Sharon Construction Corporation Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Question No. 1: Analyze the five proposals and make recommendations based on expected cost.

Answer:

SITUATION ANALYSIS:

The Sharon Construction company came into being in 2009 with the objective of construction of buildings and stadiums. Jim Brown, the owner of the company called a planning meeting with Bonnie Green, the director of personnel, after the company was awarded a construction contract for a 20,000 seat stadium. According to the agreement, the construction of the stadium must begin from the 2^nd week of Feburary and must be completed within the 52 weeks (1 year) and can make $3 millions.

PROBLEMS STATEMENT:

On the other hand, the penalty of $100,000 per week will be borne by the company in case the company failed to complete the stadium within time. Another clause stated that in case the project goes beyond 48 weeks, then the company would expect to bear $7000 per week as an additional overhead costs and on the other hand the company could save $7000 per week if the stadium completes before 48 weeks of time. Another problem the company was facing was that the company would have to use unionized labor force. The labor agreement would expire in 42 weeks of the project. As per Ms. Bonnie Green, the director of personnel, the chances of labor strike became another problem. The chances of the labor strike were 50-50. As Ms. Green figured that in case if a strike occurred, there was around 70% chance that it would last for 8 weeks and remaining 30% chance that it would go for maximum 12 weeks. Mathematically, this can be expressed as:

No strike: 50% probability.
Strike occurs:
- 8 weeks: 35% probability (50% * 70%)
- 12 weeks: 15% probability (50% * 30%)

DIFFERENT PROPOSALS / ALTERNATIVES:

Accelerate the pouring of seat gallery supports. The asking price for this alternative would be $135,000 but it will cut the length of the activity to the maximum of 6 weeks.
As all remains same as the above mentioned alternative but a cost of $70,000 would be needed in order to put a double shift on the filling of the field. The benefit would be a reduction in the duration of 5 weeks.
By inducting an amount of $60,000, the time duration for the expedition of the roof could be reduced by 6 weeks with the help of using 3 shifts and some overtime.
Do nothing until the 1^st week of December, wait for the possible strike and then expedite all remaining activities. In that case, if the company wants to cut down the duration of any activity to no less than 1 /3^rd of that activity, then this would cost the company $20,000 per activity per week reduced.
No need to take any special action.

COST AND BENEFIT ANALYSIS OF EACH ALTERNATIVES:

1^st proposal: Expedite the pouring of seat gallery supports. The asking price for this alternative would be $135,000 but it will cut the length of the activity to a maximum of 6 weeks.

This proposal stated that the speedup of the pouring of seat gallery process would need to invest the extra amount of expense in order to get benefits. The personnel director and Mr. Jack, who has attended a Risk Analysis training course, expected that this would cost around $135,000 and savings of $42,000 in terms of overhead costs. So the cost would be $93,000.

2^nd proposal: As all remains same as the above mentioned alternative but a cost of $70,000 would be needed in order to put a double shift on the filling of the field. The benefit would be a reduction in the duration of 5 weeks.

This proposal stated that along with the speedup the process of pouring of seat gallery, an additional shift could be introduced in the process of filling of the field. As expected, this alternative would cost about $135,000 , plus, an additional $70,000 will be incurred and net saving would be $49,000 ($7,000 per week for 7 weeks). So the additional cost would be $156,000. This seems less favorable alternative than the above alternative but this could bring more reduction in time at the expense of high cost associated with it. The additional cost would be $63,000...........................

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