the appointed CEO of P&G, hard and very significant decisions will be reached. In this innovative political environment, the
administration is encouraging business owners to relocation production back to
the USA. The average factory worker outside
the US makes about $37 per day or 13,505 per year (Economist, 017), while here in
the US the average worker makes $12.41 per hour, averaging 30,524 per year. If all aspects of production is fully relocated
back to the USA, we would lose a lot of profits (Payscale, 2017). Having the
production overseas is beneficial for price, however, the negative is reduced
control and unexpected events that are hard to plan for. Another decision to make
is placement of our factories in location to our vendors and potential risks. Production
plants located closer to our natural resources can reduce shipping costs and delay
periods. Also considering the risk of a disasters is imperative. Putting
factories in hazardous locations could risk production and potentially lose investors.
Production and Costs: Analyze the Factors & Decisions
The final vital input regarding Tide
is the land/natural resources. Factors
of this production includes natural resources available and the rent P&G disburses
to keep their offices, warehouses, product shelving, etc., these would be considered
fixed costs. On the other hand, natural resources could be a variable cost
since these could fluctuate in price and could affect the output of the product.
“Other environmental factors include drought, which could affect the production
of the liquid version of Tide. Electricity is a
large variable cost for P&G. In an
article written by Cincinnati Business Courier in 2015, P&G stated that
they planned to rely on windmills to provide all the electricity needs of its
five plants in North America that make Tide and other detergents.
Another vital input is the labor to
produce Tide. Labor is defined as
“expenditures of physical or mental effort”
(Merriam-Webster, 2017) for typically a wage. A wage is defined as “a payment usually of money for labor or
services usually according to contract and on an hourly, daily, or piecework
basis” (Merriam-Webster, 2017). Labor
is an important component for a company because this is how the products are produced,
manufactured, advertised and shipped. P&G employees more than 95,000 individuals
worldwide. The cost of labor would be considered variable. Labor is an expense that
fluctuates with output. P&G employs people in the US and in other countries
to develop products and uses external labor to produce its goods.
Regarding Procter and Gamble (P&G),
there are three significant elements for production of their product Tide. The
first main input would be the capital in relation to the production of their Tide.
The machinery, warehouses, technology are all important factors of capital. All
the man-made resources that are spent for production of Tide are merged into
capital. The machinery and warehouses would be fixed costs; these elements are
ones that do not bank on the result of production. The technology would be deemed
variable because these things are reliant on the output. Capital can be seen through
the packaging of Tide; P&G states “Using more recycled
materials in the production of our packages means we are not
depleting resources, but instead, putting existing resources to use in new
packages. Currently, Tide Liquid
bottles contain at least 25% post-consumer recycled material, and we plan to
increase that amount.”
Research show that Tide is looking to increase 25% to 50% or above.
Production and Costs: Inputs and Costs
economic theory defines the factors of production as the three broad categories
of input — capital, labor and land” (Chron, 2017). There are two types of
costs that a company will incur which are “Fixed” and “Variable” Costs. Fixed
costs are costs that are not related to output of a product, which include
buildings, rent and machinery. A Variable cost is one that is related to output
these types of costs include utilities, materials, labor costs.