Lorex Pharmaceuticals

Writing Analysis:

CASE 34: LOREX PHARMACEUTICALS

Jabriel Williamson

Dallas Baptist University

Case 34: Lorex Pharmaceuticals

Executive Summary:

Lorex Pharmaceuticals had come up with a new product, Linatol. Carter Blakely, manager of quality assurance for the manufacturing division, was pleased with the progress made thus far. “ Linatol was a highly promising medicine for the treatment of high blood pressure developed and patented by Lorex several years ago” (Bodily, Carraway, Frey, & Pfeifer, 1998). After 8 years of thorough testing and clinical trials, the FDA had finally approved Linatol. Manufacturing had been scheduled to begin the following Monday. The marketing division had decided to sell Linatol in sealed 10-ounce bottles, packaged in cases of 12 bottles each with a wholesale price of $186 per case.

The production capacity was 1000 bottles per case but because of unavoidable circumstances, Lorex began producing Linatol at an average of 500 cases over an eight-hour shift. The entire line was operated by two employees who earned $12.80 per hour. Other charges included $89.50 per hour for overheads and filling line of $1.10 per bottle. Those bottles filled with less than 10 ounces were rejected and sold for 80% of the normal price. Attendants for this secondary packaging were only paid $8.50 per hour. A sample of filling process and test results is given in exhibit 2, with target of 10.2 fluid ounces. The cost details from exhibit 1 are used to guesstimate for cost of other predicted samples (10.3, 10.4, 10.5 and 10.6 ounce samples).

Decision Problem:

On occasion, Lorex has experienced a case of clogged storage due to underfilled bottles. This had taken place because of the one standard deviation allowed above the required amount of 10 ounces. The current challenge presented in this case pertains to finding a balance between maximizing revenue and controlling costs. To date, the only fill rate that had been examined was 10.2 ounces....