Hamza Biodiesel - Assignment Example

Hamza BioDiesel Answer Network diagram provides the graphical representation of the activities in the sequential order depicting the length andflow of the entire project. It provides the information of interdependencies of the project activities on each other and also refers to the critical path. The diagram also identifies Earliest Start Time, Latest Finish Time, Duration and the float for each activity. The set of Activity A details in diagram with description is follows: 7 0 A 7 3 10 3 A refers to the identification of this particular activity. Number in the top of the set is the time this activity individual requires or the total time allocated to complete this activity. Compartment with 0 carries the point in time particular activity can be started. Therefore Activity A can be started at 0 point in time means that as soon as the project started and it is the Earliest Start Time (Anantatmula, 2010). Whereas Compartment with 7 refers total time consumed after completing this particular activity which means it shows the Earliest Finish Time (Brotherton, Fried, and Norman, 2008). Bottom right compartment is the time of latest finish activity. For instance, activity can be finished at the latest by 10 weeks and any further delay than 10 weeks would impact total duration of the project. Number below the complete box refers the amount of time (weeks in under study case) this particular activity can be delayed without affecting the total project time; called float (Brotherton, Fried, and Norman, 2008). For instance, activity A can be delayed to maximum of 3 weeks without affecting the total project time. This delay would also allow this activity to be included in the critical path and as the gap available for delay would entirely be consumed by the initially activity. So an activity can be represented as follows: Duration of the project Earliest Start Time A Earliest Finish Time Latest Start Time Latest finish Time float Path identified with red arrow is the critical path. Critical path refers to path or the flow of activities that are critically dependent on each other and delay in these activities would immediately result in delay of the project. Critical path of this project includes following activities: B-E-H-J-K-L. It is identified with activities that have zero (0) float; referring to no time cushion to delay this particular activity. It is the longest path and any delay in these activities will delay the entire project. The float of the activity D and F are 3 weeks and 1 week respectively. This means that activity D and activity F can be delayed by 3 weeks and 1 week respectively and this delay would have no impact on the duration of the project and project will be still completed on time. However, any delays in these activities with more than the stated time would impact completion of project on time (Alojairi, and Safayeni, 2009). Activity F has a float of 1 week and delay in this would affect the overall time required to complete the project. Manager in order to reduce time for delay in the critical path can take the benefit of float of F and G and shall take up both activities parallel. Hence, this way, two weeks benefit will be in hand to project manager. Within these two weeks manager can allocate additional resources for such as multiple panel for hiring and training staff in order to complete the project within due time or minimizing the delay. ANSWER # 1 (b) Each component of the project plays its part in order to complete the project within the duration. However, among large number of factors few are regarded as critical and discrepancy on these factors such as delays can resultantly cause the delay of the entire project along with cost also being affected. Being critical these factors require considerable attention to ensure minimization of the discrepancy chances (Bredillet, 2005). For the given project of developing petrol station with convenience stores being market already explored by Tesco Metro and Sainsbury’s Local but with distinction to exploit the high income class required critical evaluation mainly regarding the selection of location. Important factors that must have been adhered to before choosing the location are as follows: Location that is at considerable distance from similar format station. Locality shall be within area with nearness to high income class. Evaluation and feasibility of the supply chain for stalling high quality, ready-to-eat meals, branded groceries, wines and spirits etc. Identification of size of the niche segment and feasibility to install project for that size of segment etc. If the project F in the current project is delayed by 5 weeks, then it will impact the overall project duration. The value of float of F is 1 which indicates that if the project is delayed by more than 1week then it will increase the duration of the project. So, if the activity F is increased or delayed by 5 weeks then the duration of the whole project will be 23 weeks. The following diagram shows if the activity F is delayed by 5 weeks. Also if the project duration is increased then it will also increase the cost of the project. If the project is not completed within the required duration then different stakeholders of the project will be influenced. There are different stakeholders of the company that can be influenced and these include; employees of the company, managers, customers, shareholders, investors etc. For instance, if the project is not completed on time, then the employees would have to work more till the project is completed. Similarly the management has to work till the project is not completed. Moreover, investors have to invest more resources as the project will not be completed on time thus it will increase the cost of the project as managers, employees and other resources will be used a lot more than projected initially and this will impact the cost and profitability of the project. In order to complete the project within the same duration, the project manager can increase the resources required. However increasing resources will increase the cost of the project as more assets or more employees will be required to complete it on time. Moreover, if more resources are required then shareholders or the investors have to invest more money. With more cost, the profitability will be reduced and thus shareholders will receive fewer dividends than initially expected. Moreover, the project manager needs to check the progress of activity F and create short