing plans and which are single-use plans.
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Base forecast. Start from 700 kg, shade it down to 600–650 kg of full-price demand because of the franchise chain, and not up.
Production plan (single-use). Make 750 kg in three batches of 250 kg on days 1–3, then repeat a 250 kg batch on days 5 and 6 only if pre-bookings justify it. The 250 kg daily ceiling is the binding constraint - a 1,500 kg target is physically six days of full production with no room for a breakdown.
Money in two tranches. Release ₹2.75 lakh of raw material first and hold ₹1.25 lakh back until day 4, when actual offtake is visible. Buying all ₹4 lakh of material up front is what turns a demand error into a cash crisis.
Written discount trigger. After day 8, 15 per cent off; after day 10, 30 per cent off. Stop production once unsold stock crosses 150 kg. Tie up with two kirana shops to lift surplus at cost rather than dump it.
Pre-booking. Take orders with a small token in the week before, so day-1 production follows orders rather than hope.
Standing plans. Hygiene and quality SOP for the kitchen; supplier and credit terms; daily stock-count routine.
Single-use plans. The Diwali production schedule, the discount window and the local campaign are made for this festival only and lapse after it.
3. Which single planning premise is most dangerous this year, and how would you control it?
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The dangerous premise is external: the franchise chain's opening offer.
Internal premises are known and controllable - 250 kg a day capacity, family labour, ₹4 lakh of material money. The external premise that the shop will hold its full-price demand against a national brand two kilometres away is an assumption, not a fact, and it drives the whole quantity decision.
Why it matters more than the others. If full-price demand falls to 500 kg while 750 kg is produced, the shop is again discounting or discarding, and this year it also has a competitor watching it do so.
Control measures.
- Send someone to the franchise outlet on its opening days to record its price list and offers.
- Keep the discount trigger as a lever: if the competitor opens with a deep cut, pull the 15 per cent trigger forward by three days instead of waiting for day 8.
- Split production into batches so that a bad week stops at 250 kg, not at 1,200 kg.
- Keep a reserve of ₹1.25 lakh unspent until day 4 so that the response is affordable.
Planning cannot remove the competitor; premise control only ensures the shop finds out early enough to change the next batch.