week 7 discussion

Neha Desai in response to this Topic

3/7/2017 11:15 PM EST | 204 words

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Its not advisable to close the Clayton facility since it has no resale value.If the Clayton facility was to be sold, the company will have to rent additional space close to the other two processing centers, adding additional costs.Increase in rent is estimated at $600,000 and decrease of administrative expense at $90,000. The net increase in costs is $ 510,000 towards yearly financial performance. Other than the loss of one contract, there is no major cost at this point of using the Clayton facility.

It’s not ethical to lay off employees at Clayton and then re-hire new ones at Billings or Great Falls just because of an inexperienced contractor who lead them to go over their budget or by losing a contract. Ms Rumeros should focus much of her attention on managing the bottleneck. As discussed in this book, managers should emphasize activities that most profitably utilize the constrained resource. In this case the constraint resource is losing the contract.

Depreciation would have no impact if Clayton was to charge for its services because depreciation is a sunk cost, hence not relevant in decision making purposes. However, to charge further for their services, Clayton facility will definitely loose customers and eventually lead to bankruptcy if losses are reported every year.

Benjamin Ogle in response to this Topic

3/7/2017 7:26 PM EST | 207 words

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1. The Clayton facility should not be shut down. Over time, the facility will pay for itself but once the facility is shut down, it will put extra work on the other two facitiliies. This will result in poor customer service for the remaining locations as the clients will have to expect to wait longer for turnaround times, resulting in clients looking eleswhere to take their business.

2. I believe it is ethical to close down a facility as long as every attempt has been made to keep their employees and offer them other positions within the company. If the facility is not located near the Clayton facility, then relocation expenses should be given to those displaced workers. There really wouldn’t be any reason for the closure of the facility as it still performed pretty well in terms of sales.

3. I don’t think it is necessary to focus on the prices charged by Clayton for its services. This could send customers running to other vendors and losing business altogether. I would look to reduce internal costs, but not headcount (as long as there is not too many chiefs and not enough Indians), and would also do some kind of backroom handshakes with local municipalities for tax breaks and such.