Assignment 2: Sands Corporation

A report submitted to
Prof. Girija Shankar Semuwal

In partial fulfillment of the requirements of the course

Written Analysis and Communication-I

By: -
Deepanshu Singh
Section- D
Roll no. 1911076

On: -
03-08-2019
Deepanshu Singh
Consultant

President
Sands Corporations
Clairmont, United States

Mr. President,
Attached with the letter of transmittal is the report on “Sands Corporation”

This is to inform you that we have completed the report that you have assigned us for the
selection of the best suitable location among the two. In writing this report, we have followed
the information provide in the case and included the factor like labour availability, the cost
that will be incurred while setting up the new plant in either of the two places

Hope, we will be glad to clarify any discrepancy that may arise.

I hope you find the report satisfactory.

Thanks, and Regards,

Deepanshu Singh
 One-page Summary
Situation analysis: The dilemma to construct site at Kimberly or Hampton. Kimberly is the
perfect location for the company to carry on with its defence contract and research program.
The construction at Kimberly location still projects the issue of union which can be resolved
while stocking more production than required during March. One of the objectives of the
company to start its new development program can also be accomplished with the introduction
of the new site at Kimberly as it is in the vicinity to the main branch and the Kimberly site can
properly manged and operated compared to Hampton where the cost of installation is high.

Options: The option available to the Sand Corporation to set up the new site are:

1. Kimberly Street
2. Hampton

Criteria (in order of priority):

1. Availability of labour and the cost involved

2. The total cost of setting up the new plant
3. Better allocation of resource and expansion of the new development program facility

Evaluation:

1. Availability of the labourer and the wages of a labourer: The labourers are more readily
available at the Kimberly as a comparison to Hampton

2. The total cost of setting up the new plant: The total cost of setting up Kimberly is much
lower than Hampton (see Exhibit 5& 6)

3. Better allocation of resource and expansion of the new development program facility: The
Kimberly being more in the vicinity to the main branch, allocation of work can be done more
efficiently, and research program can be established

Recommendation: The sand corporation should consider Kimberly street as the place for the
construction of the new plant. The total cost of setting up the plant in Kimberly is $33,07,410.00
 Situation Analysis
Kimberly site is better suited in terms of availability of all type of worker required at the site.
The site has enough workers with prior experience in assembly and machining work which will
be helpful for the operation of work when the site is functional and operational. The larger pool
of workers availability will not put strain in the production if the given work demanded more
workers in the future.

The Kimberly site few blocks away from the main plant will help in managing the operation at
Kimberly with fewer executives required for accounting, production control and engineering
staff members as headquarter people can handle the share of work during the transition of the
facility the overhead cost will reduce and with new facility coming up supervision can be
provided to the new workers more conveniently.

The construction of the site at Kimberly will result in the workers joining the main plant union
and there will always be the possibility of the disruption in future by the union for higher
wages. With the strength of the union increasing from 1750 to 2350. The new wage contract if
required will be difficult to cater to the need of 2350, the strike will create a huge loss to the
company in the production of defence equipment which also had the penalty clause grace
period for the delivery of the equipment. Keeping the stock of the equipment during the grace
period of Jan-April and having performance-based increment will further cut down the
disruption.

The Kimberly site has provided 2 acres of land for the new facilities, which can easily
incorporate company need of 0.69-acre. The presence of land near Clairmont has provided a
good resale value for the company. Even if the demand went down for defence equipment in
the future the land can be used for other purpose and facilities. The company current product
development program can be shifted to the newer facility of Kimberly as it is much closer to
the main plant which will result in the introduction of the several new products

Hampton, 180 miles away from the main plant, and 75 miles from the nearer branch plants is
completely new to the industrial development. Despite having better connectivity and
transportation, the migration of the skilled workers to the Hampton is a major concern as it is
surrounded by major cities with industrial presence people will be attracted to other nearby
cities than to Hampton
Out of the 700 respondents, only 35 responded with having prior experience in the operation
of machine tools, 70 were semiskilled, and 105 were unskilled. The available resources were
neither skilled nor enough to manage the company day to day operation. The company must
provide training before manufacturing starts for the company. With the availability of 5-6
months as a grace period before the site, construction is completed the company can send the
employees to other branches for training which will bring additional cost to the company
operation. The company can provide a wage of $1.15 which is a minimum wage for the labourer
during training which can compensate for the training and recruitment cost company has faced
during the process

The initiation of management executive is costlier in the Hampton as it will require executive
to look after accounting, production control and engineering staff members further it was
expected that the assistant manager of the main plant will be the new defence manger it would
be difficult for him to manage the plant from such a long distance, as it will require home to
travel frequently to the Hampton site. Both issues will increase the overhead cost of the
company

