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Brin’s Oxygen Company: Project Lighthouse Report


Introduction

Effective project management is the lifeblood of the modern market economy and a constituent feature of organizational functioning. From the managerial perspective, project management is a framework within which internal and external business interactions occur. The framework allows treating a project as a multivariate entity that functions within three dimensions simultaneously: time, cost, and performance (Camillieri 2012). In a more basic sense, project management is the realization of business and customer goals in actuality with respect to their core and ancillary elements. It follows that managers have to fully understand project deliverables in terms of their risks and trade-offs to ensure that the corporate resource utilization does not have efficiency valleys (Camillieri 2012). In addition to making a complete investigation of a project, the twenty-first-century project managers have to establish harmonious relationships with their teams and stakeholders by becoming coaches, leaders, decision-makers, and facilitators.

The aim of this paper is to propose a new plan for a project that was implemented in Brin’s Oxygen Company (BOC) Group plc (henceforth BOC) in April 2017. The paper will detail the key elements of the project that can be used for the deployment of a new operational model in other outlets of the company.

Organizational Setting

BOC is a part of the Linde Group, which is a global producer and retailer of chemicals and chemical equipment (BOC n.d.). In addition to being a multinational supplier of bulk gases, the company specializes in the development of innovative solutions in the fields of steelmaking, chemical processing, wastewater management, food processing, refining, and engineering among others (BOC n.d.a). BOC places a strong emphasis on safety and corporate social responsibility in all areas of its responsibility. Therefore, the organizational setting is characterized by the drive to improve services for its customers while simultaneously minimizing sustainability risks.

Project Environment

The student works in the capacity of a sales manager in the company; therefore, the project under discussion pertains to the transition to a new retail operating model. The transition already occurred in several Australian Gas & Gear stores owned by BOC. The stores are located across Australia, the UK, and Ireland. Every location offers the company’s customers a wide range of gas and gas-related equipment, trade tools, safety products, welding equipment, and consumables (BOC n.d.b). To ensure the robustness of the BOC proposition as well as improve the business model in terms of its commercial sustainability, several Gas & Gear stores were remodelled. The environment of the project was geared towards the pursuit of earnings-based growth. Revenues of the stores were used as financial performance indicators for measuring the success of the project. The project was aligned with the core principles of the value-based corporate strategy of the Linde Group, in general, and BOC’s efficiency-boosting management philosophy, in particular (The Linde Group 2016).

Project Objectives

The key objective of project Lighthouse was to transition the Gas & Gear channel to the new service model. By doing so, the company planned to reduce retail operating expenses while staying competitive. The project aimed to accomplish an increase in profits, which was necessary for financing both its ongoing operations and expansion endeavours. The new selling model presupposed the reduction of staffing costs, which was a major item of expenditure. The project intended to transform traditional Gas & Gear outlets by reducing their staffing to only one employee per store. To this end, a traditional staffing scenario had to be reviewed. Furthermore, warehousing component of the model also required overhauling.

The implementation of the original project was accompanied by missed deadlines and budget overruns. In addition to encountering unexpected costs, a failure to account for externalities and risks led to the reduction in customer satisfaction and termination of several supplier contracts due to the inability to maintain stocking ranges on the previous level. Although the implementation of the project was associated with financial benefits, it was necessary to ensure that the effectiveness of the company’s retail outlets was not disrupted during the deployment of the model in other stores.

The project was remodelled to ensure better performance in the future. The new project was dubbed Lighthouse. The importance of the project to the organization is underscored by a recent financial report of the company, which shows that fixed monthly cash emoluments, benefits, and pension commitments along with operating expenses amounted to $29M in 2016 (The Linde Group 2016). It follows that if the company implements project Lighthouse in more than several outlets it can cut its operating expenses by a large margin. The project is also extremely important to the involved store managers because they have to review their approaches to inventory control and store organization. In addition, under the new model of store operations, customer experience scores can be improved.

