Machine and Labour Requirements Calculations

SANJAC INDUSTRIES EXPANSION

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 COO’s 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 city’s 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 services including Lyft and Uber. Visitors could also drive from Houston City to Gessner Road at an estimated fuel cost of between $3 and $4 exclusive of toll fees.

The property is approximately 36 kilometers from the Houston George Bush International Airport and 50 kilometers from the Houston Hobby Apt Airport, from where visitors could take the METRO bus service on either line 040 or 050 at a cost of between $5 and $7, or take a taxi to Gessner Road at an estimated cost of $65 and $80. The property is also served by the sea port of Houston, one of the world’s largest and busiest seaports, which is a 30-minutes drive away. Port Houston is the 7th largest seaport globally for total twenty-foot equivalent unit (TEU) containers and its proximity to the proposed plant will beneficial in moving raw materials and finished widget products along the Gulf Coast (Port Houston, 2022).

Infrastructure Considerations

The property is located at the intersection of Tanner Road and the Sam Houston Toll Road, which give it crucial highway access for the effective transportation of raw materials and finished products by road. The property is also served by to the north by the Northwest Freeway HOV Express Lane (US 290 High Occupancy Vehicle, HOV), which links the area to downward Houston in the mornings, and from downward Houston in the afternoons seven days a week. The property map is available at https://www.loopnet.com/Listing/0-Tanner-Rd-Houston-TX/25482292/.

An interactive map of Harris County indicates normal traffic, with minimal disruptions from accidents and extreme weather events (Local Conditions.com, 2022). This points to effective surface road conditions that will ensure smooth traffic flow and effective delivery of raw materials and finished products.

Equipment and Labor Requirements for the New Facility

SANJAC produces two widget models: Merlin Mystical Wonder Widgets (single widgets) and willow widgets (cases). The team plans to have four machines for producing willow widget cases and 6 for producing Merlin mystical wonder widgets at the new plant. The 4 machines have the capacity to produce 350,000 units annually and are operated by two operators each, while the 6 can produce 475,000 units annually using three operators each.

The first step in calculating machine and labor requirements is to obtain the yearly demand for both products.

Equipment and labor requirements for the current year (year 1) is then obtained by:

Dividing the total annual demand by the available capacity for producing each product. Thus,,

Single widget cases machine requirements year 1:

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

Machine requirement will be: 138/1400 = 0.099 of the available capacity, or 0.099 x 4= 0.39 machine.

Similarly, for mystical wonder widgets;

Current year machine requirement:

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

Machine requirement will be: 400/2850 = 0.14 of the available capacity, or 0.14 x 6 = 0.84 machine.

The corresponding labor requirement for year 1 operations will be:

0.39 single widget cases machine x 2 operators = 0.78 operators

0.84 Mystical wonder widget machines x 3 operators = 2.52 operators

Project equipment and labor availabilities over the planning horizon

Projections involve carrying out the same calculations for each product for years 2 and 3

Single widget cases machine requirements year 2:

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

Machine requirement will be: 176/1400 = 0.13 of the available capacity, or 0.13 x 4= 0.5 machine.

Similarly, for mystical wonder widgets;

Year 2 machine requirement:

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

Machine requirement will be: 700/2850 = 0.25 of the available capacity, or 0.25 x 6 = 1.5 machine.