Course No. BOM1102 Schedule: 3:00- 4:30 p.m. (M&W) Team No.

1 Date:
09.12.19
Attendance: Canoy, Denis Wilfrid U.
Go, Danycka Eloise Y.
Manatad, Renae Cyra M.
Tan, Alexis Marie Samantha Y.
Yap, Sherwin Thomas Jefferson
T.

Problem Statement: How does the modernization of the equipment of the company contribute to
its productivity?

1. Will the cost of the equipment increase or decrease of the productivity of the company
within a year?
2. What might happen if energy costs increase in the future?
3. Will the use of current and new equipment be practical to the company’s productivity if
we take into consideration the size of the place of company?

FACTS: IDEAS: ASSIGNED RESPONSI ACTION

LEARNING BLE: PLANS:
TASKS:
- The plant - Have an - Facts Canoy, - Invest more
manager is expansion due Go,Danycka in
contemplating a to more , Manatad, developing
plant equipment Tan, Yap the
modernization - Allocate budget financial
- The plant operates for energy department
5 days a week in usage - Ideas Canoy, - Develop
2 shifts of 30 - Allocate more Go, D; HR
workers per shift budget in Manatad, department
- The workers are hiring Tan, Yap
paid $10 dollars employees
per hour rather than
- The current purchasing a - Introduction/ Go
equipment can new equipment Background
process 1,500 - Sell current
pounds of salmon equipment in - Problem Canoy
- The new plant order to Statement
would be able to compensate for - Objectives
Tan & Yap
process 2,000 the budget of
- Analysis and
pounds per hour the new
Findings
- Since both equipment.
- Conclusion Yap
equipment are
- Recommendations Canoy& Go
manufactured by
- Powerpoint Manatad
the same
supplier.
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 Employees feel
that they will be
able to use the
new equipment
quickly so cost to
train personnel
will be negligible.
- New equipment
will cost $10,000
per week
(Principle and
Interest included)
- Current plant
uses 1,000 units
of energy.
- $10 per unit of
energy.
- New equipment
will cut down
energy usage
by 50%.

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 Case Study Report: Norwegian Salmon Processing Facility, Trondheim

I. Introduction
In every organization, operations management is a must to perform efficient and effective
production process. Organizations must perform a series of processes in order to come up with a
product. A large role of an operations manager is overseeing the organization’s productivity.
Norwegian Salmon Processing Facility case is an example where finding the productivity of the
company plays a vital role in making key decisions of the organization. The case study is
grounded on the formula for multifactor productivity, for there are multiple costs that the
productivity of the company’s outputs depend on, which are labor, energy, and equipment costs.

II. Problem Statement

How does the modernization of the equipment of the company contribute to its
productivity?
A. Objectives
The group aims to tackle the “Norwegian Salmon Processing Facility, Trondheim” case,
applying the different concepts on Productivity Measurement specifically on Multifactor
Productivity or Total Factor Productivity. Using these equations, the group will determine the
differences of the productivity measures with the current plant and with the new plant, taking into
consideration the different inputs such as the 50% energy usage cut with the new equipment, the
added expense of $10,000 per week for the new equipment, etc. The group will quantify the
measure of productivity and from there formulate a conclusion that will address the problem
statement which is “How does the modernization of the equipment of the company contribute to
its productivity?”

Additionally, the group also aims to:

● Determine the increase or decrease of the productivity of the company within a year if
there is a shift in equipment.
● Determine the additional expense on equipment to make both system’s productivity
equal.
● Determine the result of productivity if energy costs will increase in the future.
● Determine if the use of current and new equipment be practical to the company’s
productivity if we take into consideration the size of the place of company.