Scope Statement

Project Purpose and Justification

Project Lighthouse aims to redesign the service model of the company’s retail outlets and implement a cost-effective approach to staffing. As a company that operates on a limited budget, BOC is challenged to streamline its operating model to reduce its cost overruns and improve the competitiveness of its business proposition. The implementation of the project will allow the company to better leverage its resources while ensuring that all Gas & Gear outlets meet their deliverables. Specifically, by reducing staffing expenses, it will be possible to reduce BOC’s variable costs, thereby improving operating leverage and reducing the forecasting risk. The reduction of the forecasting risk will eliminate a large error margin in cash flow projections (Warren, Reeve & Duchac 2016).

Scope Description

The following activities fall under the scope of project Lighthouse: plan, design, build and implement the new service model for Gas & Gear stores. The project will involve the reconfiguration of stores in Australia and its inventory management approaches. To ensure that local service is uninhibited by the streamlining of staffing levels, all Gas & Gear outlets will be grouped into the following categories: Full Delivery (12), Local Delivery (30), Collect (15), and Depot (6). Each outlet category will have different stocking ranges and service offers.

High-Level Project Priorities

Project Lighthouse has been developed as a cost management initiative. The initiative reflects the business need to increase the effectiveness of expense management in the company. This business need is associated with the following high-level priorities:

  • Ensure that the annual staffing costs do not exceed 10 per cent of BOC’s revenue.
  • Maintain the delivery volume of the original equipment manufacturer (OEM) products
  • Increase stoking range of Full Delivery Gas & Gear stores.
  • Maintain customer satisfaction levels at 65 percent
  • Implement full BOC safety accreditation of local couriers

Boundaries

The project will involve all aspects of staff cost management with respect to Gas & Gear outlets. This includes the development of changes to the operational model, planning of the cost reduction initiative, and implementation of the project. The project also presupposes the development of training manuals and materials needed to ensure that day-to-day operations of outlets are not inhibited by the changes. Not included in the scope of the project are ongoing maintenance of OEM relationship, commercial sustainability of staff levels in warehouses, and streamlining of the stocking range.

Strategy

The project will be used to accomplish a significant objective—staffing cost reduction—therefore, it is of utter importance to leverage existing expertise across all stages of progression of the change initiative (Wilson 2014). The alternative staffing measure will be implemented by a department manager without drawing upon external resources. The project manager will ensure that all input from stakeholders is incorporated into the project design.

Deliverables

There are several outputs that Project Lighthouse intends to produce at the end of its life cycle. If one or more of these outputs are not met the completion of the project will not be successful. The project manager is responsible for producing the following deliverables:

  1. Full operation of four categories of Gas & Gear stores: Full Delivery, Local Delivery, Collect, and Depot
  2. Downsizing of sales teams in Local Delivery store to one employee
  3. The development of internal operation guides for the sales force
  4. The introduction of BOC Select Range

Acceptance Criteria

The project manager has detailed several acceptance criteria that should be met by the project. These criteria will help to assess the successful completion of the project. The quantitative and qualitative criteria will eliminate uncertainties about project expectations for all stakeholders. The following acceptance criteria will be used for Project Lighthouse:

  1. Meet all deliverables within the schedule and on budget
  2. Transition to the new operation model
  3. Reduce operating expenses by 30 percent
  4. Introduce BOC Select Range

Constraints

The project manager has outlined several constraints for Project Lighthouse. To ensure that the project does not involve schedule delays and budget overruns, considerations and adjustments for these constraints will be made across all phases of its lifecycle. In addition, all pertinent stakeholders will be provided with a list of constraints to ensure that their elevated flexibility facilitates the successful completion of the project. The project manager has identified the following constraints:

  1. Affected workers in protected employee classes are associated with legal risks.
  2. Limited budget for compensation of store managers (15 percent above existing pay bands)
  3. The project will be completed by March 28, 2018
  4. The HR manager has agreed to dedicate 50 percent of billable hours to Project Lighthouse
  5. When introducing BOC Select Range it is necessary to retain core OEM products with a limited workforce

Assumptions

The project manager has outlined assumptions for the project. Taking into consideration the fact that the level of uncertainty is extremely low, the risk associated with each of these assumptions is negligible. Nonetheless, during the project planning cycle, it is necessary to ensure that all relevant stakeholders take active steps to mitigate those risks. The following assumptions have been identified:

