Joined: 04 Jun 2013
Schools: Goa Institute of Management - Class of 2012
WE: Law (Pharmaceuticals and Biotech)
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04 Jun 2013, 23:59
Over time, the costs of processing go down because as organizations learn how to do things better, they become more efficient. In color film processing, for example, the cost of a 3-by-5-inch print fell from 50 cents for five-day service in 1970 to 20 cents for one-day service in 1984. The same principle applies to the processing of food. And since Olympic Foods will soon celebrate its 25th birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits.
The main aim here is to minimize the cost of production and maximize the profits. The highlight is drawn towards improvement in the processing thus improving the variable costs incurred. However there is no mention made about the fixed costs employed and their impact on the same stands unjustified. Further, also an apple to orange correlation has been made by extrapolating the colour film printing to the food industry.
Primarily, improvement in the style of working is indeed an improvement strategy. This could include the introduction of automated equipment, use of 5S principles of sorting, standardising, set in order, shine and sustain. Also he can consider opportunities of waste elimination (Lean) to achieve considerable reduction in the cycle times. This can be achieved without major investments, exhilarating the technical expertise and so on.
However such an improvement will be labile to factors like capacity limitation, costs of investments to achieve this state, performance assurance and continual monitoring which implies additional investment. To incur such costs it is preliminary to understand the customer demand and the return on investment. Thus evaluating the benefits reaped over the investment should be considered.
Secondarily, adopting an established strategy beyond the operational class is invalid. Here the food industry differs from colour printing. The food industry is guarded by much more stringent variables which may demand unavoidable time and cost investment. An example is baking a cake for a fixed time yields the best cake.However, if we choose to manipulate some parameters like the temperature of the oven or the time of baking it can seriously affect the quality. Hence a comparison cannot be drawn.
In conclusion, to make a correct prediction, a review of the same class food service provider and process cycle events needs to be studied. In addition, the impact on the cost of labour and the cost spent on keeping the machine idle needs to be calculated. Following this a prediction about profit maximization by only process and efficiency improvement or by any infrastructure investment can be sought.