Eastern Institute of Technology
MGMT.7.04 Strategic Operations Management
Presented by Aswath Laxman Venugopal
Mr Ram Roy
Monday 3 May 2010
Table of Contents
Summary & Introduction
If the current sales value of the FBXX product is 25 per cent of the company’s total sales of $100 million; and the average price is $1050/kg; then compute the following:
a. What is the annual sales volume?
b. What is the monthly sales volume?
c. What will be the monthly sales volume if FBT estimates its market to grow by 20 per cent in the next three or four years at current prices.
6 Section 3
Can FBT’s existing combined capacity support this 20 per cent market growth? What are the options?
6 Section 4
WHETHER FBT SHOULD INVEST IN A ‘BRAYFORD’ OR A ‘BI-LINE 8’ FACILITY?
COMPARE THESE TWO OPTIONS BASED ON TECHNICAL FACTORS, FINANCIAL COSTS, AND BENEFITS.
REPRESENT YOUR ANALYSIS WITH ‘COST-VOLUME-PROFIT (OR BENEFIT)’ CURVES (ALSO CALLED BREAK-EVEN ANALYSIS) FOR THESE TWO ALTERNATIVE CAPACITIES OPTIONS. FROM THIS DIAGRAM, SUGGEST THE OPTIONS FOR DIFFERENT RANGES OF PRODUCTION VOLUME.
What are the risks in each option?
Draw a decision tree to represent both the situations. You may assume suitable data (if needed) to complete this exercise. Finally suggest which option is the best for the Company?
How does the option selected affect the FBT’s operations in terms of flexibility, speed, and dependability?
Summary & Introduction
Freeman Biotest (FB) was one of the largest independent companies supplying the food processing industry. FB has been performing well and grown to a good position in the current market to generate total revenue over $100 million. Its initial success had come with a food preservative product, used mainly for meat-based products, and marketed under the name of ‘FBXX’. While FB had also developed other products subsequently in food colouring and food container coating fields, As FBXX accounted for only 25 percent of total company sales which has been supplying market’s 48 percent demand satisfactorily; FB has been looking forward to develop much more according to current market.
FBXX was an experimental product when the firm started. This division was self contained as a production unit, Located at the smaller of the company two sites. Currently two process lines have been used to manufacture FBXX which is designed and installed by Brayford corp., a process equipment manufacturer. It was the older of the two Brayford lines which has been giving trouble. High break down figures, with erratic quality levels, affected the output level requirements by just being reached with higher costs by maintenance. Average market price was approximately $1050/kg. There were, wide variations depending on the order size, Etc. FBXX has been sold in either solid powder or liquid form, Depending on the particular needs of the customer. However the prices tend to be related only to the weight of chemical used.
Discussion in this case is about to replace to the ageing ‘Brayford line’ with new Brayford line or if it should commission another process line ‘Bi-Line 8’ manufactured by a relatively new company. As the body considering the problem was newly formed management committee, the committee consisted of the Vice President (VP) for technology and the Marketing VP, who had been with the firm since its beginning, Together with the VPs of Operations and Finance, Both of whom, had joined the company only six month before. This made Free man Biotest to conclude or draw a decision to commission the new change as it needs to consider discussion of VP’s equally important to others.
As per Vice President of Marketing (VPM) believes there had, of late, been significant changes in market- In particular, many of the users of preservatives were now able to buy products similar to FBXX. With his experience and conclusions, VPM is not...
References: Nigel Slack., & Michael Lewis. ( 2002, 2008). Operations Strategy (2nd Edition). Harlow: Financial Times Prentice Hall.
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