Rochem Ltd Essay

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Pages: 6

Rochem Ltd
This case examines an equipment purchase decision as faced by a small food preservatives manufacturing company. The text is a description of a meeting between four managers concerned with the decision and presents their evidence to the management committee together with their personal views as to which of two alternative machines ought to be bought. No conclusion is reached in the case.

Some notes on the Rochem Ltd case exercise

The equipment purchase decision in general
It is unusual for facilities to be chosen on one criterion only. For example, if a piece of equipment is needed immediately and only one model or make is available without considerable delivery delays, then the criterion of availability has predominated.
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We may have more confidence in our forecast of some of the factors than in others, but few of them will be known absolutely. It is useful in such a situation to have some idea of the sensitivity of the outcome of a decision to changes in the various factors.

In Rochem's case

Technical factors

1. The AFU machine gives more capability if needed (140 kg per month, against 105 kg per month).

2. The quality levels which can be achieved on the AFU machine are better, but this is something of a red herring since the case is quite clear in stating that when the Chemling is working properly it achieves perfectly satisfactory quality levels. This would only be an issue if the marketing plan for the future required higher quality levels.

3. There is limited information about the ease of maintenance of each machine. The likelihood is that the AFU will be better, but the Chemling is adequate that is, satisfactory.

4. As regards after sales service, again little information on the AFU, but the Chemling is likely to be better.

5. It could be seen as if the maintenance and after sales service factors trade-off between the two machines, but the AFU's plus points on maintenance are based on estimates of performance and are therefore less certain.

Financial factors

1. The capital cost of the AFU is almost 50 per