Operations Decisions

Background of the Company

Edmonds Equipment Inc (EEI) headquartered in Richmond, Virginia is a leading provider of industrial, business-to-business, and consumer digital imaging solutions. Edmonds products include: cameras, binoculars, camcorders, printers, scanners, calculators, facsimile machines, office software, and projectors.

EEI currently employs 150 workers and has hired a consultant to offer some advice that will help it make a decision as to whether it should shut down completely or continue operations. Originally, EEI was established in 1986 by Robert Edmonds and as the business grew, the number of employed increased up to 250 employees. The forces of global competition and technological advancements have caused profound changes within the organization.

In addition, EEI uses 100 workers to produce 6,000 units of output per month (working 20 days / month). The price of the firm's output is $32, while the daily wage (per worker) is $70. The variable cost is $2,000 per day. The firm's fixed cost is “high enough” so that the firm's total costs exceed its total revenue. The marginal cost of the last unit is $30.

Assessment of Current Environmental Scan Factors

The environmental scan factor refers to the macro environment and is the study and interpretation of the political, economic, social and technological (PEST analysis) events and trends which influence a business, an industry or even a total market.

Comparably, finance, marketing, and operations will have the greatest impact on plant operations and management's decisions or whether to continue or discontinue operations. Similarly, the creation of goods or services involves transforming inputs into outputs.

In comparison, service involves customer contact more so than manufacturing, therefore, service operations are subject to greater variability of inputs than typical manufacturing operations. Operational decisions include many activities, such as, process selection, forecasting, managing inventories, assuring quality, capacity planning, along with many other avenues (Brown 1971).

Financial Analysis of the ...