[Topic]
The following appeared as part of an annual report sent to stockholders by Olympic Foods, a processor of frozen foods:
"Over time, the costs of processing go down because as organizations learn how to do things better, they become more efficient. In color film processing, for example, the cost of a 3-by-5-inch print fell from 50 cents for five-day service in 1970 to 20 cents for one-day service in 1984. The same principle applies to the processing of food. And since Olympic Foods will soon celebrate its 25th birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits."
Discuss how well reasoned you find this argument....
[My Response]
Olympic Foods' claim that the cost of processing frozen food will be minimized and profits will be maximized as the company has been learning how to do things better in 25 years is not entirely convincing because it ignores many crucial factors. There are two points which the writer needs to consider before arriving at any concrete conclusion on this matter.
To begin with, the author's conclusion rests on the premise that the frozen food processing rests on the same principle as the color film processing does. This is not a rational assumption because food processing always needs a certain period of time for mixing, cooking, baking, cooling down, freezing, etc. Some of these just cannot be further shortened. In addition, food processing is usually semi-automated where human hands are still indispensible. With manual works involved, efficiency is generally improved after a short period of time until it reaches a limit when it can only be improved marginally or cannot be improved at all. To make the argument more compelling, the author must demonstrate how Olympic Foods has been able to "do things better" throughout the company's 25-year-operation by showing the detailed historical operational efficiency statistics.
Furthermore, the author takes "25-year-experience" as the only rationale for costs minimization and profits maximization. This ignores the capability of technological improvements. Many new companies with only a few years of operation still can achieve significant efficiency improvement by heavy investments in technologies. For example, by replacing an old oven with a new one, a company can increase the baking capacity per operation hour, speeding up required time for perfect apple pies and subsequently generating higher profit margins. To persuade the shareholders, the author must be able to show that Olympic Foods has been keeping up to date with the technological changes and the workers have been trained to maximize machines' productivity throughout the past 25 years.
In a nutshell, the author's argument that all processing types can be improved solely by experience length will not be able to convince Olympic Foods' shareholders because it ignores important factors as mentioned above. Unless further information is provided, the author's claim is a merely weak assumption.
The following appeared as part of an annual report sent to stockholders by Olympic Foods, a processor of frozen foods:
"Over time, the costs of processing go down because as organizations learn how to do things better, they become more efficient. In color film processing, for example, the cost of a 3-by-5-inch print fell from 50 cents for five-day service in 1970 to 20 cents for one-day service in 1984. The same principle applies to the processing of food. And since Olympic Foods will soon celebrate its 25th birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits."
Discuss how well reasoned you find this argument....
[My Response]
Olympic Foods' claim that the cost of processing frozen food will be minimized and profits will be maximized as the company has been learning how to do things better in 25 years is not entirely convincing because it ignores many crucial factors. There are two points which the writer needs to consider before arriving at any concrete conclusion on this matter.
To begin with, the author's conclusion rests on the premise that the frozen food processing rests on the same principle as the color film processing does. This is not a rational assumption because food processing always needs a certain period of time for mixing, cooking, baking, cooling down, freezing, etc. Some of these just cannot be further shortened. In addition, food processing is usually semi-automated where human hands are still indispensible. With manual works involved, efficiency is generally improved after a short period of time until it reaches a limit when it can only be improved marginally or cannot be improved at all. To make the argument more compelling, the author must demonstrate how Olympic Foods has been able to "do things better" throughout the company's 25-year-operation by showing the detailed historical operational efficiency statistics.
Furthermore, the author takes "25-year-experience" as the only rationale for costs minimization and profits maximization. This ignores the capability of technological improvements. Many new companies with only a few years of operation still can achieve significant efficiency improvement by heavy investments in technologies. For example, by replacing an old oven with a new one, a company can increase the baking capacity per operation hour, speeding up required time for perfect apple pies and subsequently generating higher profit margins. To persuade the shareholders, the author must be able to show that Olympic Foods has been keeping up to date with the technological changes and the workers have been trained to maximize machines' productivity throughout the past 25 years.
In a nutshell, the author's argument that all processing types can be improved solely by experience length will not be able to convince Olympic Foods' shareholders because it ignores important factors as mentioned above. Unless further information is provided, the author's claim is a merely weak assumption.
