Lorex Pharmaceuticals Case Summary

Carter Blakely, QA for the manufacturing division of Lorex Pharmaceuticals was given the complex, analytical task to determine the ideal and optimal level to which each of the 10 ounce bottles of Linatol should be filled up to, in order to reduce the increased cost associated with overfilling the bottles as well as under filling the bottles and in the process, maximize the profit earned by Lorex on this new product. Linatol, which was developed and patented several years ago by Lorex had finally gotten FDA approval and was ready for production in an old, semi-automatic production line at Lorex’s production facility.

The factor that gives rise to uncertainty in this case is the fill target to be set by Blakely. For the sake of experimentation through trial and error, Blakely had conducted the Filling-Line test with a set fill target of 10.2 ounce and the result of 144 bottles were analysed to affirm whether the randomly selected fill-target of 10.2 oz. was indeed the optimal choice or not. Through a basic statistical analysis, Blakely sought to analyze the trade-offs. By increasing the fill-target, the cost of Linatol filled per bottle would increase, since the price for the same was already set at $186 per case. By reducing the fill-target, there would be a higher number of under-filled bottles which in turn would put extra load on the filling-room attendants and would result in the need for more number of attendants and hence more salaries to pay and hence lesser profit. There was also the risk of the storage area getting clogged with under-filled bottles, thus possibly resulting in reduced or hampered production. Most importantly, the under-filled bottles would be sold off to secondary markets at only 80% of the desired price, thus further bringing down the profits of the firm.