Problem statement: The company doesn’t have enough resource to meet the demand of defence
contract while operating other manufacturing equipment’s. The company requires a new
location which help them in the expansion, allocation and manufacturing of the defence
contract while keeping union issue in check

Options: The option available to the Sand Corporation to set up the new site are:

1. Kimberly Street
2. Hampton

Criteria (in order of priority):

1. Availability of labour and the cost involved

2. Total cost of setting up the new plant
3. Better allocation of resource and expansion of the new development program facility
Evaluation of options:

1. Kimberly Street

a. Availability of the labourer and cost involved: Survey conducted by US

Employment Service provided the data that approximately 1000 skilled, 2000
semiskilled and 3300 unskilled male workers were available for the recruitment. The
total cost of labours is around $28,26,000.00 (see Exhibit 3).

b. The total cost of setting up the new plant: The cost of setting at Kimberly site is
much efficient than as compared to Hampton with, Sand Corporation will save around
$204570 (see Exhibit 5 and 6).

c. Better allocation of resource and expansion of new development facility: The

location of Kimberly street near the vicinity of the main facility will provide better
allocation of resource as no further executives will require for the administration work
and new development program can be shifted to the Kimberly street which introduce
new products for manufacturing which is unable to replicate in main site.

2. Hampton:

a. Availability of the labourer cost involved: In Hampton, only 700 responded for job
query out of which only 5% have the prior work experience. Lack of labourers in
Hampton is the major challenge for the company

b. The total cost of setting up the new plant: The total cost to set up a site at Hampton
is around $35,11,980.00 (see Exhibit 6) which is $204570 more than Kimberly Street

c. Better allocation of resource and expansion of new development facility: Hampton

is 180 miles away from the main site due to which new executive is required for
administration of the new site which further increases the cost.

Recommendation: Sand corporation should consider Kimberly street as the place for the
construction of the new plant. The total cost of setting up the plant in Kimberly is $33,07,410.00
Action plan:

1. The land site can be bought, and construction can be started within 2 weeks for the
completion of the site in January

2. As there is no dearth of workers, workers can be recruited within the 6 months’ time frame
before the actual manufacturing took place in the Kimberly site

3. Maintain enough stockpile in the inventory to avoid unforeseen union disruption

Total Words: 1048

EXHIBIT 1: Requirements of Sands Corporation for New Plant

Company
Basis estimation
Area (in hectare) 0.69
Investment $6,00,000.00
Cost of machinery and
equipment $20,00,000.00

Source: Provided by the company

EXHIBIT 2: Requirement of workers in the plant

Company
Type of employee estimation
Skilled workers 300
Semi-skilled workers 150
Unskilled workers 150
Total 600

Source: Provided in the case

EXHIBIT 3: Evaluation of Labour cost at Kimberly

Rate
Types of per Working Number Workers
Labour hour days of hours Required Total
Skilled $2.25 300 8 300 $16,20,000.00
Semi-
skilled $1.85 300 8 150 $6,66,000.00
Unskilled $1.50 300 8 150 $5,40,000.00
Total $28,26,000.00

Source: Provided in the case

Assumption: Employees will be working for 8 hours a day

EXHIBIT 4: Evaluation of Labour cost at Hampton

Rate
Types of per Working Number Workers
Labour hour days of hours Required Total
Skilled $2.05 300 8 300 $14,76,000.00
Semi-
skilled $1.75 300 8 150 $6,30,000.00
Unskilled $1.40 300 8 150 $5,04,000.00
Total $26,10,000.00

Source: Provided in the case

Assumption: Employees will be working for hours a day

Exhibit 5: Evaluation of Total cost at Kimberly

Basis Rate Quantity Cost

Area (in hectares) 2 $50,000.00
Taxes (per $100 of
valuation) $3.54 $50,000.00 $1,770.00
Electricity (in KWH) $0.10 40,00,000.00 $4,04,000.00
Water (in gallons) $0.11 2,40,00,000.00 $2,640.00
Gas (per 100 cubic feet) $0.46 5,00,00,000.00 $23,000.00
Labour cost 600 $28,26,000.00
Total $33,07,410.00

Source: Provided in the case

Exhibit 6: Evaluation of Total cost at Hampton:

Basis Rate Quantity Cost

Area (in hectares) 10 $20,000.00
Taxes (per $100 of valuation) $2.40 $50,000.00 $480.00
Electricity (in KWH) $0.21 40,00,000.00 $8,40,000.00
Water (in gallons) $0.25 2,40,00,000.00 $6,000.00
Gas (per 100 cubic feet) $0.71 5,00,00,000.00 $35,500.00
Labour cost 600 $26,10,000.00
Executive Salary $9000 7 $63,000.00
Total $35,11,980.00

Source: Provided in the case