Situational analysis

for Sands Corporation

Report submitted to
Danesh Gojer

Submitted by:-
Riddhee .Gosar(60882)
Rima .Shah(60664)
Situational Analysis for Sands Corporation
Sands Corporation operates three plants in Midwestern section in the United
States. The company won a government contract for supplying military aircraft
parts for which the existing facilities of the company were not capable of
producing larger sizes as per government specifications. The company is
supposed to set up a new plant. Requirements for new plant are as follows:
Area 75000sq ft. (approx 1.72 acre) and Labour = 600 (300 skilled, 150 semi-
skilled, 150 un-skilled).
The company has a choice of two locations that is Kimberly Street and
Hampton. The construction of new plant would take around 4 to 6 months.
The company needs to start making supplies under the contract by 10th April
1962. Delay in which would attract a penalty of $1000 per day after the grace
period of one week.

Cost and benefits at Kimberly and Hampton

Kimberly Street is located in the industrial area of Clairmont near the main
plant. The total set up cost $651770 and operating cost is $3255640(see
Exhibit 1 & Exhibit 3). As the plant is located near the main plant, management
can closely supervise the work. Hampton is located 180 miles from the main
plant and 75 miles from the branch. The total set up cost $620480 and
operating cost is $3,554,500(see Exhibit 1 and Exhibit 3). In Kimberly the resale
value of land is higher as compared to Hampton but only two acres of land is
available where as in Hampton ten acres of land is available so expansion is
possible.

Labour

At Kimberly the labour force is available (see exhibi2) this labour force would
become a part of the union along with the main plant labour. The labourers in
the main plant had gone on strike this year and have returned to work on an
one year contract which would end in march 1962 and there are chances for
the labourers to go on strike again for price hike.

At Hampton only 700 replied to the questionnaire. The total population in the
area around Hampton plant is 9000 and taking into consideration family of
four and as only one family member is working it would lead us to the
calculation of 2250 work force available for Hampton plant. But the exact
division between the skilled, semiskilled and unskilled is unknown. The
municipal corporation of these cities do not feel the number of unemployed
worker is large.

The government supports the company to set up industries where there is

surplus labour available.

(Word count 417)

Exhibit 1`
CAPITAL COSTS
Kimberly street Hampton
Cost Rate $ Cost($) Rate Cost($)
Land 50000 20000
Construction 600000 600000
Tax 3.54$/100 1770 2.40$/100 480
Total cost ($) 651770 620480

* The assessment rate is assumed to be 100% of the value

OPERATING COST
Kimberly Hampton
Rate Consumption Cost($) Rate($) Consumption Cost ($)
($) in millions in millions
Electricity - 0.101 4 404000 0.21 4 840000
kilowatt/hr
Gas/1000 0.46 50 23000 0.71 50 6000
cubic feet
Water/1000 0.11 24 2640 0.25 24 35500
gallons
Labour 2826000 2673000
Total cost 3255640 3554500
($)
EXHIBIT 2
Labour available at Kimberly Street

3500

3000

2500

2000
Series 1

1500 Column1
Column2
1000

500

0
SKILLED LABOUR SEMI-SKILLED UNSKILLED LABOUR
LABOUR
Exhibit 3
Labour cost at Kimberly street
Rate ( Requirements Hours/day Days Month Total
$) cost
Skilled 2.25 300 8 25 12 1620000
Semi- 1.85 150 8 25 12 666000
skilled
Unskilled 1.5 150 8 25 12 540000
Employees - - - - - -
Total cost 2826000
for labour

Labour cost at Kimberly street

Rate ($) Requirements Hours/day Days Month Total
cost
Skilled 2.05 300 8 25 12 1476000
Semi- 1.75 150 8 25 12 630000
skilled
Unskilled 1.4 150 8 25 12 504000
Employees 9000-per 7 - - - 63000
employee/year
Total cost 2673000
for labour