Part 1: Explanatory Analysis
Research Approach
Research is critical in ensuring an effective and efficient collection of data that will be used to make the needed decision in support of an organization’s operations. The manager of the maritime logistics requires information on the market conditions for the cement carriers, and the end goal is to have much better management of the fleet. Some of the data that needs to be collected include the trends in demand for cement in the Mediterranean region. Specifically, the focus will be on Italy, Croatia, Cyprus, which are the three countries under consideration. Secondly, there is a need to collect information about the freight rate history for the time and voyage charters. Lastly, there will be a gathering of data on the effects of the Covid 19 pandemic on demand for cement among the companies. The approach used in acquiring the needed data will be quantitative, and it implies that there will be an over-reliance on statistical data in deciding by the manager. The end goal is to evaluate and realize the outcomes that are anticipated.
Primary data will be collected through interviews and questionnaires. The implemented approach entails identifying companies in the same production line and gathering the needed information. Since the organization is located in three distinct regions, collecting data independently from each section will be relevant. Transportation from one region to another might be a challenge, and therefore some of the interviews will be done through phone calls. The technique being used in obtaining primary data is that of transcription. From the approach, it will be possible to ask the management of the other organization a brief history about their performance in the market. The focus will be on the changes that have taken place in demand and supply, the number of construction activities that are taking place in the region, and the level of utilization of the fleet capacity. The data will provide the needed information about the trend in each respective market in the Mediterranean. The research technique employed will ensure that reliability and credibility of the primary data is high. More so, in the last bit of the interview and questionnaire, there will be a section to discuss the implication that COVID-19 has had on their business operations.
The gathering of secondary data will take place through online research. The main focus of the secondary data will be to gather information about the performance history of the cement production and transportation business in the Mediterranean. The credibility of the sources from which the data will be obtained will be crucial in improving the reliability of the outcomes. Therefore, the focus will be on sources that are peer-reviewed since there are more authentic. Other sources to consider are statistical websites with the needed information, such as the CW group. The information on the website is to provide a more comprehensive overview of the industry. Data collected from the consumers of the product will be categorized as secondary. For instance, interviews can be carried out among manger of the various construction sites. They will be able to provide information on the source of their cement, the challenges they have encountered in transportation, and the reliability of their providers. The cost at which they purchase the cement will equally be included. Since the client’s information is secondary, it will be categorized as secondary information. Using the research approach, a critical plan will support and back up the data gathered from the primary sources. Several decision outcomes can be made for the data collected. From the first presentation of information basic conclusion can be made, such as whether there is an increase or decrease. However, a much more in-depth analysis is needed to get the most out of the presented data. For instance, the relationship among the variables cannot be made from looking at the data, but an evaluation will provide the outcomes. In general, both the secondary and the primary data will play an essential role in the analysis for decision-making purposes. The following is a list of primary and secondary data gathered from the research approach.
- CV – Cement Volume Transported from the Company
- CGDP – Contribution of Construction Industry to the Gross Domestic Product of the Country of Destination (Croatia, Italy, Cyprus).
- Construction Activities – A Representation of Number of Construction Permits that have been Issued in the Country of Destination.
- Utilization Fleet Capacity – Proportion of Utilized Capacity from existing Fleet.
Analysis
The analysis provides answers to the market conditions for cement and cement carriers. The main concern for the manager is to get information about the cement demand to assess the carrying capacity needs. The demand outcomes can be obtained by evaluating the volume of cement transported in a specific period and the number of construction permits issued within the same period. A visual representation of the volume of cement transported will provide an overview of the changes and shifts in demand in the three markets.
Overall Demand
Figure 1:Demand for cement in Croatia, Italy and Cyprus
Croatia
Figure 2: Demand for Cement in Croatia
Italy
Figure 3: Demand for Cement in Italy
Cyprus
Figure 4: Demand for Cement in Cyprus
From the visual representation of demand, the manager can picture the changes in the demand for cement for ease of management of their fleet. The demand is for a duration lasting the past two years, starting from January 2020 and ending in December 2021. In the first four months of the 2020 financial year, a tremendous decline in the demand for cement is indicated by the falling slope. There was a regain in the remaining eight months where there was a fluctuation between increase and decrease in demand. The years 2021 started on a high note with an increase in demand for two months, and stability was achieved from March 2021 to September of the same duration. There was a slight decline in demand in the last quarter of 2021 and a moderate increase at the end.
