Project Management challenges faced by Gas & Oil Pakistan Limited in diversification into dairy industry

Gas & Oil Pakistan Ltd

Gas & Oil Pakistan Ltd. (GO) is a renowned oil marketing company and has license to operate since 2015. GO is operating more than 1000 retail outlets in Pakistan. Its contribution to the fuel industry is quite remarkable. It was founded by a group of businessmen who were already doing business in the same sector for the last 40 years. So, they were already aware of the challenges they were going to face in the industry that’s why the company is growing very rapidly since its foundation.

The company’s senior leadership realized that in order to survive in this growing world they must take on different projects to increase the portfolio of the company that’s why they have also started to facilitate the users of electric cars by implementing the first-ever EV charger in Pakistan. Besides the EV charger project, they have also started to diversify their business by going into new markets such as the farming and dairy industry. Specifically, after Covid 19 they decided to take on the project of diversifying their product offering and adding dairy products as well.

Since the organization is diversifying in the new market (Dairy industry) that doesn’t have a link with their existing market (Fuel industry) so this diversification is termed conglomerate diversification So, in order to enter into a new industry, they needed to launch different projects such as installing infrastructure for milk pasteurization and build logistic infrastructure for delivering of milk from the plant to markets where their product will be sold to the final consumer. Naturally, if anyone is starting a new thing there must be some challenges involved and that was the exact case with Gas & Oil Pakistan limited. This article will explore the project management challenges faced by the company and will try to closely look at the reasons behind that challenges.

As the universe is growing, there is an increased danger of environmental pollution and the world is taking a severe hit by global warming. One of the reasons behind environmental pollution is the usage of fuel by mankind and the fuel is majorly used in transportation. So to tackle this issue human has started to look for an eco-friendly mode of transportation that’s why electric cars were discovered. Since then, there is continuous evaluation of such vehicles in the market which put a question mark on the existence of fuel-consuming vehicles. It is predicted that there will be no fuel-consuming car in the coming decades and if there is no fuel-consuming car in the market then the whole fuel industry will decline gradually.

Although the fuel industry in developing countries like Pakistan is still booming and will continue to do so in the coming future the time will come when these developing countries’ fuel industries will also suffer because of the decline of the international fuel industry. After Covid, there was the realization of the senior leadership of Gas & Oil started to plan for the future. While planning they decided to look for a market that will grow irrespective of any factors so one of the industries was the dairy industry which is the basic necessity of humankind.

Thus, in order to enter the dairy industry, they looked at the gaps left behind by existing players in the market. One of the opportunities they found was that there is a huge gap in natural milk in the Pakistani market. Existing players were selling formula milk although few companies are selling natural pasteurized milk without any chemicals still there was a huge gap in this area which Gas & Oil decided to capitalize on.

The process of building infrastructure for the pasteurization started in the month of September 2021 and it was expected by senior management that this project will be completed in three months by end of December 2021 but the reality it was completed recently in the mid of June 2022. This was clearly a time management challenges that they faced because of various reasons.

According to CEO, Umer Liaqat, of GO foods, the failure to complete the project on time was majorly due to improper guidance and misinformation which resulted in many missed deadlines the project eventually resulted in an overall delay in the project.

Another project management challenge they faced was properly deciding the scope of the project since they were new to the dairy industry so they found it very hard initially to commercialize the scope of the project and in the initial stage of the project they didn’t have an idea of purchasing the right raw material for pasteurizing plant because of misinformation which shows their weak procurement planning but as the time passed they were quick to learn from their bad experiences that’s why this challenge did not affect so much.

Most of the pasteurizing machinery procured during the project was imported from foreign countries which was again a challenge sometimes because of the time frame it took to reach the home country. Once, upon testing a homogenizer it failed because of the issue in its seal then they had to contact their vendor and the vendor then procured a better quality homogenizer for them which is working fine to date.

Gas & Oil Pakistan limited was building their infrastructure in the remote area because their own dairy farm was already there and the idea behind building the infrastructure there was to eliminate the risk of milk getting expired before reaching to pasteurization point and also to cut the transportation cost in the process but because of the remote location they faced the challenge of finding a good human resource which is why two plant managers left their jobs in the midway of the project. Another challenge faced by the remote area was the availability of labor as it takes 10-12 hours for labor to reach there at the earliest.

When they began the construction of the plant the price of one bag of cement was around 500 Rupees but in the span of only a few months, the price went over 1000. A similar thing happened with prices of fuel the price of diesel when they started the construction was around 130 Rupees per liter but the rate doubled during the project time period and went up to 260 Rupees per liter. During this period, the electricity rates also increased from 8 Rupees per unit to 32 Rupees per unit, and raw material costs also increased. All these factors had a negative influence on their cost planning which was done in the initial stage of the project. These factors also forced them to rewrite their cost feasibility report. Other cost-related challenges during the project were that they had to give higher salaries to their employees which resulted in higher variable costs.

Despite the challenges, they were successful in the implementation of the plant and now they are in the testing phase and soon they are planning to launch their natural milk pack. The lesson learned from the project was that it is better to hire a consultant who must have adequate knowledge about the industry so that he will guide you properly throughout the project and by doing this you will also be saved from “misinformation”.

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