Solution Bata India

Bata: APP

SYNOPSIS
Bata India went public in the year 1973, with a benevolent view of providing employment to the local
people and best quality of life to the people. Bata’s mission was to provide the best quality shoes to its
customers. The plant worked more efficiently and effectively to fulfil the public demands. Bata India
has established itself as India’s largest footwear retailer. The General Manager of the plant was asked
to devise a production plan for the upcoming year. However, to devise a production plan, he was
facing multiple challenges such as limited pool of laborers, poaching by competitors/allied
manufactures belonging to nearby vicinity, and pressure from labor union. Management wanted him
to optimize the profits, reduce risks without incurring any extra cost. He was considering to apply the
concepts of aggregate production planning (chase, level, and sub-contracting strategies) to devise the
best plan for their company.

ANALYSIS
1. What were the challenges that exist for the General Manager of Bata India?
Major challenge that existed for the general manager was to chalk down the APP for the upcoming
production period that would give maximum returns or minimize the costs. For the APP, he was
supposed to forecast the demand for the year 2022-23 considering the market trend and policies. This
forecasting was supposed to be done in a manner to minimize the errors. He was facing multiple
challenges such as:

 Limited time

 Forecasting errors (market trend)

 Labour hiring, training, and firing costs

 Limited pool of labours

 Poaching by competitors/allied manufactures belonging to the nearby vicinity

 Threat of arm-twisting by labour union

He had three non-exhaustive alternatives for the production plan as follows:

1. Chase the production: - Where the production quantity as per forecast was being chased and
the labors were hired and fired according to it.
2. Maintaining inventory with constant workforce (Level): - The constant workforce
produced same quantity every month. If the production were in surplus, the inventory cost
would get added to the total cost whereas if the demand was not fulfilled due to shortage in
quantity, then cost under stocking would get added to the total cost.
 3. Subcontracting: - The production was carried with a minimum workforce required for a
selective month (lowest demand). Then the extra quantity required every month was being
subcontracted to other manufacturers or third party.
To summarize,

 For production planning, he must choose the best alternative using the concepts of aggregate
production planning.
2. APP basics and stating the assumptions made throughout the case.
Aggregate production planning (APP) is a systematic process of planning the production well in
advance to give the management fair idea of a timeline to procure the raw material or other resources
required. The whole idea of APP is to minimize the total cost of operations for an organization.
It also facilitates the matching of demand and supply for the product. It drills down all the specific
processes and gives the optimum labour force needed for the production process. It can also be used
to exploit all the possible alternatives for a production process and narrowing down to the best one. A
few key strategies involved in APP are:

 Chase plan: - To meet the demand forecasted by changing the workforce every month or year
based on the planning timeline.

 Level Plan: - With the constant workforce, producing the same quantity in every time frame.
It also calls for managing the inventory to absorb the surplus or the slack.

 Subcontracting: - The production was carried with a minimum workforce required for a
selective month (lowest demand). Then the extra quantity required every month was being
subcontracted to other manufacturers or third party
However, APP have some pre-requisites for smooth implementation. The first being information
about the facilities and the resources needed for the production. Secondly, it needs a proper forecast of
the demand quantities in aggregate terms for the period for which the planning is to be done. After
this, there should be a clear information regarding all the cost involved in the production process.
Various costs can be inventory cost, sub-contracting cost, overtime cost, ordering cost to name a few.
Once the concept of APP is laid down, the instructor should clearly list down all the assumptions
before going to next question. This is done for the ease of calculation. Typical assumptions made in
APP (alignment with the case) are as below:

 Skills of labour across any section of the plant remained the same

 Labours could be used interchangeably and each one would need same time for the same task

 Labours included only the workers working on the field. Shift in-charges, line managers, and
section engineers were ignored

 Production cycle would last for a year irrespective of seasonal and geographical conditions

 There were no hidden costs other than all stated.

1. What decision/s the General Manager of Bata India should take to minimize the cost
and carry out the production?
Should he continue with 2 shifts of 8 hours each OR Change it to 2 shifts of 12 hours each.
The demand for production cycle for financial year 2022-23 should be founded/calculated using the
demand trend (see write-up Exhibit 2). Since the market trend factor came into picture, it was
necessary to first de-seasonalize the data and then forecast to get an accurate result ( see Exhibit 1 and
Instructor spreadsheet, worksheet 1)
Few points to be taken into consideration while calculating the alternatives were:
1. Labour-hour ratio was used to calculate the number of labours required
2. For two shifts of 12 hours each, efficiency was reduced to 60% after eight hours. This meant
that for next four hours, the effective labour hours would be only 2.4. Hence, one shift
effectively had only 10.4 hours. Therefore, while calculating number of labours, the work
hours were taken as 10.4 instead of 12.
3. However, while calculating the cost, total hours were 12 for a shift.
4. Factor of safety was taken into consideration to minimize the effects of errors in forecasting.
Considering the various options that he had, Exhibit 3 gives the consolidated cost figures from all the
alternatives (Instructor spreadsheet, worksheet 6). This suggested that when he wanted to continue
with two shifts of 8 hours each, he should go with level strategy (to maintain inventory with
constant workforce) while if he wanted to run the plant with only 2 shifts of 12 hours each, he should
choose the chase strategy. For labour hour calculation (see Instructor spreadsheet, worksheet 2).
Exhibit 1: Demand Forecasting (Market Trend)

