Albion Sugar Company

Introduction: The Albion Sugar Company, situated in the Caribbean, has been in operation
since 1948 and supplies both the domestic and export markets. The company is among the
larger manufacturers of sugar in the CARICOM region and also operates a distillery that
supplies local companies and foreign markets. In 1976, the Government acquired majority
shares in the company and made it a subsidiary of the National Sugar Company. A simplified
process flow diagram summarizing the companys operations is shown in Ex. 1.

Although the company enjoys the advantage of a virtual monopoly over the domestic market for
refined sugar, Government control on the selling price and increasing operating costs have
combined to erode its profit margins. In the overseas markets, the company enjoys protection by
virtue of the quota allocated to the Government through the Lome Convention. In recent years,
however, the negotiated prices have not been very attractive and depressed open market prices
have limited the companys options on the marketing side.

In an effort to arrest declining profitability, the companys management has embarked on a

critical examination of all aspects of its operations in the hope of identifying areas for realizing
increased sales revenues or achieving cost savings.

Current operations: The Company employs some 900 management and non-management
workers. Sugar processing is seasonal as the raw material (sugar cane) is available only during
the six month reaping season, January-June. During the remaining months, the factory
equipment undergoes extensive maintenance to ensure its reliability during the grinding season.

At present, the distillery also has to be shut down between July and December as it is
dependent on low pressure process steam being supplied from the boilers in the main sugar
factory. Because of the prevailing high prices for alcohol, the continuous operation of the
distillery throughout the year seemed to offer potential for increasing the companys profitability.

The Proposal: Following an engineering economic analysis, the company decided to purchase
a 15 TPH, 1 bar, and saturated steam boiler to supply the distillery with process steam from July
to December when the main factory would be out of operation. Molasses, the raw material
needed to manufacture alcohol, would be imported during that period.
 After a review of quotations received from boiler equipment manufacturers, the company
awarded the contract to a USA based firm with a well-proven reputation. Its equipment was
moderately priced, met the required technical specifications and had the shortest delivery time.
The package boiler was due to arrive in mid-July and the companys management recognized
the need to install the unit as quickly as possible to minimize the disruption to alcohol
production. The following decisions were made:

1. The chief engineer would be responsible for the satisfactory installation and commissioning of
the boiler.

2. The installation would be done by company personnel. This was possible since the sugar crop
would be finished and work crews could be made available as required from the factorys
maintenance personnel.

3. The boiler installation should be phased in with the factorys scheduled out-of-crop
maintenance programme. Department managers should be notified in advance when the
subordinate maintenance staff would have to be diverted to installation project.

4. The project should be completed by mid-October, that is, three months after the arrival of the
boiler. Sales commitments would be based on this expected date of completion.

5. Unnecessary costs should be avoided. The company was in an unhealthy financial position and
could not afford cost slippages in the project budget.

Initial Project Planning: The project manager assigned responsibility for the boiler installation
decided to use Microsoft Project to assist in planning and controlling the project. After reviewing
the technical information available on the boiler and discussing the project with the maintenance
foremen, he prepared a list of all the jobs required for the project and their immediate
predecessors. This included an estimated time for completion of each job (Ex.2). From this
information, a project network could be created to show the order in which the jobs could be
done and identify the critical path, which indicates the shortest time in which the project could be
completed and any near-critical activities that should also be closely monitored.
 Resource-constrained project planning: The project engineer was well aware that the
installation would have to proceed within the following resource constraints (Ex. 3).

a. Only two welders would be allowed at any time

b. Only three pipe fitters would be released at any time
c. Only three electricians would be available to work on the project
d. Only one crane would be available and hence only one crane operator would be needed.
e. Only three mechanics could be released by the maintenance department
f. There would be no limitations on labourers as substitutes would be readily available.

Project crashing: The normal time estimated to complete certain jobs could be reduced to a
minimum or crash time by allocating additional resources at the same hourly rate and incurring
extra direct cost. Ex. 4 lists these jobs and summarizes their normal and crash times and direct
costs. Decisions would have to be made on whether the extra costs of crashing specific jobs
would be justified by the additional benefits associated with early project completion. It is also
possible that some workers may be prepared to work overtime at evenings (time and a half rate)
or weekends (double time rate).

Assignment to aid understanding and discussion:

You have been appointed project manager for the boiler installation project and have been
asked by the operations director to give a PowerPoint presentation of the feasibility of this
project at the next management board meeting. The presentation must provide data, charts,
analysis and interpretations of the following

1. Network diagram and early start Gantt chart to identify the Critical path (and any near-critical
activities), project start and end dates activity floats.

2. Summary resources histograms for all project resources to show resource conflicts in the early
start schedule.

3. Resource smoothing and full resource levelling options.

4. Project crashing options.

Exhibit 1: Process flow diagram

Cane preparation

Milling

Clarification

Sugar clarification

Centrifuging

Refining Drying

Packaging Bulk storage

Domestic market Exportmarket

Exhibit 2: Job list for boiler installation

Immediate Duratio
Job name Description Predecess n
or (days)
7
A Excavation of foundations (boiler, feed water tank, oil tank) Start
3
B Excavation of chimney foundation Start
21
C Laying out-steam line to process Start
21
D Laying out of main power cable from substation Start
21
E Construction of electrical panels and distribution gear D
15
F Make electrical connections on boiler E
5
G Prepare steel matting for boiler foundation A
10
H Prepare steel matting for tank foundation A
15
I Prepare steel matting for chimney foundation B
4
J Cast all foundations after matting is completed G, H, I
28
K Allow concrete to set for 28 days J
21
L Construct chimney K
3
M Install feed and fuel tanks K
3
N Remove and reinstall existing fuel tank O
3
O Place Boiler on foundation, level and grout K
Attach gauges, oil and steam valves, sight glasses, high &
P O
low level alarms and relief valves 7
Place flue gas ducting, forced-draught fan, induced draught
Q C
fan into position 15
3
R Connect flue gas duct to chimney L, Q
21
S Install feed and chemical closing pumps M, N
14
T Connect pipes and dosing lines P
2
U Test boiler F, R, S, T
Exhibit 3: Normal Resource requirement

Normal Resource requirements

Job name duration
Crane Laboure
(days) Electricians Pipe fitters Welders Mechanics
Operators rs
A 7 - - - - - 4

B 3 - - - - - 2

C 21 - 2 2 1 - 2

D 21 3 - - - - 2

E 21 3 - 1 - 1 2

F 15 3 - 1 - - 2

G 5 - - - - - 3

H 10 - - - - - 3

I 15 - - - - - 4

J 4 - - - - - 4

K 28 - - - - - 1

L 21 - - 2 1 - 3

M 3 - - 1 1 - 2

N 3 - - 1 1 - 2

O 3 - - - 1 - 2

P 7 2 2 - - 2 1

Q 15 - - 1 1 2 2

R 3 - - 2 1 - 2

S 21 - 2 - - 3 2

T 14 - 2 - - 2 2

U 2 - - - - - -
Max. resource No
availability 3 3 2 1 3 constrain
t

Exhibit 4: Normal and Crash activity durations and direct costs

 Normal If crashing used

Activity

Minimum duration Cost () to achieve

Duration (days) Cost ()
(days) minimum duration

F 15 2,240 12 2,465

G 5 250 4 275

H 10 504 7 579

I 15 1,000 10 1,175

L 21 2,900 15 3,290

P 7 1,240 5 1,410

S 21 3,480 18 3,720

T 14 1,930 10 2,190

* Save as separate files after crashing.