W6.1_LUCKY_Business case for the establishment of an office in Warri

W6.1_LUCKY_Business case for the establishment of an office in Warri

Problem or Opportunity Statement

I have been asked to develop a business case for the establishment of an office in Warri due to increased demand for more products by customers in the area, and the need to reduce the cost of the sales and service delivery process.

Feasible Alternatives

The feasible alternatives available to address the need for the office establishment are as follows:

 

o   Build own facility comprising offices, workshop and warehouse

 

o   Rent an office space (x3), warehouse and share workshop facility at LAMESCO located at Deco road inside Warri.

 

o   Rent an office, workshop and warehouse at a different location – catering company facility, Ogunu, Warri.

 

o   Rent office space, workshop and warehouse at CISCON Yard located opposite Chevron office on the NPA Express way, Warri.

 

Outcomes for each alternative

TABLE 1: Office Establishment Opportunity

                                    Alternatives (Offers and Locations)

Attribute	Build own facility	Rent space at LAMESCO	Rent space at catering firm yard	Rent space at CISCON yard
Cost of Rent per annum(MM)	$2.5	$0.03	$0.04	$0.08
Accessibility from major roads (1-10, 10 being highest)	5	3	6	8
Time until completion (years)	3	0.3	0.42	0.17
Location (area) (Excellent, Good, Fair)	Good	Poor	Fair	Excellent
Nearness to pipeline gas supply (Excellent, Good, Fair)	Fair	Poor	Good	Excellent
Available Facilities (Excellent, Good, Fair)	Excellent	Poor	Fair	Good

 

Selection of the acceptable criteria:

Using the Multiattribute Decision Analysis additive weighting technique [1] (Sullivan et al, 2012, p. 585)

There will be 6(5)/2 =15 pair wise comparisons necessary for the four office alternatives and they are shown in table 2.

TABLE 2: Ordinal Ranking of Office Establishment Attributes

A.    Results of Paired Comparison

Cost>Accessibility                              (Cost is more important than accessibility)

Cost >Time                                         (Time is more important than cost)

Cost>Location                                                (Location is more important than cost)

Cost>Pipeline Gas                              (Pipeline gas is more important than cost)

Cost >Facilities                                   (Facilities is more important than cost)

Accessibility>Time                             (Accessibility is more important than time)

Accessibility>Location                       (Accessibility is more important than location)

Accessibility>Pipeline gas                  (Pipeline gas is more important than accessibility)

Accessibility>Facilities                       (Facilities is more important than accessibility)

Time>Location                                    (Time is more important than location)

Time>Pipeline gas                               (Pipeline gas is more important than time)

Time>Facilities                                    (Facilities is more important than time)

Location>Pipeline gas                         (Pipeline gas is more important than pipeline gas)

Location>Facilities                             (Facilities is more important than location)

Pipeline gas>Facilities             (Facilities is more important than pipeline gas)

 

 

 

B.     Attribute                                             Number of times on left of >(=Ordinal ranking)

Cost                                                     1

Accessibility                                        2

Time                                                    2

Location                                              1

Pipeline Gas                                        4

Facilities                                              5

 

TABLE 3: Office Establishment Attribute Weight

Attribute	Ordinal Ranking	Weight
Cost	1	0.067
Accessibility	2	0.13
Time	2	0.13
Location	1	0.067
Pipeline gas	4	0.27
Facilities	5	0.33
Total	15	1.00

 

 

The following formulae were used in converting the original data in table 1 for a particular attribute to its dimensionless ratingⁱ (Sullivan et al, 2012, p. 589):

For large numerical values that are considered undesirable

Rating = (Worst outcome – Outcome being made dimensionless)/ (Worst outcome –Best outcome) --(1)       

For large numerical values that are considered desirable

Rating = (Outcome being made dimensionless –Worst outcome)/ (Best outcome – Worst outcome) --(2)       

            

TABLE 4: Dimensionless Values for Office Establishment Opportunity

Attribute	Value	Rating Procedure	Dimensionless Value
Cost	0.03 0.04 0.08 2.5	(2.5 – cost)/2.47	1.00 1.00 0.98 0.00
Accessibility	3 5 6 8	(Access -3)/5	0.00 0.40 0.60 1.00
Time	0.17 0.3 0.42 3	(3-Time)/2.83	1.00 0.95 0.91 0.00
Location	Poor Fair Good Excellent	(Relative Rank -1)/3	0.00 0.33 0.67 1.00
Pipeline gas	Poor Fair Good Excellent	(Relative Rank -1)/3	0.00 0.33 0.67 1.00
Facilities	Poor Fair Good Excellent	(Relative Rank -1)/3	0.00 0.33 0.67 1.00

Relative ranking – Poor -1, Fair – 2, Good – 3, Excellent - 4

 

Selected Alternative:

TABLE 5: Weighted Scores for Office Establishment Opportunity

		Build own facility		Rent space at LAMESCO		Rent space at catering firm yard		Rent space at CISCON yard
Attribute	Weights	Performance	Weight value	Performance	Weight value	Performance	Weight value	Performance	Weight value
Cost of Rent per annum(MM)	0.067	0.00	0.00	1.00	0.067	1.00	0.067	0.98	0.066
Accessibility from major roads (1-10, 10 being highest)	0.13	0.40	0.052	0.00	0.00	0.60	0.078	1.00	0.13
Time until completion (years)	0.13	0.00	0.00	0.95	0.12	0.91	0.12	1.00	0.13
Location (area) (Excellent, Good, Fair)	0.067	0.67	0.045	0.00	0.00	0.33	0.022	1.00	0.067
Nearness to pipeline gas supply (Excellent, Good, Fair)	0.27	0.33	0.089	0.00	0.00	0.67	0.18	1.00	0.27
Available Facilities (Excellent, Good, Fair)	0.33	1.00	0.33	0.00	0.00	0.33	0.11	0.67	0.22
TOTAL Score			0.52		0.19		0.58		0.88

 

Conclusion

Examining table 5, and considering the scaling and weights used, the decision would be to open an office in Warri through renting an office space at CISCON yard as it has the highest total score of 0.88.

 

 

 

Reference

1.      Sullivan, W., Wicks, E., Koelling, P., Kumar, p., & Kumar, N. (2012). Engineering economy (15^th edition). England: Pearson Education Limited.

2.      Purdue OWL APA style, (2011). APA formatting and style guide. Retrieved from http://owl.english.purdue.edu/owl/resource/560/19/

3.      Giammalvo, P. (2012, October 22). Integrated portfolio (asset), program (operations) and project management methodology course (cost engineering) slides (An AACE methodology course). Lagos, Nigeria: Lonadek

 

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[1] Sullivan, W., Wicks, E., Koelling, P., Kumar, p., & Kumar, N. (2012). Engineering economy (15^th edition). England: Pearson Education Limited.