Chocolates Essay

1074 Words Nov 1st, 2015 5 Pages
Case 5-1, Garland Chocolates

1. Identification of Problem: -Key issues/problems
Garland Chocolates is not manufacturing and packing their brand of Edgeworth Toffee as efficiently or effectively as possible.
-Subsidiary issues
48% Packing efficiency, when the goal is 80%.
Scrap rate is 9.6%, when the goal is 1.2%.
Maintenance cost is expected to rise over 12 years and it is already $18,000.00.
The cost of replacing the 2 packing lines for edgeworth toffee is $140,000.00, however it is expected to achieve the BPO efficiency and scrap rate targets.
The cost of replacing the 20 year old manufacturing line is $600,000.00, though it was close to the target efficiency of 80% but is showing signs of deterioration.
Marketing
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If the company we outsource with has some sort of issue with its equipment or is running behind schedule it will delay our orders and reflect poorly upon our company. If we choose not to do anything we will continue running at inefficient levels costing us more and more money as time goes on.

-Quantitative Analysis Quantitative Analysis

Current
$ per case
%
Outsource
$ per case
*Outsourcing to Martin Contract Manufacturing costs $35,000.00
%
Selling Price
$145.00
100%

$145.00
100%
Raw Materials
$24.65
17%
0.00
0
Packing Materials
$29.00
20%
0.00
0
Labor-Manufacturing
$13.05
9%
0.00
0
Labor-Packing
$7.25
5%
0.00
0
Overhead & Depreciation
$21.75
15%
0.00
0
Outsourcing Production Cost
0
0%
68.00
47%
Total Cost
$95.70
66%
$68.00
47%
Margin
$49.30
34%
$77.00
53%

-Qualitative Analysis
Quality of the product has not changed, only the venue of production has.

3. Evaluation of Feasible Alternative Solutions Alternative 1
Replace manufacturing lines -Advantages and disadvantages
Advantages
The advantage of replacing the manufacturing lines now would be combat the decreasing efficiency rate (within 5 years it has declined from 90% efficiency to 76% efficiency when the target is 80%) and to intervene with the deterioration that has

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