Mama Lorna bakery started its operation in 1996 in Toronto Ontario. Since its establishment, this small home base bakery specialize in two types of bread: a) English whole wheat bread and b) french baguette. On Monday June 1, 1998 Lorna Lawrence, the owner of this bakery started work concerned about the changes she had introduced in her operations in January of that year. Her primary concerned was emanating from the recent increase in her whole wheat production cost because she wondered whether the introduced changes had indeed been efficient for her operations. She called her partner, Julie Gadbois, who had been overseeing the Baguette production to the office to share her concern. Many of the changes we made in our whole wheat operations were based on your recommendation, Julie,” Lorna continue” and i need to know if they have made a difference in our quarterly productivity.
The way i see it our quarterly whole wheat production was 1000 skids and increased by 10% this year. I also know our machinery is upgraded at 10% additional cost just because we could save 5% in our labor cost. Your Baguette production seems to run smoothly. I noticed on may occasions baguettes were sold out and some customers did not get any! Why don’t you expand your production? Listening patiently Julie replied, “Starting with your concern about the whole wheat production, Let me tell you that i am sure the changes we made have done more than 5% saving in labor cost! We also had 5% saving in gas.” Not convinced by Julie comments, Lorna wanted to compare the quarterly productivity of the whole wheat operation between 1998 and 1997. “i suggest we look at the whole wheat average quarterly numbers of the last year and compare them with the first quarter of this year. Would that be good for you? said Julie. “well that would be something, Julie,” Lorna replied ” but in and by itself it may not be enough; we must keep up with our target of 4% productivity increase. That is why we went with this upgrades.
Your Baguette production should also increase! I know we cannot have a bigger oven for Baguette, but let me think it over and see if i can make a suggestion for the expansion. Julie agreed to get back to Lorna with last year numbers of whole wheat breads. Lorna promise to look at Baguette numbers to come up with suggestion for Baguette production expansion
A week later they revisited the subject and Julie reported that in 1998, the whole wheat average quarterly production was 1000 skid of bread. The bakery manage that production using 300 labor hours, 60 bags of flour, $10,000 worth of machinery and 3000 cubic meter of gas. the production output and machinery cost increased by 10% and material used remained unchanged between the two years. “All we need to know is whether the productivity change for each input happened as planned” said Julie. That would be good, Julie, but i think we should consider the cost and the change in overall (all factors) productivity. ” What i know is that you and I are the only workers here and we only received $10 an hour for our work because we also live here. Flour has always cost $50 a bag in recent days in recent years, and hydro cost $50 cent per cubic meter. I need to know whether after these cost are we on track with our productivity improvement target said Lorna.
In the same meeting Lorna told Julie that based on the sales records, the bakery produced 1200 skids of baguette and still about one fifth of the customers had not been able to buy their baguette due to sell out. We must increase the baguette production, Now we know you cannot increase the capacity of your oven, but you can increase the number of trays that is loaded into the oven. All you need is to use a multi self crate that could house more trays, said Lorna. Yes but if we go with this multi tray system additional labor would be needed. i am happy with my labor productivity rate of 2.0 so i want to maintain it, said Julie.
Determine the amount and percentage change for productivity of:
a. Labor
b. Flour
c. Capital (machinery)
d. Gas
Demonstrate if Mama Lorna bakery has met its quarterly productivity improvement target by comparing overall(all factors) productivity between 1997 and 1998.
Given the bakery operates 7 days of the week and the workers work 8 hours per day, determine how many additional labor hours Julie needs to increase the baguette production
Determine if or how Julie can manage the baguette production increase without hiring additional workers.
Identify any competitive advantage in this operation and use them to outline a strategy for Mama Lorna bakery to expand.
