In 1949, Canadian grain shipping company, Superior Grain Elevator, Inc (SGE) was secondary in the grain shipping industry in Canada to the Saskatchewan Grain Cooperative. Local interest brought out SGE in 1974 and five years later, SGE shipped a million tons of grain during a year for the first time ever but, since that year, volumes of grain has been inconsistent. In 1990, SGE purchased property along the waterfront and has yet to see the needed return on investment from the acquisition. Manager Mike Armstrong received information about a Polish contract and wanted to know if the proposed agreement would help to increase shipment volumes and allow the company to obtain the required return on investment.
State the Assignment Question
The cost for the property SGE acquired was estimated to be $1,500,000. The company needs to make 20 cents per volume of shipment to make get a profitable return on investment but, unfortunately, the volume of shipments that will allow for that type of return has yet to happen. A five year Canadian-Polish contract in which SGE already provides twenty shipments per year to, is in negotiation. The following question is now posed to SGE: Would the addition of a third wharf make SEG more profitable?
The opening of the St. Lawrence Seaway along with the development of new locks in the Welland Canal and Sault Ste. Marie in 1959 attributed to 14 giant grain elevators, allowance of larger freighter ships to enter the lakes, and an increased density of ship passage (Bell, 1998). As a result of the new development along the waterfront, SEG was able to grow steadily and eventually maintained shipment volumes of a million tons for the first time in company history in 1979. Since then, however, the amount of volumes of shipment has been inconsistent resulting in some good years and some average years. Some possible causes for the inconsistencies of shipment volumes can be
References: Bell, P. C. (1998). Superior grain elevator, inc. Richard Ivey School of Business.