Assignment 2 : Sands Corporation

A report submitted to

Prof. Gita Chaudhuri

In Partial fulfilment of the requirements of the course

Written Analysis and Communication – I

By

GAWADE MAYUR SUNIL

Section B

Roll No. 1911092

On

03-08-2019

_____________________________________________________________________________________
 13th August, 1961

To,

The President
Sands Corporation

Subject: Report and analysis on installation of new plant

(Recomendation to setup plant at Kimberly)

Dear Sir, (Could have been Ma’am as well)

Attached herewith is the detailed report and analysis on installation of new plant of Sands
Corporation. The company has two viable options of setting up of new plant, either at Kimberly
Street or at Hampton. The viable options were thoroughly analyzed on basis of location,
manpower availability and cost, probable resource expenditure and other such factors as deemed
essential.

Hope this report and analysis meet your expectations and I will be available if you seek any more
clarity on any matter stated herewith.

Regards,

John Doe
JD Consultancy Services (Provide short address as well)
 One Page Summary (Just call it summary)

1. Situation Analysis:
 Sands Corporation has acquired new government contract and has to setup new plant at
either Kimberly street location or at Hampton location.
 Various factors and their cost and benefits must be considered to arrive at a decision.

2. Problem Statement: Taking various factors into account, deciding whether the new
Sands Corporation plant must be set up at either Kemberly Street or at Hampton location
3. Options: Following two options are to be considered and analyzed
a. Plant installation at Kimberly Street
b. Plant installation at Hampton
4. Criteria:
a. Capital expenditure and overhead expenditure
b. Labour availability and cost
c. Benefits and other savings
d. Union and time crunch
5. Evaluation of options:
I. Kimberly Street
Kimberling street has lower total cost estimation considering capital, overhead and
labour costs. It has higher benefits and savings. Union has to be delicately handled.
II. Hampton
Hampton location has higher total cost estimation considering capital, overhead and
labour costs. It has lower benefits and savings. No union at this location.
6. Recommendation: Sands Corporation should set up their new plant at Kimberly location
considering all the factors and their analysis.
7. Action Plan: (Do not write Action Plan in summary)
a. Construction should be initiated within the next two weeks.
b. Manager-Employee relations should be given priority and grievances should be
addressed within time so that union doesn’t mount pressure.
 c. Abundance of manpower can be utilized and work shifts can be started.

1. Situation Analysis:
 Sands Corporation is engaged in manufacture of various parts for the automotive, aircraft
and agricultural equipment industries and had annual sales of $26 million in the precious
year that is 1960.
 The company’s main plant’s employees became members of a national union for
collective bargaining representation in the year of 1942. Subsequently the company
established its two new branches in the years 1943 and 1946. Not required
 Sands Corporation after winning the competitive bidding (Good) for contract of
supplying military aircraft parts, realised in August, 1961 that the company required an
additonal facility to produce parts on larger scale to be able to fulfill the government
order. (Logical flow from contract winning to new facility required is present)
 The government order required delivery starting 10th April, 1962, and the contract also
has a penalty clause for non-delivery set at $1,000 a day after the exhaustion of one week
grace period. (Good)
 The plant requires 75,000 square feet of floor space and 600 employees, out of which 300
jobs would be available for skilled personnel, and 150 jobs each for semiskilled and
unskilled personnel.
 The company has shortlisted two sites for final consideration, one at Kimberly street and
another one at Hampton. Kimberly street location is few blocks from Clairmont’s main
plant while the Hampton site is 180 miles away from the main plant.
 It is estimated that capital and overhead expenditure will cost $420,570 more at Hampton
location than at Kimberly street location. Labour while it is cheaper in Hampton than in
Kimberly street, the availability of required manpower is present in Kimberly street.
 Other savings and benefits such as savings in form of fewer administrative personnel
required, better resale value and other such things are more visible at Kimberly street site
than at Hampton site.
 NO EVALUATION OF OPTIONS AND CRITERIA IN SITUATION ANALYSIS
  The Kimberly street plant if setup would mean that the new 600 plant employees become
part of main plant’s union due to proximity, while there will be no union at Hampton site.
 Contract was important for SC because it was a prestigious opportunity to improve its
financials and future contract would depend on success of this contract.

