I hope that this analysis satisfies you and helps you in making the required decision. Regards, Rohit Sirohia Executive summary Sands Corporation has received a new contract from the government which cannot be full filled by them based on their existing capacity and therefore the need to start a new plant arises. The company now has two site’s selected one at Kimberly street in Clairmont itself and the other in a small town called Hampton.
The two sites have been evaluated on the basis of cost, availability of labor and various other factors and based on the evaluation it is recommended that the company starts its plant at Kimberly Street. (Word count 94) Situation Analysis: Sands Corporation currently operates with three plants in the mid-western section of US. The main plain is in Clairmont while the branch plants are in 2 small towns 60 miles apart from each other and 180 miles from the main plant.
Sands Corporation has won a contract from the government and has to fulfill it within the given period of time or else they would be charged and would lose any further contracts from the government. The current plant’s are capable of producing enough for commercial purpose and are already being used at full capacity, also the government contract requires them to produce large parts which cannot be done with the current machinery. Hence there is now a need for the company to expand and start a new plant which would work independent of the other three plants and meet the government’s requirements.
Plant Requirements: The new plant would require: 1. 75,000 sq feet of floor space. 2. 2 million$ worth of machinery which would be provided by the government. 3. 600 laborers out which 300 should be skilled and 150 each of semi skilled and unskilled laborers. 4. The construction should start within 2 weeks so that the plant can be up and running on time. Problem Statement: Which location would be the most optimal and in the company’s best interest to start the new plant at. Options:
Purchase and resale value: the price of land in Kimberly is 50,000$ for 2 acre with tax of 1,770$ (at the rate of 3. 54$ per 100$) while at Hampton it is 20,000$ for 10 acre with tax of 480$ (at the rate of 2. 40$ per 100$). The price of land at Hampton is a lot cheaper when compared to Kimberly but it has very low resale value as Hampton is a small town with no industries in it while Kimberly is in Clairmont which is a highly industrialized area and the land price keep rising with every passing day this makes Kimberly a wise investment. . Operating expenses: The price for annual consumption of electricity, gas and water at Kimberly is 404,000$, 23,000$ and 2,640 $ respectively while the same at Hampton is 840,000$, 35,500$ and 6,000$ respectively. Clearly Hampton is almost twice as expensive as Kimberly in these areas. 3. Availability of labor and hourly wage rates: the available labor in Kimberly is 1000 skilled, 2000 semi skilled and 3300 un skilled male labor for an hourly rate of 2. 25$ for skilled, 1. 85$ for semi skilled and $1. 5 for unskilled while in Hampton only 35 men are skilled 70 semi skilled 105 with experience in assembly work and 390 unskilled for an hourly rate of 2. 05$ skilled, 1. 75$ semi skilled and 1. 40$ unskilled. Even though the wage rates are a lot cheaper in Hampton it still does not meet the plant’s requirement of 300 skilled labors while in Kimberly labor is easily available. 4. Transportation facilities: Kimberly has excellent air, rail and road transport while at Hampton the transportation facility was considered good. 5.
Other Factor’s : Opening a plant at Kimberly would require 7 less employees with salaries of 9000$ a year which means the company would save 63,000$ at Kimberly and Hampton spend that much more 6. Long term prospectus : after the completion of the government project the company can use the Kimberly site for expansion which would be better as Kimberly is very close to the main plant which make the cost of transportation and operations a lot lesser when the company expands, this would not be the case at Hampton as it is very far from the main plant as well as the branch plant.
Also if the company decides to shut down the plant it would easier for them to sell the land at Kimberly. Recommendation: The company should setup the new plant on Kimberly Street in Clairmont as it is a much more feasible and better option in all the areas of consideration. Action Plan The right course of action would be to immediately purchase the land at Kimberly and start construction on it so as to complete setting up the plant on time. (Word count – 782 words)
