Report: Hurbank plc

I'm now an independent management consultant, to write a report to the analyse the main arguments for and against the relocation.

For:
By looking at the Human resource and operations data for Cellton factory and the information on possible Chinese relocation. Above 80% employees are trade union membership and there's non in China, that means Chinese workers are unprotected and then Hurbank plc can make worker on overtime, and the unemployment in the region of the new factory in China is 14%, which is high. Also, the average annual pay within Chinese region is very low, which is 2,000 pounds pa and the average proposed annual pay for staff in Chinese factory is 16,000 lower than the average proposed annual pay for staff in the UK factory. This is a big advantage to Hurbank plc to reduce the cost for long views. Also Hurbank plc has to pay the net present value of the investment for the first five years about 5.7 million pounds, which is a large number. By looking at the break even, it is faster to meet the break-even point if the factories are relocated in China because the lower variable cost and lower fix costs, that means the risk of the loss has been reduced. We also can see, at the same volume (700), the profit will be higher, and there is 25% more capacity, so that much more profit!

Against:
By looking at the Human resource and operations data for Cellton factory and the information on possible Chinese relocation. There are absolutely the estimated costs of relocating and setting up in China, and this will cost a lot about 22 million pounds. This big cost may case cash flow problems and the company may be forced to increase their bank loans or bank overdraft. Also, the percentage of shirts returned by customers will be increased a lot from 0.01% to 1 %, this means the quality of the shirts are being bad and this will affect the company's reputation straightly, otherwise, the Hurbank plc has to introduce new machine and train the Chinese workers to improve the quality, and this increases the cost. The lead time is being longer as well because China as far away from the UK, and the number of redundancies in the UK is 350, and each person cost the company 100 pounds. Also, there's a forecasted change in the value of pound relative to Chinese currency, and it is -18%, which is not good to the Hurbank plc.

In summarise, I don't think to move all three factories to China is a good idea, because the disadvantages are more than the advantages above!