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Case Study 1

The document discusses a case study of the Norwegian Salmon Trondheim processing facility considering upgrading its equipment. Currently the facility processes 1,500 pounds of salmon per hour with productivity of 3.53 pounds per input dollar. The proposed new equipment would increase processing to 2,000 pounds per hour and productivity to 4.1 pounds per input dollar while lowering energy costs by 50%. For the two systems to have equal productivity, the additional cost of the new equipment would need to be $6,325.78 per week. If energy costs double in the future, the new equipment's productivity would remain higher at 3.64 pounds per input dollar compared to 2.73 pounds for the current equipment. The document recommends upgrading equipment to improve output and efficiency

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Frances Mary Bareño
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159 views

Case Study 1

The document discusses a case study of the Norwegian Salmon Trondheim processing facility considering upgrading its equipment. Currently the facility processes 1,500 pounds of salmon per hour with productivity of 3.53 pounds per input dollar. The proposed new equipment would increase processing to 2,000 pounds per hour and productivity to 4.1 pounds per input dollar while lowering energy costs by 50%. For the two systems to have equal productivity, the additional cost of the new equipment would need to be $6,325.78 per week. If energy costs double in the future, the new equipment's productivity would remain higher at 3.64 pounds per input dollar compared to 2.73 pounds for the current equipment. The document recommends upgrading equipment to improve output and efficiency

Uploaded by

Frances Mary Bareño
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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A Case Study Report

NORWEGIAN SALMON
PROCESSING FACILITY, TRONDHEIM

BSBA – OM 1
Bareño, Frances Mary
Batuigas, Kent Leo
Dupla, Shiela Mae
Salvacion, Shannen Denise
Tigbao, Alexxa Grace
I. Introduction
Norway comes from a long line of rich seafaring heritages and traditions. With
nearly 101,000 kilometers of mainland and island coastline, Norway, indeed, has a strong
connection to the sea. Fisheries were able to form the very basis of their livelihood and
culture along the coast of Norway. Rooted in more than a thousand years of fishing,
Norway’s aquaculture sector has more recently capitalized on excellent coastal conditions
that include pristine ocean water for farm raising seafood. Norway began experimenting
with aquaculture in the late 1950s, and has steadily increased production decade by
decade ever since. The main species farmed in Norway is Atlantic salmon, representing
93% of total Norwegian aquaculture production (FAO 2016). Today, Norway's aquaculture
industry ranks among the world's leading program.

Norway’s seafood industry has pioneered the development of responsible ocean


salmon-farming, allowing them to keep up with the increasing demand for quality salmon
without sacrificing safety or sustainability. These salmons are produced by companies or
firms, like the Norwegian Salmon Trondheim, that utilizes facilities which make the
production process easier and more convenient. The Norwegian Salmon Trondheim
operates a salmon processing facility where fish are purchased from local sources along
the North Sea, processed at the facility, and sold to customers for distribution. Although
its plant performs well enough now, modernizing the equipment would allow the plant to
increase capacity per hour, which can be advantageous because the factory has enough
demand to cover the additional capacity.

II. Problem Statement

The Norwegian Salmon Trondheim is planning a plant modernization to upgrade


its existing equipment, which would increase the output while lowering energy costs. How
would the plant modernization increase productivity while lowering its energy costs?
A. Objectives
1. To determine the productivity of the processing facility, with the
equipment currently in use.
2. To determine the productivity of the plant if the new system will be
purchased and implemented.
3. To determine the amount of additional expense on equipment that
would make productivity of the two systems equal.
4. To identify the effect of increasing energy costs.
5. To provide alternatives or possible solutions that could minimize costs if
the new system will be implemented

III. Analysis and Findings


Norwegian Salmon Trondheim is considering upgrading its current facility to
increase plant productivity. Although an upgrade in the equipment would mean additional
cost, a modernized plant would, on the contrary, reduce energy consumption. It is
therefore necessary to compute for the productivity of the current equipment and the
proposed new equipment. Moreover, the amount of additional expense on the equipment
that would make productivity of the two system equal, as well as the effect of increasing
energy costs, will also be identified to aid in the evaluation of the case.

The following data are given for the current equipment and proposed new equipment:
1. The firm has 30 workers per shift, a total of 60 workers in 2 shifts.
2. The current equipment can process 1,500 pounds of salmon each hour.
3. The new equipment can process 2,000 pounds of salmon per hour.
4. The new equipment would cost $10,000 per week.
5. The old plant uses 1,000 units of energy per week.
6. The new plant uses 50% consumption of energy.

All findings and computations will be based on the data provided in the case.
1. What is the productivity of the processing facility, with the equipment currently in
use?
a. Labor: 30 workers x 2 shifts x 8 hours x 5 days x $10 per hour= $24,000
per week
b. Energy: $10 per unit x 1000 units per week = $10,000 per week
c. Output: 1,500 pounds of salmon per hour x 8 hours per shift x 2 shifts
per day x 5 days = 120,000

Multifactor Productivity = Outputs


Inputs
= 120,000
10,000 + 24,000
= 3.53 pounds of salmon
2. What would the productivity of the plant become if the new system were purchased
and implemented?
a. Labor: 30 workers x 2 shifts x 8 hours x 5 days at $10 per hour= $24,000
per week
b. Energy: 50% reduction or $5 per 1000 units= $5000 units per week
c. Output: 2,000 pounds of salmon per hour x 8 hours per shift x 2 shifts x
5 days = 160,000 pounds of salmon per week

Multifactor Productivity = Outputs


Inputs
= 160,000
10,000 + 24,000+5000
= 4.10 pounds of salmon
3. What would be the amount of additional expense on equipment that would make
productivity of the two systems equal?
Multifactor Productivity (Current Equipment) = Multifactor Productivity of New System
3.53 = 160,000
x + 39,000
160,000 = 3.53 (x + 39,000)
x = $6,325.78/week

4. What might happen if energy costs will increase in the future?


Assuming: the energy cost doubles
New Energy Cost: $10/unit x 2 = $10/unit /unit
Energy Consumption Reduction (New Equipment) = 50%
Current Equipment New Equipment
Energy = 10,000 x $20/unit Energy = 10,000 x $20/unit x 50%
= $20,000/week = $10,000 week
Multifactor Productivity= 120,000 Multifactor Productivity= 160,000
20,000 + 24,000 10,000 + 24,000 + 10,000
= 2.73 pounds of salmon = 3.64 pounds of salmon

IV. Conclusion and Recommendation


The idea of modernization is advantageous, because not only does it upgrade the
equipment but it also improves the output to be processed in a short time. The major
criterion for picking the most desired alternative is productivity. An increase in productivity
in the new and modernized equipment will mean that efficiency is greatly emphasized –
more output at a lesser cost.
Bibliography
Arias, T. (2019, January 29). Norwegian Salmon & Gravlax. Retrieved from
https://www.handletheheat.com/norwegian-salmon-gravlax/
(n.d.). Aquaculture in Norway. Retrieved from https://aquaculture.ggn.org/en/aquaculture-
in-norway.html
Venvik, T. (2005, May 1). National Aquaculture Sector Overview. Retrieved from
http://www.fao.org/fishery/countrysector/naso_norway/en

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