Relocating Smitheford Pharmaceuticals to the US

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Table of Contents

Introduction
Transportation Model
Labor Costs
Impact on Image
Estimated Costs and Benefits
Recommendation
Conclusion
References

Introduction

The current cost of production in the current environment and the affordability directly connected with it are components of achieving company goals, and they may be one of the most crucial factors to consider. Profitability is essential in any firm, but there are also other factors. Careful consideration must be given to the possible adverse publicity that might result from shutting a whole manufacturing facility in Canada. Other aspects to consider are the utility of the building, a structure on 245 acres of land, its location, and its $7,000,000 price tag.

Transportation Model

The existing transportation strategy is based on the fact that a sizable portion of raw materials is shipped from Colorado to Canada. The final pharmaceutical product is exported from Canada, mainly to the United States, Central America, and South America. Alone, the travel to Colorado is 1576 miles long. It takes two days to go there and back, or around 24 hours. Smitheford Pharmaceuticals has a fleet of vehicles intended explicitly for Colorado-Canada and Canada-Colorado routes. Three hundred fifty trailers and 50 tractors make up this fleet. There are often eight runs each day from each place to the other. That amounts to around 5012 runs annually, with Sunday being a rest day.

Diesel fuel costs $2.533 per gallon, and the average tractor can go six and a half miles per gallon. As a result, each journey costs an average of $614.16. The corporation is paying $9826.56 per day on petrol when compounded by the 16 trips made each day. The tolls for each journey also cost $91.70. This translates into a daily toll expense for the corporation of $1467.2 when multiplied by 16 trips. Total transportation expenditures come to $11,300 per day or slightly over $3.5 million annually.

Labor Costs

The higher labor cost in Canada compared to the United States is another financial aspect to consider. “Average all-in labor expenses in the sector” (pay, benefits, and taxes included) are now $35.76 in Canada and $34.74 in the US, respectively. Canada’s manufacturing sector continues to decline year after year. Higher labor costs are the result of slower productivity. A little more than ten years ago, when Canada’s labor costs were lower than those of the US, this was not the case. Unfortunately, with the implementation of NAFTA, taxes also rose in Canada, along with labor prices.

Impact on Image

There will be negative impacts if a large manufacturing facility is moved out of Canada. First and foremost, the lives of everyone engaged will be impacted in some way. The worst effects will be seen by individuals who lose their jobs and have no other viable options. While moving is complicated, most employees will have the choice to do so (Rajesh & Kaintura, 2017). This action is being taken to enhance the business and pave the path for potential future development, not to address the company’s failure to keep its doors open. Second, even if Smitheford Pharmaceuticals does not have a sizable employment base, nearby companies can nevertheless experience a drop in total sales due to the company’s departure.

Naturally, the firm will suffer as a result. Locals may feel outraged about the loss’s impact on their community’s economy and feel for their friends, family, and society in general. The firm will have a tarnished reputation, but it is unlikely to spread beyond the nearby area. Any unfavorable press that may result from the decision will be defended by the reputation built globally and the good done for the numerous communities across the world. Leaving Canada, Smitheford Pharmaceuticals will initially lose some market share, but still, with more production and efficiency in the United States, it is likely to recover that share and grow it.

Estimated Costs and Benefits

The financial reductions that come with transferring the company outside Canada are one of its main advantages. Currently, it is situated on 245 acres that are worth $7,000,000 (S. Berne, 2019). The proceeds from selling this land will go a long way toward covering the costs of transferring and may even enable the acquisition of a brand-new cutting-edge facility in the United States. In addition, there will be immediate savings due to lower taxes in the United States. The corporation will reduce its annual spending on travel costs, vehicle maintenance, and fuel use. Except for some particular raw materials that can only be acquired elsewhere, most of the suppliers are headquartered in the US.

Recommendation

In the autumn of 2019, the idea to relocate the facility emerged. Nobody could have foreseen at the time how a worldwide epidemic would have such a profound effect on the globe and the economy. Admittedly, they should stick with the advice to leave Canada despite many setbacks and much thought (Vanden, 2017). They should become increasingly aware of how crucial they are at this tremendous moment of need, despite the possibility that the epidemic will impede and dictate some of the plans. Government exemptions from both nations will allow us to relocate staff and take care of relevant travel needs, even though general travel restrictions may hinder the relocation.

Conclusion

In many ways, COVID-19 has had the unfavorable side effect of causing the business to grow. Additionally, “demand for pharmaceuticals and the lockdown in some nations may drive the FDA to accept flexibility in a few areas.” The FDA’s lowered limits will enable Smitheford to satisfy the demand for pharmaceutical supplies during these challenging times. Finally, although the proposal to leave Canada was not made lightly, it was made with the people’s best interests in mind.

References

Rajesh Babu, R., & Kaintura, P. (2017). 5. North American Free Trade Agreement (NAFTA). Yearbook of International Environmental Law, 28, 437–443. Web.

S. Berne, A. (2019). Event report – big data in the pharmaceutical sector. European Pharmaceutical Law Review, 3(1), 37–45. Web.

Vanden Eynde, J. (2017). Pharmaceuticals: Impact factor or citescore. Pharmaceuticals, 10(4), 61. Web.

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