Based on this analysis, explain whether QL should vertically integrate by owning and operating the narrow gauge railroad themselves, or whether they should not vertically integrate and have an outside firm own and operate it.
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
QL (“Quebec Lumber”) is a logging and wood processing firm in a remote part of the Canadian province of Quebec. They have recently acquired a remote track of timber that is located ten miles from their processing facility. Normally, this is not a problem as they are able to simply cut the timber and haul it using trucks to their processing facility. However, this track of forestland is ten miles to their north, and there are no roads connecting the tract of land to their facility. They have also acquired a narrow (120 foot wide) ten-mile strip of land connecting this tract of timber to their processing facility. QL considered building their own road between the two points, and have log trucks haul the logs to the processing facility. However, they have decided instead to go with a less expensive option, a narrow gauge railroad. The narrow gauge railroad would require the laying of ties and steel tracks, and will require a custom-built locomotive and rolling stock (train cars that will carry the logs).
While they have settled on the idea that the railroad is the best way to move the logs to the processing facility, they are trying to determine whether to own and operate this railroad themselves (vertically integrate), or instead have an outside firm own and operate the railroad. QL is considering an outside firm because they do not want to make such a large investment themselves up front, and would rather pay an outside firm to transport the logs based on the number they transport over time. Also, QL does
not have any experience operating a railroad, as they have only engaged in cutting down trees and then processing them (turning them into wood boards). Obviously, vertically integrating has some advantages and disadvantages, some of which might be particularly relevant in this situation.
For each of the three ways that vertical integration can be used to increase profitability mentioned in the textbook, discuss to what degree each is relevant in this specific scenario. Also, discuss what degree the three problems with vertical integration discussed in the textbook are relevant to this specific scenario. Based on this analysis, explain whether QL should vertically integrate by owning and operating the narrow gauge railroad themselves, or whether they should not vertically integrate and have an outside firm own and operate it.
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