The demand for cement in Italy behaves similarly to the demands in Croatia. A possible explanation is that the industry of operation is the same, and the changes in the market are effective in all the organizations in the same line of production in a similar way. The same situation applies to the Cyprus market as the demand trend is the same. The changes taking place follow a familiar path. However, there is a notable difference in demand in the three regions from the analysis. Croatia has the lowest demand for cement compared to Italy and Cyprus, and Italy is second in line, followed by Cyprus. Therefore, Cyprus has the highest demand for cement in the Mediterranean region. The outcomes are evident from the visual representation of the graph where the demand line for Croatia is at the bottom, followed by that of Italy, and the one for Cyprus is at the top.
Evaluating the changes in demand in the two years makes it possible to predict a fifth pandemic wave. The past data indicates a considerable fluctuation in the first financial year of 2020. It is represented by a time when the infection rate due to the pandemic was at its highest level. However, in 2021, there is the stabilization of the demand and less decline as the pandemic rate is also reducing. Therefore, it is expected that the demand will shift upwards in the future, even in a situation where there is a fifth wave of the COVID-19 pandemic. The stability perceived at the end of the demand curve is a good sign for the cement industry, and it is anticipated that demand will be on the rise. Therefore, the varying capacity needed by the organization should be increasing because of the expected increase in demand and the need to meet the utility through an increase in the supply. It is possible to achieve the plan only if there is an increase in the fleet capacity. Competition in such a situation is likely still, and the firm needs to have gathered all the resources needed to improve its fleet capacity.
Part 2: Statistical Analysis
The manager has information that the number of construction permits in Greece are likely to double in 2022 when compared to the number issue in 2021. The intention is to evaluate if there will be any implication on the demand for cement. A descriptive statistical analysis will be able to prove the answers on whether or not there is a relationship between the number of permits and a change in demand. A regression analysis will be a suitable tool to use in determining the correlation that exists between the variables.
The evaluation to be done will be a regression analysis for the three regions trying to establish relationship between the demand for cement and number of permits. The focus will be specifically in the permits and demand for the 2021 financial years which will be used in making a prediction for the outcomes in 2022. The outcomes of a regression analysis will provide a wider picture of the effect that the dependent variable has on the independent variable. In the case of the evaluation, the dependent variable is the volume of cement that transported of demanded which is represented by Y in the demand function. The independent variable is the number of construction permits that have been issued. In general the number of permits that have been issued are the ones which will determine the volume of cement that will be transported or demanded.
Croatia
| SUMMARY OUTPUT | ||||||||
| Regression Statistics | ||||||||
| Multiple R | 0.96062003 | |||||||
| R Square | 0.92279084 | |||||||
| Adjusted R Square | 0.91506992 | |||||||
| Standard Error | 3379.14063 | |||||||
| Observations | 12 | |||||||
| ANOVA | ||||||||
| df | SS | MS | F | Significance F | ||||
| Regression | 1 | 1364730753 | 1.36E+09 | 119.5183 | 6.98E-07 | |||
| Residual | 10 | 114185913.9 | 11418591 | |||||
| Total | 11 | 1478916667 | ||||||
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | |
| Intercept | 28520.1167 | 3294.031027 | 8.65812 | 5.85E-06 | 21180.56 | 35859.68 | 21180.56 | 35859.68 |
| Permits | 60.168892 | 5.503700486 | 10.93244 | 6.98E-07 | 47.90588 | 72.4319 | 47.90588 | 72.4319 |
Y=Mx + C
Y= 60.17x + 28520
Italy
| Regression Statistics | ||||||||
| Multiple R | 0.96062003 | |||||||
| R Square | 0.92279084 | |||||||
| Adjusted R Square | 0.91506992 | |||||||
| Standard Error | 5068.71094 | |||||||
| Observations | 12 | |||||||
| ANOVA | ||||||||
| df | SS | MS | F | Significance F | ||||
| Regression | 1 | 3070644194 | 3.07E+09 | 119.5183 | 6.98E-07 | |||
| Residual | 10 | 256918306.2 | 25691831 | |||||
| Total | 11 | 3327562500 | ||||||
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | |
| Intercept | 42780.1751 | 4941.04654 | 8.65812 | 5.85E-06 | 31770.84 | 53789.51 | 31770.84 | 53789.51 |
| Permits | 60.168892 | 5.503700486 | 10.93244 | 6.98E-07 | 47.90588 | 72.4319 | 47.90588 | 72.4319 |
Y=Mx + C
Y= 60.17x + 42780
Cyprus
