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Analytic Review of Plant Operations in Canada as compared to the United States
2/24/2013

Phase 1 Individual Project Patrick Eschete Colorado Technical University Online MGMT640-1301B-02 : Operations Management Instructor: Dr. M. Zelihic

Recommendation for Relocations and Operations

Introduction This paper will reflect on the analysis and make suggestions whether Umpa-Lumpa Inc Pharmaceutical manufactures should continue with its current plant operation in Canada or if the time has come to move their operations back to the United States. The recommendations that are made, are done on the basis of analyzed estimated transportation cost and the possible impact it might have on the cooperate image by shutting down plant operations within Canada. The decision to relocate manufacturing operations will be an extremely crucial one, as it will have affects on both the image and production costs for the company.

Current position and recommendations for Umpa-Lumpa Inc Currently Umpa-Lumpa Inc is a United States based pharmaceutical manufacturing company with a production plant located into Canada. As a result of globalization, there have been many transitions and other changes brought about in the operations of the company. The removal of trade barriers has played key roles in the facilitation of global trade. Labor costs are in Canada are extremely high, which has had an impact on product and service cost. As an added contributing factor, the taxation system within Canada is very high and complex at the present time. It would be a very beneficial and strategic choice for the company to relocate its plant operations back within the United States. One of the benefits for the company would be tax breaks and rebates the United States give to companies that operate within their borders. This in turn will have an important role in the reduction of costs for production and services, which will ultimately reduce the cost of labor that company will incur. This will contribute to the positive

Recommendation for Relocations and Operations

impact on the company profits, efficiency and help maintain its competitive edge within their industry. When comparing the costs of labor in the United States to that in Canada, labor cost as cheaper in the United States. Thus, this would be a very beneficial and strategic decision on behalf of the company, with the relocation of its Canadian plant operations to the Unites States. At present, the company already has established production plants in the United States, and if they move the company back to its native country, it will help with better operation management for those plants as well. As a result of this, it will impact the companys production capacities so they can be ran on more efficient levels. Due to these actions, the company will be able to lower down the production costs, which will ultimately lead to maintaining and increasing their competitive edge within their industry (Olhager, J., & Persson, F. (2007))

Financial and Company Image Factors with Relocation With the decision for relocation of the company, it will be very important that company manages its monetary resources and company image in Canada. With the implementation of NAFTA there has been an elimination of trade barriers even if the plant operations relocate to the United States, trades with Canada will continue with virtually no hindrance or complications. it is extremely important that company management establishes the cost that will be incurred and the benefits the company will obtain with the relocation. With this being said, it is clear that the estimated costs presented above are going to be lower than the taxation and employment benefits. Thus, this shows that the company will have maximized their benefits with their choice of relocation back to their native United States.

Recommendation for Relocations and Operations

In the above section we covered information that helped with ascertaining the costs and benefits and their relationship to the company relocation. Along with this, there are other crucial elements that are related to company image with concerns to the choice of shutting down plant operations in Canada. It is very important that the company does not lose focus or sight of their image that they must maintain amongst their customers. The change and relocation should not have an extreme impact on the companys image since; the companys decision to move and relocate from Canada to the United States will not have any type of impact on the distribution levels. This means that the company will be able to meet and maintain the needs of their clients with no interruptions to their operations. The relocation will also allow the company to reduce its cost for products, as the cost for product manufacturing will see a significant decrease. Thus, the companys image will not deteriorate but will improve since; it will be able to provide a cheaper product to their customers as compared to their market competitors. Once again, this has shown to prove to be a very strategic and beneficial move for the company with the opportunity to maximize on the benefits of both increased profit and competitive edge. Twelve Month Action Plan The following plan was designed to assist in taking the final company decision to move from Canada and to relocate back to the United States. It has been aligned with the recommendations based on the found facts which have been discussed in the above sections. As per the recommendation that have been made for company management, it is obvious the company will be rewarded greatly and proves to be very beneficial in its move back to the United States. For this purpose, it will be important that the company creates and implements a strategic action plan that will make the transition as smooth and efficient as possible and done

Recommendation for Relocations and Operations

within a reasonable time frame. The following, outlines the action plan that will help with the transition and the various aspects that will associated with relocation process from one country to another. The total time frame should take an estimated twelve (12) months to finish and complete the winding-up process. Action Time Decisions regarding winding up or selling the company to competitors. 2 months Winding up the business in context of legal formalities. 3 months Preparation of Physical Relocation. 4 months Informing the local suppliers and customers about the shift. 2 months Final Wind Up. 1 month (Multinational corporate strategy: planning for world markets. 1985)

Recommendation for Relocations and Operations

References Leontiades, J. C. (1985). Multinational corporate strategy: planning for world markets. Lexington, Mass.: Lexington Books. Olhager, J., & Persson, F. (2007). Advances in production management systems International IFIP TC 5, WG 5.7 Conference on Advances in Production Management Systems (APMS 2007), September 17-19, Linkoping, Sweden. New York: Springer.