  1. The department manager is capable of producing service guidelines for store managers
  2. Store managers are capable of maintaining the Select Industrial range
  3. Customers will respond positively to the introduction of the Select Industrial range
  4. Account managers will be able to maintain customer communication during the transition
  5. HR manager working only 50 percent of billable hours will be sufficient to complete the project on schedule

Cost Estimate

The project is based on a precise cost estimate, which represents funding allocations necessary to bring the project to completion. Some of the expenses are not known prior to the project completion; therefore, the accuracy of the cost estimate depends on the accuracy of risk assessment. The projected costs of the project are shown in Table 1.

Table 1: Cost Estimates for Project Lighthouse.

Expense Estimated Budget
Internal Labour $45, 000
External $0
Software $5, 000
Hardware $0
Other $9, 000
Total $59, 000

Cost-Benefit Analysis

The project manager has conducted a cost-benefit analysis to determine whether Project Lighthouse will benefit BOC by improving its bottom line. The analysis shows that the restructuring of the company’s workforce and transition to the new operating model will result in a net benefit of $1, 041, 000 over one year after the completion of the project. The benefit includes the elimination of the cost of employing 30 additional workers in 30 Local Delivery stores. The calculation of the monetary benefit will provide involved stakeholders with a quantitative result of the successful completion of the project, which will motivate them to overcome the constraints outlined above. Table 2 shows a cost-benefit analysis for Project Lighthouse.

Table 2: Cost-Benefit Analysis for Project Lighthouse.

With Project Lighthouse Without Project Lighthouse
Project Cost
Non-Recurring Cost of the Project $59, 000 $0
Recurring Cost $0 $0
Total Cost of the Project $59, 000 $0
Benefits (1 year)
Reduction of Staffing Expenses $1, 050, 000 -$1, 050, 000
Resource Allocation $50, 000 -$50, 000
Total Benefits of the Project $1, 100, 000 -$1, 100, 000
Net Benefits of the Project $1, 041, 000 -$1, 100, 000

The analysis shows that the project had the potential to bring substantial financial benefits to the company—$1, 041, 000. Therefore, the implementation of the project will be financially justified.

Work Breakdown Structure

The project manager has used a work breakdown structure (WBS) is a tool for facilitating both the planning and execution of the project. According to Sokowski (2015), a WBS is used to “define the project’s scope of work in terms of deliverables and to further decompose these deliverables into components” (p. 204). In addition to decomposing the work structure for the project, the WBS has helped to facilitate communication between the key stakeholders and the project managers, which is essential for the successful complication of the project. Furthermore, the articulation of the project’s scope will serve as a basis for structuring other processes and components. The elements have been developed by the project manager and included: activity definitions, performance reports, risk analysis, schedule, and control tools among others (Sokowski 2015). To increase the readability of the WBS, the project manager has opted for a tabular presentation format. Table 3 shows the WBS for Project Lighthouse.

Table 3: The WBS for Project Lighthouse.

Level 1 Level 2
1. Initiation
  1. Evaluation
  2. Recommendations
  3. Project statement development (scope, objectives, and participants)
  4. Deliverable: submit the statement
  5. Revenue manager reviews the statement
  6. The statement is signed/approved
2. Planning
  1. Outline preliminary scope statement
  2. Create a project team
  3. Project initiation meeting with the team
  4. Project plan development
  5. Timeline and budget development
  6. Submission of the project plan
  7. The plan is signed/approved
3. Execution
  1. Project kick-off meeting
  2. Verification of OEM supply requirements
  3. Designing of BOC Select Range
  4. Designing of Full Delivery stocking range
  5. Selection of access channels for the account managers
  6. Drafting of a downsizing plan
    1. Determination of locations
    2. Development of reduction in force budget (severance and attorney fees and administrative expenses)
    3. Timeline development
    4. Employee selection
    5. Audit (HR review; development of supporting documentation; assessment of employees in protected classes)
    6. Software development
    7. Software installation
    8. Training plan development
    9. Training
    10. Training assessment
4. Control
  1. Project management
  2. Project status control
  3. Risk management
  4. Project management plan re-evaluation
5. Closeout
  1. Transitioning to the new service model
  2. Document lessons learned

