- Mayank is responsible for the healthy biscuits production line at Topeka's Ahmedabad facility and must present his unit's performance review on Monday. - Last year, the company implemented a cost-cutting initiative to reduce batch sizes by 30% to lower costs and free up working capital. However, Mayank is now unsure if this helped as costs increased and production struggled to keep up with demand. - He needs to analyze key metrics like cost per unit, material costs, scrap costs, and labor costs from the previous year to understand the impact of the smaller batches and plan improvements for the coming year.

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Topeka International – Mayank’s Performance Quandary
“Yes, I will be ready with all the data” said Mayank and sat down with a sigh as the phone call ended. At the other
end of the line was Vikram, the General Manager – Operations at Topeka International’s Ahmedabad facility. The
phone call was to inform Mayank that his performance appraisal was on Monday and he should prepared to make a
presentation of his unit’s performance for the financial year ending March 2017. Of particular interest was the cost-
saving initiative implemented at the start of the year under the direction of Vice President Operations. The direction
had been simple ‘reduce costs and free up working capital’. The leadership at the plant had discussed this directive
at length and decided that the best way to achieve both goals would be to reduce the batch/lot size of the various
products produced at the factory. The idea being that reduced batch sizes would make the factory capable of
producing more variety of products and also be responsive to the changing demands of the market.
The plant leadership, namely Vikram and his team; the company’s operational leadership i.e. Vice President
Operations and above and the marketing team at Topeka were very enthusiastic of the idea and believed that this
approach will reduce the costs at the factory and also make the company respond faster to the changing demand
trends in the market.
Mayank himself had thought that it was good idea. He was convinced that reduced batch sizes would make it easier
for the production team to respond to marketing requirements. He also thought that producing a variety of products
will increase the overall production at the plant and thus lower cost per unit. The problem is that now Mayank is not
so sure of whether that has happened. Overall production cost had increased, the production team was struggling to
meet the increased demand and the cost targets set for the production line were not being consistently met.
He needed to present his team’s performance by Monday. He needed to highlight the successes that they had achieved
in the past year while also shedding light on the problems faced; he also needed to show a way forward for the next
year and beyond.
Topeka International & the Biscuits business.
Established over 60 years ago, Topeka International has become well known throughout the world as one of the best
biscuit manufacturers in the world. Having started in India, Topeka has established its presence in over 90 countries
both with its own brands and also a third party manufacturer for internationally well-known brands.
In India, Topeka is among the largest players in the market jostling for the No.1 spot in every category of products it
is involved in. Other than biscuits, Topeka is also well-known for a lot of its other products including ready to eat
snacks, ready to cook food, packaged fruit juices and some dairy products. With rising income levels, urbanisation,
better connectivity (both transport & internet) India was a fast growing market for food based FMCG players like
Topeka. With a sales revenue of over Rs.3000 Cr. Topeka is well entrenched in the market to drive deeper sales in
the future.
Greater awareness of health issues and ever increasing internet connectivity was changing the consumption trends
for all food based products, this along with a wider and deeper distribution network had resulted in the opening up
of various channels to satisfy customer demand. This had resulted in the need for firms to be more receptive to
changing trends and adapt quickly. The Vice President Operations was worried that Topeka being a behemoth was
not responding quickly enough to changing trends in the market. He was concerned that Topeka was losing in the
market to a whole host of new but small players and wanted to reign this loss at the earliest.
The idea being discussed in the CXO level was to make the company more agile and responsive in its operations. A
more flexible supply chain needed to be built and the production capability of the company needed to be more
adaptable to changing market trends without any increased expenditure. Increasing competition was also putting
pressure on the margins that Topeka was operating with and hence a simple yet far reaching directive was shared
with all production facilities ‘reduce cost and free up working capital’
Topeka’s Ahmedabad Facility
The production plant at Ahmedabad is Topeka’s largest production facility for biscuits. It is designed to cater to both

