NorSal 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. The plant manager, Inger Hansen, is contemplating a plant modernization to upgrade the technology in the plant. While the plant performs well enough now, modernizing equipment would allow the plant to increase capacity per hour, which is particularly advantageous because the factory has enough demand to cover the additional capacity. Currently, the plant operates seven days a week, three shifts of 20 workers per shift. The workers are paid $15 per hour. The firm is contemplating a plant modernization to upgrade existing equipment, which should increase the plant's output while lowering energy costs. Using the current equipment, around 1.500 pounds of salmon can be processed each hour, while the new plant would be able to processed each hour, while the new plant would be able to process 2.000 pounds per hour. The updated equipment is made by the same manufacturer as the existing equipment, and the new equipment quickly. For this reason, costs to train personnel are assumed to be negligible. The production manager, Bjorn Pedersen, is skeptical about undergoing the plant modernization. The older equipment, he argues, is already paid for, and new equipment would cost $15.000 per week. This cost is comprised of both principal and interest, and includes manufacturer installation of the equipment. The controller, Maret Karlsen, cautions that all decisions related to costs should be included in the analysis and that because the energy consumption would be different, this must also be accounted for in the decision. Energy costs are presently S12 per unit, and the existing plant uses 1.500 units of energy per week. With the modernized plant, the consumption of energy would fail by 50%. 1. What is the productivity of the processing facility, with the equipment currently in use? 2. What would the productivity of the plant become if the new system were purchased and implemented? 3. What would be the amount of additional expense on equipment that would make productivity of the two systems equal? 4. What might happen if energy costs increase in the future?

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FUNDAMENTALS OF PRODUCTION MANAGEMENT
CASE STUDY 2
NorSal TRONDHEIM
NorSal 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.
The plant manager, Inger Hansen, is contemplating a plant modernization to upgrade the
technology in the plant. While the plant performs well enough now, modernizing equipment
would allow the plant to increase capacity per hour, which is particularly advantageous
because the factory has enough demand to cover the additional capacity. Currently, the plant
operates seven days a week, three shifts of 20 workers per shift. The workers are paid $15 per
hour.
The firm is contemplating a plant modernization to upgrade existing equipment, which should
increase the plant's output while lowering energy costs. Using the current equipment, around
1.500 pounds of salmon can be processed each hour, while the new plant would be able to
processed each hour, while the new plant would be able to process 2.000 pounds per hour.
The updated equipment is made by the same manufacturer as the existing equipment, and the
new equipment quickly. For this reason, costs to train personnel are assumed to be negligible.
The production manager, Bjorn Pedersen, is skeptical about undergoing the plant
modernization. The older equipment, he argues, is already paid for, and new equipment would
cost $15.000 per week. This cost is comprised of both principal and interest, and includes
manufacturer installation of the equipment. The controller, Maret Karlsen, cautions that all
decisions related to costs should be included in the analysis and that because the energy
consumption would be different, this must also be accounted for in the decision. Energy costs
are presently $12 per unit, and the existing plant uses 1.500 units of energy per week. With
the modernized plant, the consumption of energy would fail by 50%.
1. What is the productivity of the processing facility, with the equipment currently in
use?
2. What would the productivity of the plant become if the new system were purchased
and implemented?
3. What would be the amount of additional expense on equipment that would make
productivity of the two systems equal?
4. What might happen if energy costs increase in the future?
DISCUSSION QUESTION 2
Productivity growth will increase gross domestic income as a result of the surplus value, and
employment opportunities will be created by increase in investment. However, at the same time,
increasing productivity may result in an increase in unemployment levels, because of the same
production levels can be achieved with less use of labor and salary increase. How can a sustainable
balance of growth and level of prosperity be set up?
Transcribed Image Text:FUNDAMENTALS OF PRODUCTION MANAGEMENT CASE STUDY 2 NorSal TRONDHEIM NorSal 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. The plant manager, Inger Hansen, is contemplating a plant modernization to upgrade the technology in the plant. While the plant performs well enough now, modernizing equipment would allow the plant to increase capacity per hour, which is particularly advantageous because the factory has enough demand to cover the additional capacity. Currently, the plant operates seven days a week, three shifts of 20 workers per shift. The workers are paid $15 per hour. The firm is contemplating a plant modernization to upgrade existing equipment, which should increase the plant's output while lowering energy costs. Using the current equipment, around 1.500 pounds of salmon can be processed each hour, while the new plant would be able to processed each hour, while the new plant would be able to process 2.000 pounds per hour. The updated equipment is made by the same manufacturer as the existing equipment, and the new equipment quickly. For this reason, costs to train personnel are assumed to be negligible. The production manager, Bjorn Pedersen, is skeptical about undergoing the plant modernization. The older equipment, he argues, is already paid for, and new equipment would cost $15.000 per week. This cost is comprised of both principal and interest, and includes manufacturer installation of the equipment. The controller, Maret Karlsen, cautions that all decisions related to costs should be included in the analysis and that because the energy consumption would be different, this must also be accounted for in the decision. Energy costs are presently $12 per unit, and the existing plant uses 1.500 units of energy per week. With the modernized plant, the consumption of energy would fail by 50%. 1. What is the productivity of the processing facility, with the equipment currently in use? 2. What would the productivity of the plant become if the new system were purchased and implemented? 3. What would be the amount of additional expense on equipment that would make productivity of the two systems equal? 4. What might happen if energy costs increase in the future? DISCUSSION QUESTION 2 Productivity growth will increase gross domestic income as a result of the surplus value, and employment opportunities will be created by increase in investment. However, at the same time, increasing productivity may result in an increase in unemployment levels, because of the same production levels can be achieved with less use of labor and salary increase. How can a sustainable balance of growth and level of prosperity be set up?
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