Project Performance Monitoring

Effective project performance monitoring is a mainstay of project management. The general purpose of monitoring is to aid decision-making of the project manager and all involved stakeholders as well as to support the effectiveness agenda (Hill 2013). To ensure the successful completion of the project, the project manager has evaluated available monitoring arrangements and their capacity. The assessment has involved the identification of their strengths and weaknesses as well as collection and analysis of information provided by stakeholders. The following incentives to monitor have been indicated by the manager: managerial priority, information sharing, feedback provision, resource allocation, and recognition and reward (Camillieri 2012). Upon establishing monitoring incentives, three monitoring steps will be taken: reviews, analyses, and improvement actions.

Regular reviews will be conducted through project team meetings during which the current status of the transition will be evaluated and compared to the initial plan of project activities. The project manager will examine individual performance reviews during the meetings. Individual day-to-day contributions of relevant stakeholders and their integration towards the success of the project will be evaluated by the manager to assess how they affect the overall status of the change initiative.

Analyses will involve the evaluation of individual performance indicators for each Full Deliver Gas & Gear outlet. These indicators are associated with the development of a stoking range, the continuation of account contracts, and implementation of the downsizing plan. The analysis will be conducted within the overall norms of BOC. The implementation of the downsizing plan will be evaluated in accordance with BOC’s human resources (HR) department guidelines.

The project manager will work closely with key stakeholders to transform the analysis output into actionable improvement activities. The information will be analysed and discussed with the team to propose effective corrective measures. Insights gathered in the most successful Gas & Gear outlets will be applied to other stores.

Risk and Change Control Process

Risk and change control process in Project Lighthouse has been designed by the project manager to safeguard the implementation environment against two types of changes:

  1. changes of potentially disruptive nature
  2. changes that pose unmanageable and/or unacceptable risks to the service quality

Process Objectives

The process will be implemented to ensure that the transition occurs on budget and within scheduled timelines. It is also necessary to safeguard the continuity of relationships with key BOC’s suppliers and customers.

Process Scope

The scope of the risk and change control process mirrors that of the project itself and special activities that require additional resource allocations. Quality service delivery necessitates the revision of in-scope activities to respond to unpredictable fluctuations in demand volumes. All special activities will be coordinated by the project manager. Table 4 shows the classification of changes by category.

Table 4: Classification of Changes.

Category Items
1. Store Software
  1. Develop and install new stocking applications
  2. Enhance existing selling application by adding additional data sources
  3. Deploy internally developed monitoring applications
  4. Develop supporting documentation
2. Warehouse Software
  1. Develop and install new warehousing applications
  2. Develop supporting documentation
3. Reduction in Workforce
  1. Develop and implement reduction in workforce strategy in accordance with the downsizing plan
  2. Conduct selection
  3. Engage in downsizing audit
  4. Develop supporting documentation
4. Restocking
  1. Stoking change in four types of outlets: Full Delivery (12), Local Delivery (30), Collect (15), and Depot (6)
5. Training
  1. Develop and implement a training program
  2. Assess the impact of the training program

After categorising changes, it is easier to assess the overall likelihood of encountering barriers to change. The assessment of risk factors had not been properly conducted at the planning stage of the original project, which led to the numerous inefficiencies. The enumeration of all risk factors is beyond the scope of this paper; therefore, Table 5 shows generalized risk factors.

Table 5: Generalized Risk Factors.

