http://biz.yahoo.com/ap/071002/dean_foods_outlook.html?.v=5
Deans Foods Co. plans to cut 600 to 700 jobs, over 2% of their employees. Dairy products prices are beginning to drive up because of foreign trades. Many Asian countries are in high demand for dairy products from the States and it has caused the prices in the States to go up as well. A gallon of milk that used to cost $3.29 is now $3.87 in just seven months. Deans Foods reason for the cuts is to produce more revenues by not paying as many wages. Deans isn’t making as much money as before because many consumers are switching to private companies for their dairy products. Deans is the nation’s largest dairy producer, selling dairy to over 50 different companies.
In our textbook in Chapter One, we studied opportunity costs as well as scarcity. This article shows that when a lot of dairy products are bought, they become scarcer and therefore their value rises. The example of opportunity cost in this article is shown when they cut 600 to 700 employees. The opportunity cost of this action is the jobs that the 600 to 700 employees had must be covered by the other employees. Another opportunity cost would be paying severances to the employees they layoff. This could cost them a lot of money for no labour gained at all.
Deans’ actions they plan to do seem very reasonable and intellectual in my opinion. They already have a lot of workers and spreading out the 600 to 700 workers jobs throughout the remaining workers will be extremely easy with their 26,500 employees. They will be saving a lot of money a year as well (Around $30,000 a year per person times 650 average workers = $19,500,000 a year). They should also sell their dairy for less money so that more people are coming back to Deans instead of switching to a private company’s dairy.
Deans Foods Co. plans to cut 600 to 700 jobs, over 2% of their employees. Dairy products prices are beginning to drive up because of foreign trades. Many Asian countries are in high demand for dairy products from the States and it has caused the prices in the States to go up as well. A gallon of milk that used to cost $3.29 is now $3.87 in just seven months. Deans Foods reason for the cuts is to produce more revenues by not paying as many wages. Deans isn’t making as much money as before because many consumers are switching to private companies for their dairy products. Deans is the nation’s largest dairy producer, selling dairy to over 50 different companies.
In our textbook in Chapter One, we studied opportunity costs as well as scarcity. This article shows that when a lot of dairy products are bought, they become scarcer and therefore their value rises. The example of opportunity cost in this article is shown when they cut 600 to 700 employees. The opportunity cost of this action is the jobs that the 600 to 700 employees had must be covered by the other employees. Another opportunity cost would be paying severances to the employees they layoff. This could cost them a lot of money for no labour gained at all.
Deans’ actions they plan to do seem very reasonable and intellectual in my opinion. They already have a lot of workers and spreading out the 600 to 700 workers jobs throughout the remaining workers will be extremely easy with their 26,500 employees. They will be saving a lot of money a year as well (Around $30,000 a year per person times 650 average workers = $19,500,000 a year). They should also sell their dairy for less money so that more people are coming back to Deans instead of switching to a private company’s dairy.
3 comments:
Milk being an everyday thing for most people, the price of milk is very important. I also agree with you, I thought it was a sensible idea on their part because of the large amount of money they would save. Although laying off 600-700 sounds like a lot, that is only 2 % of the total amount of workers they have. I am just wondering how they will fill in the work that the 600-700 workers did. The estimations of the amount the company would loose was a nice addition to your blog. The severances were the only thing that bugged me, for how long and how much do they get for finding a job.
This article has raised a few interesting points. It demonstrates as a product, in this article milk, is high in demand the price will increase due to the scarcity of the product. As Asian countries demand for more milk, we will expect the value of milk to rise in Canada. Also, I like how you calculated the amount of money saved because of the cut of employees, but how about the money spent for severances? It also should be considered into the equation for a more accurate calculation for the money saved. Overall, I think the company will benefit more with the decrease in employees as well.
K. Chen
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