Noram Foods

Topics: Cost, Standard deviation, Percentage point Pages: 2 (571 words) Published: March 25, 2013
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.e. rotate every ½ day instead of every ½ 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
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