AFA819 Modern Co

.docx

School

Toronto Metropolitan University *

*We aren’t endorsed by this school

Course

819

Subject

Industrial Engineering

Date

Apr 3, 2024

Type

docx

Pages

2

Uploaded by jaljinaeyo

Report
Case Name : Modern Co. Case Who : Lupita Mallo, sole decision maker for Modern Bottling Co., biased to maximizing profits. What : 1. Should Modern consider ways of using the spoilage instead of just throwing it out? 2. If Modern decides to utilize the spoilage, what options are there? Minor issue: How can Modern change the inspection process to capture spoiled units during product lines to reduce spoilage? Why : 1. Ms. Mallo may have political connections, which may imply that the company may benefit unethically. 2. Modern Bottling Co. is a large corporation that dominates the sales from wholesalers and retailers, therefore, reducing the urgency of addressing operational challenges. When : Present, urgency is medium-high (concerns for the sustainability of the production process for Modern). List the Alternatives : A1 : Introduce spoilage reduction procedures and sell the remaining spoilage. A2 : Sell the spoilage as scraps to the local recycler. A3 : Rework the spoiled bottles. Analysis of Alternatives - quants : (All data is in 000’s). A1 : The cost of Normal spoilage is $229,670 (4,192 units), and the cost of Abnormal spoilage is $323,686 (5,908 units) (Exhibit A) , which indicates that the abnormal spoilage is higher. Profits will increase due to the procedure in place. Therefore incurring less spoilage, as more good units can be sold. A2 : If the spoiled units are sold, the amount earned would be $10,100 (10,100 units x $1) (Exhibit B). A3 : The costs of the rework can either be expensed as Abnormal rework ($323,686) or charged to manufacturing overhead as Normal rework ($229,670) (Exhibit A) . Assessment of Alternatives - quals (ranking in the order of alternatives): A1 : Pros: Improves governance by implementing reduction practices to establish quality control and assurance for higher quality. Better for the environment due to reducing overall waste. Cons : Time- consuming to develop, implement and execute new procedures. Employees may be resistant to change in established processes. A2 : Pros : Builds connection with local recycler; therefore, could negotiate better prices. Recycling instead of disposal in landfills would reduce environmental impact. Cons : Is the amount received associated with environmental cost? Not contributing to sustainability as this is only dealing with symptoms and not the issue. No control over what the recycler would do with the scraps. A3 : Pros: Provide employees with the ability to gain new skills. Opportunity to promote the sustainability of the company. Cons : How much of the product can be used to rework is questionable. Contamination issues may arise without proper sanitization. Will the process of reworking harm the environment? Recommendation: Quants show that A2 is the best option, with profits of ~$10M, but considering long- term aspects and the quals, A1 is a better option. As noted above, improvement of governance and sustainability by reducing Modern’s environmental impact through management of spoilage. The revenue generated from the sale can be used to reduce the overall job costs through job tracing (as long as it is economically feasible) of the scrap. Will require further assessment after gathering data on the production stage that produces the most waste, as well as the costs of implementation. Implementation Plan: The priority should be to implement reduction practices to cut waste at the source as soon as possible, and all other options can be considered further afterwards. Additionally, increasing the number of inspection points during the production process can help prevent further costs from being wasted on units that are already spoiled.
Appendices: Assumptions: Assume the spoilage reduction procedures will significantly reduce waste (sustainability). Exhibit A: Weighted Average Cost (WAC). Exhibit B: Sale of spoilage
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help