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domestic and international demand. The factory consists of a warehouse to store raw materials, 5 production lines
and a distribution centre for finished goods. The factory produced over 10 crore packets of the various biscuits that
Topeka sells in the market. About 45% of all biscuits sold by Topeka (domestic & international) were manufactured
at the Ahmedabad plant.
The factory focussed on the production of the 5 category of biscuits with all their variants:
1. Energy biscuits
2. Cream Biscuits
3. Healthy biscuits
4. Cookies & Delectables
5. International blends
Mayank was responsible for the healthy biscuits line and was directly responsible for 54 employees (18 per shift).
The health biscuits were targeted at the more aware audience, who preferred a healthy snack and did not mind paying
a premium for the biscuit. The employees were paid Rs.75 per hour and were provided with additional benefits like
PF and medical insurance. The manufacturing facility run 3 shifts per day for 350 days per year.
The Production Process
Making a biscuit is a simple enough exercise that can be done at home itself if you have the right ingredients and
equipment for it. Manufacturing the volume of biscuits that Topeka was producing though was a gargantuan task.
The process consisted of 8 steps.
a. Mixing the dough: the dough was made in large quantities and an industrial mixer was used to make the
dough of the right quantity, quality & texture
b. Adding the ingredients: ingredients such as oatmeal, fibre etc. were added to the dough as per the
requirement of the flavour being produced.
c. Cutting: The dough then was cut into the requisite size and weight.
d. Baking: the cut dough was then baked in an industrial oven
e. Packaging: the baked biscuits were directly transferred to a packaging machine where the biscuits were
packaged according to the SKU size specified
f. Sorting: This was a Quality check step done to ensure that no biscuits were damaged and that all packets
met the quality standards at Topeka. All defective packets were discarded and very rarely (if there was a
major issues) the whole batch was discarded.
g. Bundling: The finished goods were then packed in polyethylene wraps and stored in cardboard cartons
h. Dispatch: The cardboard cartons were then placed on moving pallets and dispatched to the distribution
centre for further distribution.
Typically the factory would run 15 batches in process on a production line. The set up time for each run was lengthy
as significant changes needed to be made from one product to the other. It was very important that the whole line
was flushed and cleaned of any residual raw material to ensure that the next product was produced to the best quality
possible. Mixing of ingredients from one product to another was result in a bad taste and eventually customer
complaints and therefore was to be avoided at every opportunity. To achieve this level of cleanliness, a thorough
flush was done after every run and as a result a lot of material stuck in the machinery would be scrapped. The set up
time and associated scrap are given in Exhibit 2.
Batch/Lot Size Reduction
At the end of the financial year 2015-16 the VP-Operations sent out a directive to reduce cost and free up working
capital; the leadership at the Ahmedabad plant had decided to reduce the work-in-process inventory by 30% to
achieve the goals set out by their VP. They figured that they would be able to do this by reducing the batch size by
30% thus reducing the need for inventory. The smaller batch size would mean that the plant is able to respond to
changes in demand faster as each batch would be smaller and therefore faster to produce. The challenge was to ensure
that the operational costs did not increase at all as that would not only impact the overall cost of production but also
bring more scrutiny on lines that were expensive to operate.

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Mayank had wholeheartedly agreed with this idea. He figured that the changing demands from the market was already
putting pressure on him to increase the speed of production. By reducing the batch size by 30% he would be able to
produce faster and thus be able to meet the requirements of the marketing team as well. Mayank anticipated that by
reducing the batch size the product will move from production to sale about 35% faster and thus reducing the lead
time for the sales & marketing team. The marketing team was very interested in the potential of the idea and Mayank
hoped that this reduction in batch size would lead him to a favourable response from all stakeholders.
Mayank’s Performance Appraisal
As Mayank sat down to assess the performance over the last year, he was worried that the performance may not meet
the standards expected. The costs had increased, the lead time had not reduced as much as expected and there had
been some delays in production as well. He realised that he had to look at multiple things simultaneously before he
could arrive at any conclusion and only then decide the future course of action. He realised that the best way to
showcase the impact of the decision would be to look at the cost per unit for year 2016-17 and compare with the year
2015-16. To be able to understand the cost per unit he would need to calculate the total cost of production and for
that he would have to look at total material cost, total scrap cost & the total labour cost.
Mayank realised that he had a lot of work to do by Sunday evening if he wanted to make a good impression on
Monday.
Exhibit 1: Labour Information
Average
Labour Rate
(per hour)
Employees/Shift
(Health Line)
Days/Year Hours/Shift Shifts/Day
75 18 350 8 3
Exhibit 2: Run Time & Scrap Information
Run Time
(seconds/unit)
**Setup Time
(minutes/batch)
Scrap
Material Cost
per Setup
0.12 55 490
Exhibit 3: Volume & Cost Information
Year
Volume
(units/year)
Total Run
Time*/Year
(hours)
Average
Production
Quantity
(lot size)
Total Material
Cost
2015-16
5,76,84,800 1,923 15,000 12,94,29,876
2016-17
6,54,99,900 2,183 10,500 15,07,68,297
*total run time is the total time that the production process was active producing output, it is also known as active production
time; it is simply calculate as (run time per unit*volume)
**Set up time is the time take to get the system ready for production. This is also known as non-active production time.
#Total production time = active production time + non-active production time
&Capacity utilisation = total production time/total available time