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Research Paper Written
Research Paper Written
PLANT FACILITIES
The company operated three plants, all of which were located in the
Midwestern section of the United States. The main plant and executive
offices were in Clairmont, a large, highly industrialized city, and the two
branch plants were in small town 60 miles apart, approximately 200
miles from the main plant.
The main plant had floor space of 225,000 square feet, and was equipped
primarily for deep drawing, punch pressing, forging and assembly
operations. The plant employed 1,750 people, who were members of a
national union which had been the sole collective bargaining
representative of the main plant employees since 1942. The company
had maintained satisfactory labour relations until March, 1961, when a
strike for higher wages closed the main plant for three weeks. Although
the employees had returned to work under a new one-year contract,
management was not sure that the issue had been resolved, since the
union had indicted that it was not completely satisfied with the
settlement.
Sands Corporation’s two branch plants each had floor space of 60,000
square feet and were equipped primarily for automatic screw machine
operations. While the branches manufactured some finished parts for
shipment direct to customers, a major share of the parts produced were
sent to the main plant for further processing and final assembly. The
branch plants each employed 500 people, who were not members of a
union, although attempts had been made to organize the plants. Both
plants were the major industrial concerns in towns of approximately
3,500 people which were located in the centers of farming areas.
PLANT DECENTRALIZATION
Sands Corporation had established its first branch plant in 1943 and its
second one in 1946. The decision to set up branch plants in small towns
instead of enlarging the main plant had been made for several reasons.
The management believed that the grater dependability of workers in
small towns and the closer relationships between executives and
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From Raymond, Thomas Cicchino (1964) Problems in Business
Administration: Analysis by the case method. New York: McGraw-Hill.
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employees in small plants would result in less absenteeism, lower
turnover, and greater pride on the part of employees in their work, all of
which would contribute to higher labour productivity. Executives
believed, furthermore, that operation of a branch plant in a small town
would mean savings in land cost, taxes, wages, and other costs of doing
business. They believed that the company could develop executive talent
more readily in a small decentralized plant and that the manager of a
small plant could maintain, with a minimum of red tape, closer and more
effective control of operations. The management considered a plant
employing from 500 to 600 people to be the ideal size for the company’s
operations.
The step-up in military and space programs in 1960 and 1961 led to
increased orders for the Sands Corporation, primarily for parts and
fittings in military aircraft, tanks and other military vehicles. By August
1961, it became apparent that the company needed additional plant and
equipment to fulfill a contract for military aircraft parts which it had
won on competitive bidding. Existing facilities did not lend themselves
to the production on such items because government specifications called
for larger sizes than could be produced on company-owned machine
tools, which furthermore, were being used to near capacity to produce
parts for regular commercial customers and for the Defense Department’s
tank and military vehicle program. Company officials predicted that
existing facilities would reach capacity at some time during the next 12
months. An informal investigation indicated that managerial and
supervisory skills at the middle management level were not available for
a second or third shift at any of the existing plants.
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Government orders required delivery starting April 10, 1962, with a
$1,000 a day penalty clause for non-delivery after a grace period of one
week. Moreover, Sands executives were aware that if the company were
unable to meet delivery schedules, it would probably not be able to
obtain additional government contracts.
Company official took the position that the demand for military aircraft
parts would decline with any reduction in government expenditures for
national defense. After World War II, the company’s production of these
items had fallen 95%. During that time it had used the released floor
space to manufacture automatic parts, for which there was a large
postwar demand, and to produce new items designed for markets served
by the company.
Executives believed that the new plant would require 600 employees.
Approximately one-half of the available jobs would call for skilled
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personnel, such as machine tool operators, while the other jobs would be
evenly divided between semiskilled and unskilled personnel. Supervisory
and executive personnel would be selected from the present staff. It was
expected that the assistant manager of the main plant would become the
new defense plant manager.
PLANT SITE
The Kimberly Street site consisted of two acres of land which could be
purchased for $50,000. The company estimated that real estate and
personal property tax rates would be $3.54 per $100 of assessed
valuation. Electricity, gas, and water were in ample supply at the
following rates: electricity; $0.101 a kilowatt hour; gas $0.46 a thousand
cubic feet, and water, $0.11 a thousand gallons. Management thought
that on an annual basis the new plant would use 4 million kilowatt hours
of electricity, 24 million gallons of water, and 50 millions cubic feet of
gas. Excellent air, rail and highway transportation facilities were
available. The company estimated that transportation costs on incoming
materials and outgoing products would be about the same for both sites.
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The alternative site, Hampton, was a town of 1,200 people in the center
of a farming area. Within a ten-mile radius were six other towns with a
total population of 7,800. The two nearest large cities were 24 miles to
the southwest and 40 miles to the northeast. Municipal officials in these
cities reported that there was some unemployment, but they did not think
the number of unemployed workers was large.
The company had conducted a mail survey of the labour force within a
ten-mile radius. Questionnaires were sent to all households in the area.
Those receiving the questionnaires were asked if they would be
“available” for work in a new manufacturing plant if one were to open,
and respondents were also requested to indicate what experience they had
had in machining or assembly work. In the replies, 700 people said that
they would be “available.” Of this 700, 5% indicates that they had one
or more years of experience in the operation of machine tools, 10% had
six months to a year’s experience. (At least a year’s experience in
machine tool operation was required before a man was considered
skilled.) An additional 15% said that they had had experience in
assembly work which did not involve mechanical skills. The remainder
had had no experience in machine or assembly work at all. Sands
Corporation officials estimated that the average beginning hourly wage
rates would be as follows: skilled, $2.05; semiskilled, $1.75; and
unskilled, $1.40. Shopping and recreational facilities and housing were
considered adequate.
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EXHIBIT 1
SANDS CORPORATION
Net Sales and Income, 1942-1961
*Estimate
EXHIBIT 2
SANDS CORPORATION
Organization Chart
President