Question

1. Queen City Treating is a metal treating company that hardens prefabricated metal products for automobile accessories, including seat belt buckles, wheel rims, radiator caps, and other items. The company is experiencing some serious cost problems. Foreign competition, which uses better technology and has different cost structures, is taking away some of Queen City’s customers by offering lower prices. As a result, Queen City is scrutinizing all of its costs. The CFO has concluded that one area that needs revamping is the high labor cost of the senior workers. The company is considering a voluntary buyout of these workers, in which they would be offered a financial incentive to leave the company before their normal retirement age. Company statistics indicate that 30 percent of the workforce has over 25 years of service and is earning the top rate of pay. The total wage difference among the highest and lowest paid production workers is about $8 per hour, and the company utilizes about two million labor production hours per year. Management believes that replacing these more senior and higher paid workers with persons at lower rates of pay would significantly improve the costs and productivity of the business.

Are there viable alternatives to the voluntary buyout that would achieve the desired cost reduction? What is a range of possible solutions? How would you measure their effectiveness?

Answer 1

Are there viable alternatives to the voluntary buyout that would achieve the desired cost reduction? What is a range of possible solutions? How would you measure their effectiveness?

The manageemnt ecsion of replacing the old worker with new one is one of the best feasible solution the problem faced by the company in terms of cost reduction However , if the alternative nee to be found to get the desired cost reduction is the Research and evelopment aspect which again need a high investment but it is the best solution to make the cost reduction in the unit product and sell at low price .The other alternative is to focus on the refabrication area which need to improve the processes use involving application of innovative technology and finest quality control .If these mentioned area are proper monitored then the effectivenss of the company process and production will improve the overall productivity an business marketing .

Have a good day !