Demand in pair of shoes for past 5 years with seasonality or market trend

Month/
Year 2016-17 2017-18 2018-19 2019-20 2021-22 2022-23
14,312.0
14500 14900 14250 14360 13500
Apr 0
14,675.0
13850 14250 14450 16000 14850
May 0
18,756.0
18280 18990 18235 20000 18280
Jun 0
12,330.0
12230 12000 12250 14000 11230
Jul 0
12,911.0
11880 13000 12265 14600 12880
Aug 0
12,935.0
12280 12100 12000 14000 14280
Sept 0
18,148.0
17540 18290 18365 19000 17540
Oct 0
11,686.0
11040 11180 11200 13000 12040
Nov 0
11,480.0
11000 11220 11000 13250 11000
Dec 0
11,027.0
10000 10250 11750 13265 10000
Jan 0
10,124.0
9500 10900 10235 10500 9500
Feb 0
15,421.0
15900 17000 18000 11000 14900
Mar 0
13,166.6 13,673.3 13,666.6 14,414.5 13,333.3 13,650.9
Average 7 3 7 8 3 2

De-seasonalizng the data   Average index

Apr 1.101 1.090 1.043 0.996 1.013   1.048

May 1.052 1.042 1.057 1.110 1.114   1.075
Jun 1.388 1.389 1.334 1.387 1.371   1.374
July 0.929 0.878 0.896 0.971 0.842   0.903
Aug 0.902 0.951 0.897 1.013 0.966   0.946
Sep 0.933 0.885 0.878 0.971 1.071   0.948
Oct 1.332 1.338 1.344 1.318 1.316 1.329
Nov 0.838 0.818 0.820 0.902 0.903 0.856
Dec 0.835 0.821 0.805 0.919 0.825 0.841
Jan 0.759 0.750 0.860 0.920 0.750 0.808
Feb 0.722 0.797 0.749 0.728 0.713 0.742
March 1.208 1.243 1.317 0.763 1.118 1.130
Source: Company Information
Exhibit 2: Labour Calculation
i. For 2 shifts of 8 hours each
Chase production - Hire and fire cost

Labour hour
Working required to Total labor
Factor of safety Days in Time available produce one pair required in a
Month/Year Actual demand 10% Final quantity month for one labor Daily production of shoes Labour required shift
Apr 14,312 1,431 15,743 26 416 605 1.2 90 45
May 14,675 1,467 16,142 25 400 645 1.2 96 48
Jun 18,756 1,875 20,631 25 400 825 1.2 123 61
Jul 12,330 1,233 13,563 26 416 521 1.2 78 39
Aug 12,911 1,291 14,202 26 416 546 1.2 81 40
Sept 12,935 1,293 14,228 25 400 569 1.2 85 42
Oct 18,148 1,814 19,962 26 416 767 1.2 115 57
Nov 11,686 1,168 12,854 25 400 514 1.2 77 38
Dec 11,480 1,148 12,628 26 416 485 1.2 72 36
Jan 11,027 1,102 12,129 26 416 466 1.2 69 34
Feb 10,124 1,012 11,136 24 384 464 1.2 69 34
Mar 15,421 1,542 16,963 25 400 678 1.2 101 50
Total 1,63,805 16,376 1,80,181 305 4,880 7,085

ii. For 2 shifts of 12 hours each

Labour hour
required to Total labor
Factor of safety Days in Time available produce one pair required in a
Month/Year Actual demand 10% Final quantity month for one labor Daily production of shoes Labour required shift
Apr 14,312 1,431 15,743 26 416 605 1.2 69 34
May 14,675 1,467 16,142 25 400 645 1.2 74 37
Jun 18,756 1,875 20,631 25 400 825 1.2 95 47
Jul 12,330 1,233 13,563 26 416 521 1.2 60 30
Aug 12,911 1,291 14,202 26 416 546 1.2 63 31
Sep 12,935 1,293 14,228 25 400 569 1.2 65 32
Oct 18,148 1,814 19,962 26 416 767 1.2 88 44
Nov 11,686 1,168 12,854 25 400 514 1.2 59 29
Dec 11,480 1,148 12,628 26 416 485 1.2 55 27
Jan 11,027 1,102 12,129 26 416 466 1.2 53 26
Feb 10,124 1,012 11,136 24 384 464 1.2 53 26
Mar 15,421 1,542 16,963 25 400 678 1.2 78 39
Total 1,63,805 16,376 1,80,181 305 4,880 7,085

Source: Company Information

Exhibit 3: Summary of all strategic plan

       
Two shifts (12 Two shifts (8
Alternative hours) hours)
27,59, 22,54,
Chase strategy 640 480
21,07,
Level 28,89,114 324
31,77, 26,13,
Sub-contracting 580 940
       
Source: Company Information
Team 6
21M110 – Dhyey Salot
21M131 – Shubham Khair