As far as organizational change is concerned, there are hard decisions that have to be made by the decision makers. Numerous issues have to be addressed and the overall profitability of the organization taken into consideration. Smitheford pharmaceutical has been a very successful company for the last century standing on its feet against all odds including global financial recession. The company has over the years expanded bases and opened its operations in new areas including Pueblo, Fort Collins, Colorado, Grand Junction and Durango. The progress of the organization has been based on Fredrick Taylor’s approach on employee satisfaction and improvement methodology. However, the approach has come under heavy challenge especially in the Canadian market where the NAFTA (North American Free Trade Agreement) has imposed strict rules that constrain the organization’s overall performance in the region. This has led to the management to ask the viability of remaining in the region while providing an option for relocation from Toronto, Canada to Colorado, U. S.
Canada, for a long time, has been a good country to invest in due to conducive investment opportunities and regulations that attracted many organizations and stabilized its economic arena. However, over the years, there have been changes and stricter regulations that have been put through and continue to be put through that have in recent times constrained the operations of various companies within that region. This has prompted companies to look for alternatives for them to either relocate their business dealings and whole companies or make adjustment s that will ensure that the company remains profitable. It is for this reason that Smitheford pharmaceuticals intend to weigh the options of either pulling out of that region totally or otherwise as per the figures and research. In this research, as the operations manager of the Canadian branch of Smitheford pharmaceuticals, there is consideration of the available options and figures supporting the best decision that the organization should take as far as making decision on the matter is concerned.
Financial Obligation for Transporting from Toronto to Colorado
In this section, there will be consideration of the option of transporting the whole factory and its operations from Toronto Canada to Colorado U. S. In this option there are various financial burdens that have to be taken into consideration. For example, the fact that the company has employed Canadian citizens obligates the company to comply with the compensation policies that have been laid down by the country. Ordinarily, a pharmacist in Canada is paid about $ 66, 192. The top management can earn up to $ 99, 027. Assuming that Smitheford Pharmaceuticals has employed about 200 employees to work in the organization; on an annual basis, the company pays a salary range of between $ 13, 238, 400 to $ 19, 85, 400 to its employees. Upon termination of their contract by virtue of the fact that they would have to compensate their employees an average of between $ 397, 152 to $ 594, 162 or more per employee depending on how long the employee has worked on the organization. This should amount to about $ 118, 832, 400 for the 200 employees.
Taking the translocation expenses into account for relocation from Toronto, Canada to Colorado, U. S., the following figures are likely to occur. According to Long Distance Mover Cost (2007), and calculating based on their charges, the distance between Toronto and Colorado should be about 1, 355 miles that is equivalent to about 2, 181.7 km. Estimating that the total weight of all the products (including the manufactured drugs, machinery and all other assets except fixed assets like land and premises), the total weight of these movable products and parts is estimated to about 77,097,505 pounds that is approximately 17 metric tons.
Moving this amount of weight would cost about $ 113,333,333,300 on transport alone (Long Distance Mover Cost, 2007). Adding Tipping charges according to Long Distance Mover Cost (2007), this would yield an addition of about $ 1,156,462,585 to the cost (Long Distance Mover Cost, 2007). Adding moving insurance that is calculated based on the weight of the commodity on transit would add another $ 595, 578, 231 to the cost (Long Distance Mover Cost, 2007).
Looking at this amounts that have to be incurred, even if the land on which the company is located is a prime land and can earn a whopping $ 7 million, the transfer would not be worth it. Another reason to support this is the fact that since there is closure of the operations of the company in the region would result in wastage of crucial production time and thus decrease the annual cost of the company.
Relocation is not expected to take one day since there has to be removal of all machinery (disassembling) for relocation that can take several weeks. At this time of financial go-slow, every dollar is important. Additionally, relocation would either mean that the company has to invest on purchasing a new piece of land for setting up these operations in the new area or having to set apart a location to keep the moved items awaiting further directions.