III. Analysis and Findings

Productivity of Norwegian Salmon Productivity of Norwegian Salmon Processing Facility
Processing Facility using the current using the new equipment:
equipment:
Input
Input - Labor
-
Labor $10/hour per worker × 8 hours/worker × 30
$10/hour per worker × 8 workers/shift × 2 shifts × 5 days/week = $24,000
hours/worker × 30 workers/shift per week
× 2 shifts × 5 days/week =
$24,000 per week - Energy
500 units/week × $10/unit = $5,000 per week
- Energy
1,000 units/week × $10/unit = - Capital

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 $10,000 per week $10,000 per week

Capital Output
Current equipment already paid for =
$0 -Salmon
(2,000 Salmons/hour × 16 hours)5 days = 160,000 per
Output day

Salmon Multifactor Productivity

(1,500 salmon/hour×16 hours) 5 days = 120,000 per week
(
160,000 Salmon processed per week
24,000( Labor)+5,000( Energy)+10,000 (Capital , New
= 4.10 pounds of salmon/dollar
Multifactor Productivity
120,000 Salmon processed per wee
($ 24,000( Labor)+10,000( Energy
= 3.53 pounds of salmon/dollar

SUMMARY:
- Productivity of Norwegian Salmon Processing Facility 3.53 pounds of salmon per dollar
using the current equipment

- Productivity of Norwegian Salmon Processing Facility 4.10 pounds of salmon per dollar
using the new equipment

A. Amount of additional expense on equipment that would make productivity of the two
systems equal.

120,000 Salmon processed per week

(
$ 24,000( Labor)+10,000( Energy)
=

160,000 Salmon processed per week

(
24,000( Labor)+5,000( Energy)+10,000 (Capital , New Equipment )+ χ

The group solves for χ .

➔ 120,000 (39,000+ χ )
➔

➔
( (39,000) += χ(
120,000
120,000
34,0
) = 34,000)
160,000
39,000 120,0
5,440,000,000
=

× 160,000 120,000
➔ 120,000 (39,000 + χ)= 136,000
5,440,000,000 ➔ 39,000 + χ =
3
136,000
➔ 39,000 + χ - 39,000 =
3
- 39,000

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 ➔ 19,000 ➢ To make the productivity of the two
χ = 3 systems equal, the new plant
➔ χ = 6,333.33 requires
$6,333.33 additional expenses.

B. Outcome of increase in energy cost

- Energy cost per unit = $10
- If the energy cost will increase by 50% = $10 x 1.50 = $15/unit
- If the energy cost will increase by 100% = $10 x 2 = $20/unit
Using
Using the current equipment (given the current energy the new equipment (given the current energy cost and the usage
cost):

$10 x 1000 = $10000/2 = $5000/week

$10 x 1000 = $10000/week

Using the current equipment (given that the Using the new equipment (given that the usage
current energy cost will increase by 50%) will decrease by 50%) if energy costs increase by
50%

$15 x 1,000 = $15,000 per week $15 x 500 = $7,500 per week
Using the current equipment (given that the Using the new equipment (given that the usage
current energy cost will increase by 100%) will decrease by 50%) if energy costs increase by
100%

$20 x 1,000 = $20,000 per week $20 x 500 = $10,000 per week

Assuming that the cost of the energy will Assuming that the cost of the energy will increase by 50%
increase by 50% using the current using the new equipment
equipment

(processed
120,000 pounds of Salmon (we 160,000 pounds Salmon processed per

24,000( Labor)+7,500( Energy)+10,000 (Capital ,

$ 24,000( Labor )+ 15,000(
Ene
= 3.08 pounds of salmon per dollar
Assuming that the cost of the energy will
increase by 100% using the current
equipment
N
= 3.86 pounds of salmon per dollar
➢ Assuming that the cost of the energy will increase
by 100% using the new equipment

(processed
120,000 pounds of Salmon
(w 160,000 pounds Salmon processed per

$ 24,000( Labor )+ 20,000( 24,000( Labor)+10,000( Energy )+10,000( Capital ,

Ene N
= 2.73 pounds of salmon per dollar = 3.64 pounds of salmon per dollar

IV. Conclusion/Recommendations
➢ Based on the computations made by the group it is certain that the new system’s productivity is
greater than the current system’s productivity.
➢ Computations that took into consideration the different measures such as the increase of the
energy costs by 50% and 100% have shown that the new system’s productivity will still be
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 greater than the current system.

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 ➢ Additionally, since the productivity of the new system is greater, to make even the productivity of
the current system to the new system, the new system must add $6,333.33 per week to their
expenses which is a very big amount. To conclude, the new system is the superior choice.

Recommendations:

1. To get more extensive results of the productivity, the future researchers may use a hypothetical
cause for the expansion of the plant
2. The future researchers can check on the possibilities of other inputs that the company may not
have done in the case

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