term milestones and check whether these small milestones are completed within the deadline. If these small milestones are completed within the deadline, then it will allow the project manager to make sure that the project is completed within the same deadline or duration. ANSWER # 2 Hamza Bio Diesel’s has allocated amount of £85,000 to this project of three petrol stations with convenience store for the upper income class. The cost allocated for each of the activity is totaling to £103,950. Therefore, the difference of £18,950 exists. Funds for raising this investment shortage shall follow the most popular method of Pecking Order Theory (or pecking order model). Initially according to Pecking Order Theory, firm should direct to its retained earnings for financing it (or extend financing above already allocated investment amount). This is the most suitable option as it only accounts for the opportunity cost and not the additional cost. In case, if retained earning cannot provide the further finance, it can refer to the bank for loan or debt financing. Debt mode of financing cost interest expense to the firm’s income statement; provide tax benefit to the firm and increases its risk with increased leverage. In case the firm has already taken considerable debt and increased debt financing is no more feasible for its balance sheet than last option advised is to raise funds from equity. Equity cost high to income statement (dividend) and dilutes the management’s power (to the extent of shares issued). Among the three options, first two are more advisable. The third option is adopted to raise large amounts and whereas the difference amount required is much less (£18,950) and hence, cost will increased burden on the firm. ANSWER # 3(a) Each business has certain level of capacity to produce or generate services in a given period of time. However at the same time it is not necessary that the firms actually operate at full capacity. Therefore, the capacity at which the firm is operating is called capacity utilization. In other words, it the percentage expressing the capacity that is actually being utilized out of the firm’s total capacity (Jeston, and Nelis, 2008). Formula to calculate the capacity utilization is as follows: Capacity utilization (%) = actual output per month (or per annum) x 100% Max. Possible output per month (or per annum) ANSWER # 3(b) Capacity utilization for Hamza Bio Diesel’s station A Total capacity: 7,500 units Actual Production: 4,800 units Capacity utilization (%) = 4800 x 100 7500 = 64% Hamza Bio Diesel’s station is operating at 64% of its capacity. ANSWER # 3(c) Maximum Capacity of Hamza Bio Diesel’s station B is 10,400.00 units while it is operating at 75% and producing 7800 units. Capacity utilization (%) = 7800 x 100 = 75% x = 7800 = x 0.75 Maximum capacity = 10,400.00 units ANSWER # 3(d) Operating at full capacity has its own benefit as well as implication. Mentioned below are the two merits and demerits of operating at full capacity: MERITS OF OPERATING AT FULL CAPACITY Operating at full capacity reduces fixed cost per unit. Therefore, Hamza Bio Diesel would be able to gain higher per unit margin (profit) that will increase pace of achieving target of dividend growth of 15% per year. Busy business stations leave positive impression on the visitors regarding its products and services and hence, ensuring less investment is required for marketing. This will reduce operating expense of the station and increase profits. DEMERITS OF OPERATING AT FULL CAPACITY Operating at full capacity can also have following disadvantages despite increasing profits: Operating at full capacity will over crowd station, increasing queue time for each customer and hence leading to dissatisfaction among customers as the station is aiming to target high income class that are ready to premium price for more efficient and personalized services. Full capacity would provide less or no time for the maintenance of the machines and service area. This would affect the efficiency of machines as well as labor that may result in high turnover of over burdened labor and machine breakdown etc. Hence affecting the quality and quantity of service and affecting profits. ANSWER # 3(e) CONSTRAINTS FOR HAMZA BIO DIESEL ON REACHING FULL CAPACITY Hamza Bio Diesel has plans to establish the petrol station and convenience store locations for the high income class people. For this purpose, it requires to ensure that high quality, ready-to-eat meals, branded groceries, wines and spirits etc are available on the site. Facilitating high priced products require higher working capital than normal business plan. Also, similar format services are already provided by Tesco Metro and Sainsbury’s Local and hence, attracting customer to distinctive service requires also considerable investment in promotion. Moreover, operating at full capacity will lead stations to be over crowded and delay in services; hence, increasing dissatisfaction among customer. Last but not the least, high income group are niche segment of the market whereas petrol station and store to operate at full capacity requires large number of feet to drop in. Therefore, all these factors result as constraints for Hamza Bio Diesel to operate at full capacity. List Of References Alojairi, A., and Safayeni, F. (2009). “The Fragmented Nature Of The Project Management Field”, ASAC, Niagara Falls, Ontario, Available at http://ojs.acadiau.ca/index.php/ASAC/article/viewFile/662/571 [Accessed 8 December, 2012] Anantatmula, V. (2010). “Project Planning Techniques for Academic Advising and Learning”, The International Journal of the Scholarship of Teaching and Learning, vol. 6, no. 1, pp. 1-19. http://mountainrise.wcu.edu/index.php/MtnRise/article/view/19/9 [Accessed 8 December, 2012] Bredillet, C. (2005). “Understanding the very nature of Project Management: A Praxiological approach”, In Innovations : Project Management Research, Project Management Institute, London, Available at http://eprints.qut.edu.au/49501/1/49501.pdf [Accessed 8 December, 2012] Brotherton, S., Fried, R., and Norman, E. (2008). “Applying the Work Breakdown Structure to the Project Management Lifecycle.” PMI Global Congress Proceedings: Denver, Colorado, Available at http://www.ca.com/us/~/media/files/whitepapers/fried_wbs__pmi_global_congress_202925.aspx [Accessed 8 December, 2012] Jeston, J. and Nelis, J. (2008). Management by process: A practical road-map to sustainable business process management, London: Butterworth-Heinemann. Read More