2. Problem Statement:

Taking various factors into account, deciding whether the new Sands Corporation plant must
be set up at either Kemberly Street or at Hampton location

3. Options:

Following two options are to be considered and analyzed

a. Plant installation at Kimberly Street

b. Plant installation at Hampton

4. Criteria for evaluation (Rank the criteria in terms of rationale)

a. Capital expenditure and overhead expenditure
b. Labour availability and cost
c. Benefits and other savings
d. Union and time crunch
1. Operating cost – Utmost importance as it will lead to higher profits
2. Ease of operation – Significance of contract and tight delivery schedule as it is important
3. Expansion Potential –
4. Decentralization programme – Additional, but a minor criterion. The decision will not
hinge on it

5. Evaluation of options
 I. Kimberly Street (Good job stating figures and exhibit number in evaluation
report)
a. Capital expenditure and overhead expenditure
The plant location of two acres will be costing $50,000 since the space in
Kimberly street is at a premium. While the property tax on this site will be
$1,770. The resale value for this site would be high since considerable amount of
industries were setup in Clairmount city and its vicinity. (See exhibit 8.1(a))

b. Labour availability and cost

Since Kimberly street is located in an industrial area there is abundant skilled,
semi-skilled and unskilled labour available. The rate per hour is a little higher in
Kimberly street than in Hampton but the excess manpower means lesser instances
of unavailability of labour. The total labour cost in Kimberly street is $2,449,200.
(See exhibit 8.2(a))

c. Benefits and other savings

Setting up of factory in Kimberly street will mean a saving of $63,000 per annum
(Seven employees at average annual salary of $9,000) since fewer administrative
personnel would be required owing to proximity to main plant. There is excellent
air, rail and highway transportation available. The proximity to main plant would
also mean the promoted Plant manager of the new plant can get instant assistance
from the main plant in case of difficulty.

d. Union and time crunch

The new 600 employees would be part of the main plant’s union and would give
them stronger bargaining powers. This can lead to differences if not handled
properly by the plant management.

II. Hampton
a. Capital expenditure and overhead expenditure
 The plant cost and property tax amount is less in Hampton than in Kimberly
street, while also getting a ten acre land. The utilities like electricity, water and
gas are at a premium and huge difference is noticeable between annual overhead
costs of Kimberly street plant and Hampton plant. (See exhibit 8.1(b))

b. Labour availability and cost

There is not enough skilled and semi-skilled labour available for the smooth
running of plant. Only 35 skilled workers are available as skilled labour, while
175 are available as semi-skilled workers as against the required amount of 300
skilled workers and 150 semi-skilled workers. The company has to bear additional
training cost for training semi-skilled and unskilled workers to make them skilled
workers before the plant becomes operational. (See exhibit 8.2(b))

c. Benefits and other savings

There are no special benefits associated with Hampton plant site

d. Union and time crunch

There will be no union in Hampton plant, and the company can have a greater say
in deciding the remuneration of workers. But this can lead to sense of uneasiness
among the workers if the management doesn’t resolve their grievances in time.

6. Recommendation:
Sands Corporation should set up their new plant at Kimberly location considering the total
savings of $233,370, the abundant manpower availability, the proximity to main plant and
other benefits associated with the site.

