Alternatives

There are 2 alternatives for this case study, The Nowegian Salmon Processing
Facility, Trondheim. It is either the current equipment will be retained and used or
modernization would take place and improve the existing equipment. Current
equipment will have their costs for maintenance paid for already but the
Modernized equipment to installed would cost $10,000 per week, although the cost
for training existing workers will be negligible since the Modernized equipment are
easy to use and is user friendly. The $10,000 per week includes both principal and
interest as well as manufacturer installation of the equipment.

Key Decision Criteria

The major criterion for picking the most desired alternative is Productivity
because Productivity is like the dictator of almost all companies and work systems.
Obviously, an increase in productivity in the New and Modernized system will
mean that efficiency is greatly emphasized, having lesser cost, more output.
Productivity in itself has all the necessary elements to consider in picking the
alternatives or the options available for the work system. It contains the output and
the input which are the cost, labour, energy, materials, capital, and miscellaneous.
The Cost would also always play a big factor in any company, establishment, or
organization. It is also stated by the controller Maret Karlsen that all decisions
related to costs should be included in making a decision. Any organization would
agree that having to pick an alternative with much less cost is very ideal. And Costs
are usually what people would look to first before anything else in considering
alternatives or options.

Evaluation of Alternatives
The tool used in this study is the measure of productivity since the main issue
in Norwegian Salmon Processing Facility, Trondheim is that the firm is contemplating
a plant modernization to upgrade the existing equipment. There are two
alternatives for this case study either to retain the current equipment or to purchase
and implement the new equipment for plant modernization.
Single Factor Productivity (labor)
Current labor productivity
150

New labor productivity

20

200
=
20

75 pounds
salmon
labor hour
100 pounds
labor hour

Multi-factor Productivity
Current Productivity

1500 x 16 x
=

New Productivity

(30 x 16 x 5 x 10) + (10

2000 x 16 x

(30 x 16 x 5 x 10) + (10 x 1000 x

3.53 pounds
salmon
dollar

= 4.10 pounds
salmon
dollar

The productivity of the processing facility of the equipment currently in use is

75 pounds/labor-hour while the new equipment is 100 pounds/labor-hour with labor
as an output. It is shown in the calculations that the new equipment has the highest
new labor productivity than the current labor productivity. Using the multi-factor
productivity, it is calculated that the current productivity has 3.53 pounds
salmon/dollar and the new productivity has 4.10 pounds salmon/dollar. The
productivity for the new equipment is higher than the current equipment with the
given input of labor and energy costs. There is an upgrade cost for miscellaneous of
$10 000 per week for new equipment since the old is already paid for.
The combined results of Single-factor and Multi-factor productivity indicate
that the firm should select the second alternative. Plant modernization should be
selected to upgrade the existing equipment.
The new equipment has the
productivity of 100 pounds salmon/labor-hour and 4.10 pounds salmon/dollar while
the current equipment has the productivity of 75 pounds salmon/labor-hour and
3.53 pounds salmon/dollar. So, upgrading the existing equipment is the best choice
since the productivity of the new equipment is higher than the current equipment. If
the energy cost increase in the future, the productivity will decrease. Even there is
an upgrade cost of $10 000 per week in the new equipment, it would balance all the
expenditures by reducing the energy consumptions thus increasing the productivity.
If the energy cost rise in the future, the new equipment technically saves more
money than the current one.