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New Distribution Facility in Northeast PA

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I am needing assistance with the task which is attached. Basically the company is wishing to consider construction of a new facility within the northeastern part of the US and you are to formulate your thoughts of how/why/where.

These are my thoughts

Instead of moving or erecting a facility in Northeast PA (where it suggests) it should be done in VA which is near a port as this area has a lower cost of living/lower taxes/land, etc.

Then the questions -

1 - What kind of data will you need to fully perform your analysis? - You would need real estate information data, tax information (both personal for associate relocation and corporate), trucking costs, transportation costs, and all other costs which I cannot think of at this time.

2. - Remember that adding a new distribution facility will reduce the volume through other facilities. Transportation costs will clearly be affected; instead of shipping products by truck from Charleston, SC (the nearest existing facility), products will be shipped from eastern PA to the Northeast. A new facility will also affect inventory levels (and valuations). - This area would pull from the SC facility and the Savannah facility and probably in turn close the Savannah facility which is in turn struggling anyway. It will in turn be a go between so to speak for the other areas as it in between.

3 - Which products will you propose to distribute through the new facility? - This I feel should be perceived by the demand of the market/customers. It should be housed with the products the customers in the area purchase - thus making it a one stop shop so to speak.

4 - How will you estimate the construction costs of the new facility? How will you estimate the cost of real estate for the new facility? - I think these are connected and should be done through the hiring of a professional company which is an expert in this field as this is a large transition/investment for the organization.

5 - How will you estimate the operating costs of the new facilities? - I would think they would be compared to the facilities which are currently operational within the company.

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New distribution facility in Northeast PA

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I fully agree with the fact that instead of an inland location in Pennsylvania, a coastal location in either Virginia or New Jersey, which provides option for sea going ship and barge transportation, will be more feasible for the company in terms of reducing the cost of operations and transportation. The locations in Virginia or New Jersey will not only reduce the cost of transportation, but will also offer lower operational costs due to lower cost of living. As the previous analysis of the proposed facility in Pennsylvania has already highlighted the fact that the costs outweigh the benefits, there is no doubt that the proposed facility in Virginia or Jersey along the shores or water body will be much more beneficial for the company.

Now let us go through each question in this context:

1 - What kind of data will you need to fully perform your analysis? - You would need real estate information data, tax information (both personal for associate relocation and corporate), trucking costs, transportation costs, and all other costs which I cannot think of at this time.

The following data will be required to conduct an indepth cost benefit analysis of the proposed distribution facility in the North East:

1) Real Estate Data: The first information that will be required is the data for the real estate rates in the proposed location in order to ascertain the cost of purchasing the land for the proposed contruction of the facility. In order to get this data, a survey of the local area with the help of various real estate brokers should be done and the most competitive rates for various options in the area should be obtained.

2) Taxes and benefits for setting up operations in the state: Another major area to analyze is the tax structure in the proposed state. It is essential to know whether the tax structure will prove to be beneficial for the company for ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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