Impact on market
According to Heizer and Render (2012) and Coughlan and Coughlan (2002), it is important that an organization keep its current customer since it is four times as easier to keep a current customer than win one. Relocation from the current Toronto, Canada would jeopardize the confidence that the customers in Canada have on the company. It is likely that despite exporting the same drugs to Canada upon relocation, companies that remain in the region will have gained a milestone set previously by Smitheford pharmaceuticals.
For the location in Toronto, there is likely to be major political setbacks and thus harder reentry standards upon ease of laws by the Canadian government in future since politicians will make it harder for such companies to invest back based on past actions (Treasury Board of Canada Secretariat, 2011).
The Way Forward
Instead of pulling out, there should be action plan that should be taken to ensure that the company remains competitive. The following is an action plan that is intended to run for twelve months starting from February.
February: In February, there should be realignment of the top management by eliminating redundant positions in the organization. This calls for increase in roles for top management and building a stronger committee that has more roles in the organization. This committee should formulate ways of reducing the number of employees in the organization. The committee should also be empowered to look into ways of revising the compensation packages for those employees that will remain and the additional roles that each employee can handle.
March: In the month of March, there should be evaluation of redundant employment positions and those that share roles and action plan to decrease the number of employees. This should be handled by the management committee. Some roles like customer care can be automated and outsourced offshore (Heizer & Render, 2012).
April: Implementation of organization resizing and relieving duties from employees to be dismissed from the organization based on their credentials and necessity in the new reorganization (Coughlan & Coughlan, 2002). Evaluation of possible offshore outsourcing jobs in the organization.
May: Employees who were left behind after some were relieved would be assigned more work through delegation. Furthermore, research and development would be outsourced with acquisition of novel equipment to quicken drug production.
June: Implementation of the new modern equipment on drug production with robotic support system to ensure continuous production throughout the day and night.
July: Training personnel on operation of the new machinery. Automation of sales and purchases, and decrease delivery time by opening up new distribution centers in remote places.
August: Evaluation on the proposals given on outsourcing and decision-making by the committee on selecting the most credible and reliable outsourcing company for various tasks like research & development, customer service among others.
September: Start of the implementation of the outsourcing by meeting with the necessary stakeholders and affirming the demands of the company.
October: Introductory training to key personnel on outsourcing to monitor in real-time the implementation of the program. Consideration of the ethical and professionalism in the outsourced program and ensuring that there is strict adherence to all the necessary rules and regulations.
November: Reassessment on any redundant positions and action taken based on the necessity of the work by either addition of tasks on personnel with fewer tasks or by relieving such persons of their positions in the organization.
December: Risk evaluation and critical evaluation on the performance of the organization thus far based on the changes implemented. Consideration of the dynamics that come about in the socio-technical system (Coughlan & Coughlan, 2002) and awarding employees based on the performance of their individual and group performance.
In conclusion, it is evident that despite the option to pull out of Canada due to high salary scales and high taxes, it is imperative to remain in the region and instead realign the organization for increased profitability. In this case study, it has been shown that opting to relocate from Toronto, Canada to Colorado, U. S. would result in massive losses that would take years to recover from. Having been in the region for a long time and having a large customer base, it is possible to increase production by restructuring the organization to ensure efficiency and effectiveness in operations.
Coughlan, P., & Coughlan, D. (2002). Action research for operations management, International Journal of Operations and Production Management 22(2), 220-240. Retrieved from http://search.proquest.com/docview/232332281?accountid=45049
Heizer, J. & Render, B. (2012). Operations management. Upper Saddle River, NJ, Pearson Education Inc.
Long Distance Mover Cost. (2007). How much does a long distance mover cost? Retrieved from http://home.costhelper.com/long-distance-mover.html
Treasury Board of Canada Secretariat. (2011). Canadian cost-benefit analysis guide: Regulatory proposals, Secrétariat du Conseil du Trésor ddu Canada. Retrieved from http://sciencepolicy.colorado.edu/students/envs_5120/CanadaCBA.pdf