7. Action Plan (Do not write in paragraphs)

a. Construction should be initiated within the next two weeks, so as to construct the plant
well within the time frame of four to six months. This will also ensure the company is in
 position to start delivery from 10th April, 1962 onwards and hence can avoid the penalty
clause of $1000 per day.

b. Manager-Employee relations should be given priority and grievances should be addressed

within time so that union doesn’t mount pressure. Employees can be kept happy by resolving
all of their issues within time. The savings will provide the company some headroom for
possible future wages negotiation as and when the union will start it.

c. Abundance of manpower can be utilized and work shifts can be started. The industrial area
of Kimberly street means plenty manpower. The extra shifts can be started to increase
production or to meet deadline if production falls behind.

8. Exhibits

Exhibit 8.1

a. Capital and overhead cost at Kimberly street

Types of Annual Rate

Cost Requirement ($) Per Units Valuation Formula Total ($)
A B C D E F
Property
cost 50,000.00
Property
tax 3.54 100 dollars 50000 C x F / D 1,770.00
Electricity 40,00,000 0.101 1 Kw BXC/D 4,04,000.00

Water 2,40,00,000 0.11 1000 gallons BXC/D 2,640.00

cubic
Gas 5,00,00,000 0.46 1000 feet BXC/D 23,000.00
Grand Total 4,81,410.00
 b. Capital and overhead cost at Hampton

Types of Annual Rate

Cost Requirement ($) Per Units Valuation Formula Total ($)
A B C D E F
Property
cost 20,000.00
Property
tax 2.4 100 dollars 20000 C x F / D 480.00
BXC/
Electricity 40,00,000 0.21 1 kw D 8,40,000.00
BXC/
Water 2,40,00,000 0.251000 gallons D 6,000.00
cubic BXC/
Gas 5,00,00,000 0.71 1000 feet D 35,500.00
Grand Total 9,01,980.00

Exhibit 8.2

a. Labour availability and cost at Kimberly street

Rate
Shifts Number of per Number
Types of Hours per per weeks per hour of
labour shift week annum ($/hr) workers Formula Total ($)
A B C D E F

Skilled 8 5 52 2.25 300 BxCxDxExF 14,04,000.00

Semi –
skilled 8 5 52 1.85 150 BxCxDxExF 5,77,200.00

Un – skilled 8 5 52 1.5 150 BxCxDxExF 4,68,000.00

Grand Total 24,49,200.00

b. Labour availability and cost at Kimberly street

 Rate
Shifts Number of per Number
Types of Hours per per weeks per hour of
labour shift week annum ($/hr) workers Formula Total ($)
A B C D E

Skilled 8 5 52 2.05 300 BxCxDxExF 12,79,200.00

Semi – skilled 8 5 52 1.75 150 BxCxDxExF 5,46,000.00

Un – skilled 8 5 52 1.4 150 BxCxDxExF 4,36,800.00

Training Semi-
skilled to skilled 8 5 4 1.75 175 BxCxDxExF 49,000.00
Training
Unskilled to
skilled 8 5 6 1.4 90 BxCxDxExF 30,240.00
Training
Unskilled to
semi-skilled 8 5 3 1.4 150 BxCxDxExF 25,200.00

Grand Total 22,62,000.00

Assumptions for Exhibit 8.2 (b)

i. Extra training at rate of Rs.1.4/hour will be provided unskilled workers upto the level of
skilled workers for 6 weeks before the plant gets operational
ii. Extra training at rate of Rs.1.4/hour will be provided for getting unskilled workers upto
the level of semi-skilled workers before the plant gets operational
iii. Extra training at rate of Rs.1.75/hour will be provided for getting semi-skilled workers
upto the level of skilled workers before the plant gets operational

Exhibit 8.3

Total cost for each plant location

 Kimberly
Cost Street Hampton

Land cost 50,000.00 20,000.00

Property tax 1,770.00 480.00

Electricity 4,04,000.00 8,40,000.00

Water 2,640.00 6,000.00

Gas 23,000.00 35,500.00

Labour cost 24,49,200.00 22,62,000.00

Executive salary - 63,000.00

Total 29,30,610.00 31,63,980.00

Conclusion: The company will be savings a total of $233,370 if the new plant is setup at
Kimberly street location.

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