Risk Type Factors
Project Risk
  1. Large project team that spans across actively-involved outlets, warehouses, and departments
  2. Limited breadth of account managers’ participation
  3. Tightly compressed delivery frame
  4. Limited budget
Technical Risk
  1. Use of unfamiliar software packages
  2. Stocking supply complexity
  3. Restocking of four outlet types that involves change of underlying software architecture
  4. Human error
  5. Deployment of external technical expertise
Operational Risk
  1. Ongoing operations in Gas & Gear stores
  2. Complexity of the implementation
  3. Complexity of predicting demand volumes
  4. Lack of post-implementation correction provisions

Resources and Costs Scheduling

To estimate costs and resources necessary for the successful completion of the project, the manager has used the following tools: calculation of resource cost rates, vendor bid analysis, reserve analysis, and cost of quality analysis (Camillieri 2012). The use of these tools has provided the project manager with approximate order-of-magnitude estimates, which is necessary for budget planning.

Calculation of resource cost rates has been performed to assess the monetary equivalent of labour and material resources that will be dedicated to each outlet, in particular, and the project, in general. The assessment of resources has been complicated by the change of store managers’ rates, which will be recalculated in the middle of the implementation phase.

Vendor bid analysis has been conducted to determine expenses associated with the employment of tech professionals whose expertise is needed for the development of new software packages for stores and warehouses. The analysis has been performed based on the evaluation of twelve propositions of competing contractors.

Reserve analysis has helped to estimate a level of monetary reserves necessary to account for cost overruns that can hinder the implementation of the project. The analysis is based on the informational output of the risk analysis. The reserve analysis also involves the calculation of the cost of quality-related activities that might fall outside the budgetary limits. Table 6 provides a rough estimate of the project budget.

Table 6: Project Budget.

Analysis Result
Resource Cost Rates $32, 000
Vendor Bid Analysis $12, 000
Reserve Analysis $15, 000
Total Budget $59, 000

The project manager has estimated a budget timeline to ensure that money needed for the completion of project activities will be allocated prior to their start dates and will suffice for their duration periods. It is an extremely important step that requires reconciliation with the project schedule. Table 6 presents activity expenditures for 10 key activities.

Table 6: Key Activities Expenditures.

Activity 1 2 3 4 5 6 7 8 9 10
Cost $2,950 $2,500 $1,750 $1,250 $1,675 $5,025 $5,025 $5,025 $6,000 $4,000
Total Spent $5,900 $10,000 $1,750 $1,250 $5,025 $5,025 $5,025 $5,025 $12,000 $8,000
Transfers $18,900 $15,075 $25,025

Project Schedule

To ensure the successful completion of the project, the manager has defined activities that will be completed in order to fulfil all deliverables. Upon defining activities and completing the WBS, an activity list has been compiled. The list details predecessor and success activities as well as constraints associated with them. After conducting the activity sequencing process, the Gantt chart has been created to illustrate a schedule of the project. Table 7 shows the Gantt chart for the project’s WBS

Table 7. Gantt Chart for the WBS of Project Lighthouse.

Phase Week Number
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Initiation X
Planning X X
Execution X X X X X X X X
Control X X
Closeout X

Conclusion

The paper has proposed a project that can be implemented in BOC. Project Lighthouse has been developed to eradicate inefficiencies of a change initiative that was undertaken by the company’s management. The key objective of the project is to transition Gas & Gear retail channel to a new service model. The implementation of the project is associated with the reduction of operation costs, which will help to improve the sustainability of the current business model of BOC. The paper has presented project objectives, scope statement, WBS, project performance monitoring, risk and change control process, project schedule, and resource and cost scheduling. It has been argued that this project will be implemented without budget overruns and missed deadlines that can hamper operations of Gas & Gear outlets.

Reference List

The Linde Group n.d., Leveraging potential: financial report 2016, Web.

Wilson, R 2012, Mastering project management strategy and processes: proven methods to meet organizational goals, FT Press, Upper Saddle River, NJ.

Warren, C, Reeve, J. M & Duchac, J 2016, Financial & managerial accounting, Cengage Learning, New York, NY.

Camillieri, E 2012, Project success: critical factors and behaviours, Gower Publishing, Aldershot, England.

Hill, G. M 2013, The complete project management office handbook, 3rd edn, CRC Press, New York, NY.

Sokowski, D 2015, Mastering project management integration and scope: a framework for strategizing and defining project objectives and deliverables, FT Press, Upper Saddle River, NJ.

BOC n.d.a, , Web.

BOC n.d.b, , Web.

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