Business Management Factory Relocation

Topics: Net present value, Cash flow, Diamond Pages: 26 (4438 words) Published: March 19, 2013
Should Lypsa Diamonds relocate its factory from Mumbai to Surat?

Candidate name: Sahil Patel Candidate number: 002151-041
Word Count: 1976



To evaluate if Patel Diamonds should relocate its factory from Mumbai to Surat.


Patel Diamonds is one of the largest retailers of diamonds in the local Indian market. It is also a major diamond exporter with interests in most global diamond centers. Presently, Lypsa Diamonds has its manufacturing facility in the suburbs of Mumbai comprising 100 mills with a monthly production of around 15000-20000 ct.

A sharp increase in the prices of rough diamonds coupled with inflation has caused a major increase in costs of productions, cutting profit margins substantially. Profitability can be increased by minimizing production costs and one way of doing this would be to consider relocation of the factory. The project aims to evaluate the relocation of the factory from Mumbai to Surat, taking into consideration the qualitative and quantitative factors.


An overview of the diamond manufacturing industry

The company profile

SWOT analysis of Surat and Mumbai as locations for the diamond processing industry Qualitative analysis identifying the strengths, weaknesses, opportunities and threats of both the locations.

Investment Appraisal
Financial analysis using NPV, ARR and Payback to evaluate both the options.

Projected profit and loss statement
The projected profit and loss statement of the company with the two different locations and the use of profitability ratios to evaluate the choice.

Impact on Human resources
Potential effects of relocation on the management staff and the laborers and the recruitment and training needs.


Collect primary data

Interview the proprietor of the company to know the general background of the company. Interview the operations manager to know details of the existing production facility. Interview the operations manager of a diamond processing unit in Surat.

Collect secondary data

Obtain statistics on the diamond manufacturing industry in India.

To analyze the data collected and assess the advantages of the two options, reaching a conclusion and making recommendations on the expansion method to be chosen


The relocation costs would also include compensation costs which would be difficult to estimate. The costs of production would be estimates varying considerably from factory to factory. It is assumed that only one size and type of polished diamonds are being manufactured to ease calculations of cash flows.


|SR.NO. |CONTENTS |PAGE NO. | | | | | |1 |Acknowledgements |6 | |2 |Executive Summary |7 | |3 |Introduction |8 | |4 |Company Profile |9 | |5 |Rationale for Study |10 | |6 |Location decision |11 | |7...
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