SANJAC Industries Expansion

SANJAC Industries has chosen to expand its widget operations into Houston, Texas. Following extensive deliberations and consultations, the Chief Operating Officer (COO has settled on a 0.78 acre commercial land along Tanner Road as the prime location for the proposed manufacturing plant. This presentation summarizes the rationale for the COOs selection. It covers areas such as the property cost, nature of the transport network, infrastructure considerations, and the projected labor and equipment requirements for the proposed facility.

Property Cost

The property, located at 0 Tanner Rd Houston 77041, is a piece of vacant land measuring 0.78 acres (approximately 33,977 square feet (SF). The land is valued at $26 per SF, or a combined value of $875,000 (Showcase.Com, 2022). The property is categorized as commercial with parcel identity number 0210700090008 (Showcase.Com, 2022).

The land contains a few trees and tree stumps that will need to be removed before construction can begin. The topography to be cleared is relatively flat. The land preparation processes will most likely involve eliminating stones, debris, and trees, clearing to the proper soil level, and grading it. Land clearing and preparation costs in Houston average $3,437 per acre (How Muc.net, 2022). Further, developers of commercial buildings in Houston are required to obtain a Buildout Permit for any new buildings or additions/conversions of existing structures (Houston Public Works, 2022). The permit costs $30.50 and is valid for six months (Houston Public Works, 2022). The breakdown for the projected land and building preparation costs per acre is presented in the table below from estimates obtained from credible online sites.

Item

Cost

Land Purchase

$875,000

Removal of trees

$1,000 ($200 per tree)

Removal of stumps

$300 ($100 per stump)

Grading

$500 ($0.15 per SF)

Disposal

$100 to split trees into firewood and leave in one part of the site for internal use

Labor

($1,500) $500 per day for 3 days (hourly rates)

Buildout permit

$30.50

Total land Preparation Cost

$3,430.50

Total Property Cost

$878,430.50

Ease of Transport to and from Transportation Hubs

Generally, the City of Houston offers plenty of options for public transportation ranging from light rail to the local bus system, cab service, the B-cycle program, Ride-sharing services, Airports, and Seaports.

Surface Transport Providers

METRO is the citys public transportation system. The proposed property is easily accessible by bus through the METRO local bus system. Customers using the local METRO bus system can board from, or alight at the Gessner Road Bus Station along Tanner Road, which is a four-minute walk from the property. Visitors can access the proposed plant on bus 126 from the City of Houston (Louisiana Street at Congress Station) a 41-minutes ride (distance of 29 kilometers) at a cost of $4 to Gessner road. Typically, around 85 buses ply this route every week.

Alternatively, one could take a taxi from the central business district in Houston, in which case they would take approximately 19 minutes to Gessner Road at a cost of between $35 and $45. There are multiple taxi operators available, including Fiesta Cab, Liberty Cab, and Yellow Cab Houston, as well as Ride-Sharing...

The corresponding labor requirement for year 2 operations will be:

0.5 single widget cases machine x 2 operators = 1 operators

1.5 Mystical wonder widget machines x 3 operators = 4.5 operators

Year 3

Single widget cases machine requirements year 3:

Available Capacity = 1,400,000 (350,000 units x 4 machines)

Machine requirement will be: 223/1400 = 0.16 of the available capacity, or 0.16 x 4= 0.64 machine.

Similarly, for mystical wonder widgets;

Year 3 machine requirement:

Available capacity = 2,850,000 (475,000 units x 6 machines)

Machine requirement will be: 1050/2850 = 0.34 of the available capacity, or 0.34 x 6 = 2.21 machine.

The corresponding labor requirement for year 3 operations will be:

0.64 single widget cases machine x 2 operators = 1.28 operators

2.21 Mystical wonder widget machines x 3 operators = 6.63 operators

The actual labor and machine requirements for both products vis--vis operations in other plants can be summarized as follows:

Single Widget Cases

Year

% Capacity Utilization

Machine Requirement

Labor Requirement

1

Projected: 33%

Calculated: 9.9%

Projected: 0.5

Calculated: 0.39

Projected:1.4

Calculated: 0.78

2

Projected: 47%

Calculated: 13%

Projected: 1.37

Calculated l: 0.5

Projected: 2.42

Calculated: 1

3

Projected: 50.4%

Calculated: 16%

Projected: 1.45

Calculated: 0.64

Projected: 3.13

Calculated: 1.28

Mystical Wonder Widgets

Year

% Capacity Utilization

Machine Requirement

Labor Requirement

1

Projected: 21%

Calculated: 14%

Projected: 1.9

Calculated:0.84

Projected: 5.6

Calculated:2.52

2

Projected:46%

Calculated:25%

Projected:3.4

Calculated:1.5

Projected:8.2

Calculated:4.5

3

Projected:92%

Calculated:34%

Projected:4.6

Calculated:2.21

Projected:12.8

Calculated:6.63

A negative capacity cushion exists for both products for all three years because the forecasted available capacity is lower than the expected demand as observed in other plants throughout the planning horizon (Jacobs & Chase, 2013). Thus, SANJAC cannot develop its operations and sales plan based on the current expected demand estimates as the available capacity is unable to support…