Operations Management

As our manager, Mr. Richards presented us with data points that we needed to analyze so that we could provide him with an accurate picture of how the company is doing in comparison to last year. One important note that stood out was the fact that our capital expenditures have increased significantly, almost doubling. When we questioned Bob on the stability and certainty of these numbers, he said they were rock solid. Another important metric to note was the significant increase in labor hours that our employees put in. While our labor hours have also increased, so has the cost per labor hour, or how much we are paying our employees. Lastly, our raw material costs have come up by nearly 33%. The results of all of these increases have been rather dim, our total increase in production has risen by 25%. It is mentioned that our PPI has increased rather insignificantly in comparison to the other numbers. To be more accurate, the PPI increased, but the total cost decreased by 0.07%. In total our multi-factor efficiency has actually decreased. This is due in large part to our doubling of capital costs. Albeit, an increase in the remaining numbers in unhelpful.

There are some things to note behind all of this. Although our reasons for our giant increase in capital expenditures isn’t immediately apparent, it can be deduced that this is a result of our new neighboring plant that opened up close to ours. We increased our capital cost to build up new machinery, and products in order to compete. We also increased the amount of labor hours our team was putting in. Simultaneously the labor cost has increased per hour. An increase in both simultaneously tells us two things; first, we are trying to out service our competition, and secondly we are trying to keep our good employees with us. This is opposed to

ZYCHOL CHEMICALS CORP 1

letting our good employees perhaps work for the competition. As the amount of hours our team is putting in has increased we also have began to...