Key Issues of Project Management - Coursework Example

Project Management Project Management Question i) Net work diagram L K J D H G E F A B Critical path is identified by identifying equal EST and LST throughout the path: therefore Critical Path for the project B-E-H-J-K-L. EFT and LFT are calculated by adding the activity time duration to EST and LST correspondingly Activity Description EST LST EFT LFT Duration (wks) TOTAL(LFT-EST-D) FREE FLOAT(EFT-LST-D) INDEPENDENT FLOAT(EFT-LST-D) A Adapt sites & shops 0 0 7 9 7 2 0 0 B Negotiate with suppliers 0 0 4 4 4 0 0 0 C Prepare workforce 0 0 1 2 1 1 0 1 D Fit new pumps 7 9 11 11 1 3 3 1 E Order goods & await delivery 4 4 6 6 2 0 0 0 F Recruit & select staff 1 2 3 4 2 1 0 0 G Train staff 3 4 6 6 2 1 1 0 H Stock shop & display goods 6 6 8 8 2 0 0 0 J Test tills& stock systems 8 8 11 11 3 0 0 0 K Fire service inspection 11 11 14 14 3   0 0 L User Testing 14 14 19 19 5 0 0 0 (ii) In assuming that there is a delay of five weeks in completing activity F. The analysis of one action that the Project Manager would take to avoid exceeding the current length of the critical path is to crash other activities or reschedule the activities so that not more than 19 weeks are required to complete the project. This is because in decreasing time of critical activity normally come on with other direct costs. And the option of crashing the project will depend on the following factors; the resources are in abundance therefore addition of the resources can be done up to the level which communication cost are augmented, and the productivity diminishes. In this situation the project manager may decide to sub contract or even to out source the project work. Another thing which could be done is to introduce over time and multitasking in some activities. Activity F is the Recruit and selection of staff therefore if this is delayed with five days then it means the preceding activities will also delay and not as initially planed. The factors considered before choosing the localities include, Nature and type of business, nature and type of business, is the greatest factor to be considered. Pertinently, the businesses that rely on consumers that do drive from the public road are the most targeted. The business will rely heavily on transportation sector and other industries that uses petroleum product as their energy for moving the machines. Hazma Biodiesel has to get their location in a suitable place. Availability of resources; Hamza has an expectation of $103950 but the actual capital the company has is $85000. This amount of money the company is able to secure some of the equipment needed to start and run the project. Timing is also important they want the company to start generating cash flows which will be used to grow the business. Hamza Biodiesel Company secured the premise and this provided the best value for their money. . Required space; this type of business requires very large amounts of space. For the case of Hamza BioDiesel, Mandy stated at the Board meeting that retailing high quality groceries will be a very different venture from selling fuel it will require large space for parking purposes. Facilities needed – Hamza Biodiesel will require pumps and fire fighting equipments in this business to carry out their business effectively. For instance, if Hamza Biodiesel could need safety measures in place as they will trade on inflammable such like product. For that reason very special mechanical, plumbing, electrical and fire suppression requirements shall be in place for smooth running of the project. These are the factors that must be taken into consideration. Question 2 No, the total cost of the project is $103,950 whereas the company has earmarked £85,000 for this project. There are various sources where Hamza BioDiesel can raise additional capital as follows; a).External sources of finance is the capital (either long or short term) borrowed from sources external to the firm. Where the adopts a conservative working capital management policy, an organization uses more of long-term sources of finance used to funding all permanent working capital (current assets) and part of temporary current assets together with other activities. The firm is therefore more liquid but sacrifices profitability as interest charges have to be paid on long term finance even when it is not required. The cost of such capital may be high thus may restrict the firm to use internal sources of financing only in particular retained earnings. Examples of external sources of financing are: 1. short term loans 2. bank overdraft 3. debt capital using debentures or corporate bonds 4. preference shares capital 5. Issue of new ordinary shares. On the other side the project manager may decide to adopt an aggressive policy to uses more of short-term finance. Here all seasonal working capital requirements and part of permanent current assets are financed from short-term sources. This policy leads to higher levels of profitability at the expense of liquidity. b) Internal sources of finance: This refers to sources of finance which arise from internal operations of the firm. Examples of internal sources of finance are: 1. Depreciation which yield tax shield and is a provision/transfer to a sinking fund for future asset replacement 2. Retained earnings – the company can retain part of the income instead giving all as dividends. 3. Deferred tax is a liability to the government which is a source of financial before it’s paid up by the firms. Usually, the cost of depreciation and deferred tax are not computed. They are usually cost-free sources of finance. The cost of retained earnings is the foregone benefits/dividends by ordinary shareholders. However, this source of finance is only realizable after the take off, where by the manager may wish to resume the other activities which were not that necessary in the initial start of the project. Question 3 Explanation of what is meant by capacity utilization and the formula for its calculation is as follows; Capacity utilization means the level or extend to which the plant productivity capacity, organization, or a given country is used in production of goods and services (RAMROTH, 2006). Capacity utilization is normally expressed as a percentage. Capacity utilization= total capacity Portion being utilized b) Capacity utilization of Hamza Biodiesel station A 7500/4800 *100 =156.25% c) Production in station B is …………. 7800 Capacity utilization factor…………..75% The maximum number of production is as follows Solution Capacity utilization= total capacity/ Portion being utilized 75/100=x/7800 =100x=75*7800 X=585000/100 X=5850 this is the maximum level of production. d) Analyze two likely benefits and two disadvantages for Hamza Biodiesel operating at full capacity. Hamza Biodiesel has a chance to charge low cost and enlarges the volume. When the firm will operate at its full capacity more production of goods and services will be realized. Large production will result into low cost associated with the production and hence a benefit to Hamza biodiesel. This is because the primary objective of any firm is to look for ways of reducing cost. Another benefit that the firm will get is the lowest possible level of fixed cost. When the capacity is utilized to the maximum it will assist the firm to produce more goods. Although there will be an increase in fixed cost, the effect will not be felt to a larger extend since the firm basically will produce more. Disadvantages of operating at full capacity Although Hamza Biodiesel will reduce wastage when it is operating at full capacity, the firm will not have control over cost because the output increment will be restricted by the very present full capacity. Hamza Biodiesel may not get enough time for maintenance which is a routine required to prevent breakdown of machine. This is because when a machine breaks down, orders will be delayed. This means that Hamza Biodiesel will be unable to meet new or expected orders and hence the business cannot grow without expanding production scale. Employees will experience overworked and so this can lead to increased mistakes, absenteeism and eventually employee turnover. Constrains of Hamza Biodiesel on reaching full capacity include, Financial resources, Hamza Biodiesel is limited by funds, this is because we are told that Timing is important for the company’s cash flow, as the sooner the service stations and high quality expediency stores open; the faster the payback would be on the project. This shows that the company wants to rely on the amount available to run and expand the business. Human resource, this refers to man power. At initial stages the company can only operate with a specific number of employees and so when the company decides to go full capacity, then there will be constrain on employees. Employees will experience overworked and so this can lead to increased mistakes, absenteeism and eventually employee turnover in the company. Another constrain that Hamza Biodiesel will experience is the use of machines. The machines can only handle a specific capacity and hence when it decides to go full capacity then breakdown of machines can be realized. When machines fail, there will be no production of goods and hence the company will not be able to meet the current demand or expected demand. References RAMROTH, W. G. (2006). Project management for design professionals. Chicago, Kaplan Pub. http://site.ebrary.com/id/10131999. Read More