Noram Foods Noram Foods is considering changing their current policy on package weight standards. The current policy states that 95% of packages are to be greater than the stated net weight. However, management believes a more accurate control policy could reduce costs for Noram foods while insuring net weight does not fall below the stated amount. Current issues: Specifically regarding the pre-cooked cereal line Noram Foods has initiated the 95% weight policy to ensure stated weight specifications are met.
This relatively high percentage is due to increased regulations, undeveloped technology, and negative consumer response towards under weighted packages. This has motivated Norman to establish reputability by choosing this control policy. Additional considerations include: * Addressing flexibility of a 95% standard * Updated, precise technology is expensive – What is the ROI? Is there on marginal value added? * Keeping norms within government specifications * Preservation of positive company reputation Lower product deviation without falling under stated weight * Overweight packages creates higher cost and decreased profit margin * Underweight packages leads to consumer and governmental reaction and inefficiency due to under-utilization of capacity Current Policy Analysis Option 1: Keep Current Control Policy(=95%) With Option 1, Norman Foods will be able to maintain the 95% weight policy and seek cost reduction in another area to increase their profit margin. Potential Cost Reducing Opportunities: * Reduce the rotation schedule of control operators – i. . rotate every ? day instead of every ? hour * Leads to improvement in efficiency due to less shifting of human resources * Increased total output * Mid-shift change could assist control operators dealing with redundancy * Seek possible technological improvements with the weighing instruments * Decrease inefficiency Potential Consequential Issues: * Probable high turnover rate to due mundane * Could led to an increase in HR costs due to recruiting and training new people Option 2: Reduce current standard (< 95%) Graph 1 Retrieved from: www. ublicecon. com With Option 2, Noram Foods would be required to test and analyze various percentage points below the current 95% standard and, as Graph 1 demonstrates, doing so until an equilibrium is achieved between costs incurred and control not falling below LCL. Possible Consequential Issues: * Reducing the current standard would result in a decrease in standard deviation * Increased risk of falling below the lower control limit * Additional problems may be created * Additional value through cost reduction is added through the rectification of arising issues.
Our Analysis Moreover, the company shuts down the operation when outliers fall below the LCL. However, when the process produces outliers that are above the UCL, the machine continues to operate. Noram Foods should develop a cost/benefit analysis to conclude at what level of upper outliers creates excessive costs. Based on Exhibit 4 that concerns the Consumer Packaging and Labeling Act, Noram Foods should have a warning system that signifies that the package has exceeded its required tolerance level of ~7. 5 grams. This will reduce unnecessary cost.
The operator working at a particular station should be in charge of making sure the weight is within control limits. The company should create incentives to keep control operators motivated while performing these mind numbing tasks. We propose that for every year that a control operator completes their processes while staying in the specified range, they receive personal recognition from the company. This could take the form of an award or plaque offered by the manager. The added incentive can increase employee productivity and moral, thereby reducing turnover.