| SUMMARY OUTPUT | ||||||||
| Regression Statistics | ||||||||
| Multiple R | 0.96062003 | |||||||
| R Square | 0.92279084 | |||||||
| Adjusted R Square | 0.91506992 | |||||||
| Standard Error | 5068.71094 | |||||||
| Observations | 12 | |||||||
| ANOVA | ||||||||
| df | SS | MS | F | Significance F | ||||
| Regression | 1 | 3070644194 | 3.07E+09 | 119.5183 | 6.98E-07 | |||
| Residual | 10 | 256918306.2 | 25691831 | |||||
| Total | 11 | 3327562500 | ||||||
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | |
| Intercept | 42780.1751 | 4941.04654 | 8.65812 | 5.85E-06 | 31770.84 | 53789.51 | 31770.84 | 53789.51 |
| Permits | 60.168892 | 5.503700486 | 10.93244 | 6.98E-07 | 47.90588 | 72.4319 | 47.90588 | 72.4319 |
Y=Mx + C
Y= 60.1x + 42780
From the regression analysis of the three regions, it can be established that there is a positive correlation between the volumes of cement transported which represents the demand in tons, and the number of construction permits that have been issued. Therefore, when there is an increase in the number of construction permits provided, there is a positive and corresponding increase in the demand for cement transported. A key point to note is that the focus is on the last year of 2021, resulting in c common demand function presented as Y= 60.17x + 42780. Since the demand function obtained is the same, the manager can use the same to predict the demand anticipated in 2022 when there is an increase in the expected permits in Greece. Therefore, a conclusion can be made that the permits in Greece can be used in predicting the cement demand while using the demand function that has been calculated.
Other than the factors that have been mentioned in the excel file, price is a critical factor that will affect the demand for cement. It is expected that there will be a fluctuation in cement price, and it cannot remain constant. When there is an increase in the price for one bag of cement, the demand will decline while the supply will rise. On the other hand, there will be an upwards shift in the demand when there is a decrease in one bag of cement. Therefore, apart from the construction permits to be issued, price is a critical factor that needs to be considered. The utility level will be much higher with low prices than with higher prices.
Part 3: Decision Analysis
Cost-effectiveness is the primary agenda of the decision analysis. The manager has been presented with four options based on the suitability of the business needs and satisfaction of the consumer’s needs. The schedule continues with cement production and outsources activities that are not directly related to the manufacturing process. Therefore, the most suitable approach to make the decision is time value for a moment. From the analysis, the most suitable option to consider is C. That is because the total cost incurred is the least compared to the other alternatives. An evaluation of option D suggests that it might have been a practical consideration, especially when there is a 0.4 probability that the cement carrier will decline by 30% and the monthly hire for the time charterparty will decrease to 8000 Euros/day. However, the option is secluded since there is a risk associated. There is a 0.4 chance that the cost of the cement carrier will increase by 30%, and the monthly hire will rise to 15,000 Euros a day. It will be the most costly venture to consider of all the options posing a greater risk to the company is put into consideration. The reason for selecting option C is because there is a reduction in duration from five to three years while the cost of the cement machine remains constant. The yields might be minimal, but also, there is no high risk associated. In the other option, the outcomes might go either way. More so, there will be more losses in a situation where the results favor the increase. Since the objective is to continue production and outsource some of their activities, a risk is not worth considering.
| Option A | |||
| Cement Carrier | 3,000,000 | ||
| Montly Hire | |||
| Cost | 8000 | ||
| Duration (5 years) | 1750 | ||
| 14000000 | |||
| Total | 17,000,000 |
| Option B | Constant | Increase | Decrease |
| Cement Carrier | 3,000,000 | 3,900,000 | 2,100,000 |
| Monthly Hire (5 Years) | |||
| 8000 | |||
| 1750 | 14000000 | 14000000 | 14000000 |
| Total | 17,000,000 | 17,900,000 | 16,100,000 |
| Option C | |||
| Cement Carrier | 3,000,000 | ||
| Monthly Hire | |||
| Cost | 10,000 | ||
| Duration (3 Years) | 1050 | 10500000 | |
| Total | 13,500,000 |
| Option D | |||
| Cement Carrier | Constant | Increase | Decrease |
| 3,000,000 | 3,900,000 | 2,100,000 | |
| Montly Hire (3years) | |||
| 0.3% probability (12,000) | 12,600,000 | ||
| 0.3% probability (15,000) | 15,750,000 | ||
| 0.4% probability (8,000) | 8,400,000 | ||
| Total | 15,600,000 | 19,650,000 | 10,500,000 |
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