Question

Create Thread When your instructor creates a forum, they have the option of ollowing you to start threads. More Help Indicates a required field. FORUM DESCRIPTION Please listen to Federal Reserve Bank of St. Louis Tonomie Lowdown podcast Episode 19: Costs of Production and the Shutdown Deco There's no such thing as a free lunch." You know that means that everything has a cost Businesses are especially aware of costs because costs affect profits, and without profits a business might not survive. Imagine that you are the leader of a company. Please select a company you are not limited to size, tyne or geography Give examples of specific types of production costs for the business. Please identify the costs as foxed costs, variable costs and explicit costs or implicit costs and even possible marginal costs or any other thoughts you have based on readings. Explain your reasoning. Then explore in detail the impact of the COVID-19 pandemic on your company's operations, supply chains, HR policies, etc. Consider the long run and the short run. In your response post, review the ideas of your peers, expand on their ideas, give additional examples of production costs identified, or give an example of a type of cost not discussed in the post but which relates to the industry. Your post should be a minimum of 150 words and is due Sunday April 5. Your response to two classmates posts is due Wednesday April MESSAGE

Answer 1

Lets assume that we are an online delivery portal of groceries and other daily necessity items such as over the counter medicines etc (one example of this would be bigbasket.com). The main costs that we face and their types are-

• Portal building cost-Fixed, explicit
• Portal maintenance cost- Variable, implicit
• Portal hosting cost- Variable based on traffic, explicit
• Warehousing cost- variable since we are leasing warehouses based on demand. Also increases in times of high demand or festivals etc. Hence it is explicit but marginally increasing.
• Delivery cost- Includes the cost of personnel delivering the goods, cost of fuel, cost of vehicles used in delivering etc. Variable and explicit.
• Office space cost- Fixed since the space is not leased but bought.
• Other Personnel costs- salaries of employees. Variable depending upon hiring/expansion/demand etc, explicit.
• Administrative and legal costs- These include any fee to be paid to the government, legal fees for any disputes or agreements, daily costs such as snacks at office, outings for teams etc. Variable and implicit.

The Covid-19 pandemic has resulted in a mandatory lockdown of the whole country. This means that people movement is restricted and they are allowed to go out only in case of medical emergency or buying essential items. Most of the businesses are closed but this represents a unique opportunity for us. Since we supply groceries and hence come under essential supplies, we can still deliver the items. Lets us see how this will affect us

• Our demand- This might benefit us in both short run and long run. As people can't go out, many will explore new ways of getting groceries and we will be one of the few remaning choices. So our demand will go up in the short run. But in the long run too we will be able to increase our demand since quite a few people will keep using the platform even when the lockdown is over.
• Operations- This is going to be tough in the short run. Some of our suppliers may no longer be able to fulfill demand- especially since demand will go up too. It is also possible that we might need to change our payment methods to suppliers. We may need to enable more cash transactions or vice versa. We may also need to defer payments or pay higher interest, based on the situation.
  But the biggest challenge I see right now is to make sure that not only we have enough fleet and resources to get the groceries to our customers on time, we also need to make sure that the items delivered are not contaminated and that our own staff and customers are both safe all the time. This will require more stringent food quality measures and staff cleanliness measures.
  We also need to make sure that we have all the required clearances from the government and that our movement is not impeded.
  Finally, our customer care team may need to work from home in the short run but that does not mean that there should be any customer dissatisfaction, especially in the current scenario.
• Supply Chains- Part of this was discussed above. Our supply chain partners will also face uncertain times now and this may affect us too. Some supplies may be delayed or payment may be demanded in a different manner. The costs may also go up. We need to have backups in place in case of any disruptions. We should also try to source from local suppliers, as much as possible, since getting supplies from farther areas might be an issue.
• HR policies- Ad discussed, HR should make sure that all our staff is working from home with the same efficiency. Due to increased demand, we will face more work but since we cant hire in the short run due to restrictions, we will need to push our teams. Overtime pay should be such that we are able to meet demand.
  If any of our staff gets sick, HR should make sure that our insurance policies and practices are well in place.
  HR should also make guidelines for our ground staff regarding cleanliness and safety.