INTRODUCTION 1 MAIN BODY1 RECOMMENDATIONS FOR MANAGING FINANCE AND OPERATIONS

MANAGING FINANCE AND OPERATIONS INTRODUCTION 1 MAIN BODY1 (a) Evaluation of operational, environmental and regulatory factors to be considered by Board 1 (b) Identification of Financing Needs and evaluation of alternative sources of finance 4 (c) Critical Evaluation of Financial Worth of Current Proposaland Alternative Evaluation of Proposal including all incomes and expenditures 6 (d) Recommendations 9 CONCLUSION 10 REFERENCES 11 INTRODUCTION Management of Finance and Operations is a crucial component of the overall corporate performance. •

MANAGING FINANCE
AND OPERATIONS

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
(a) Evaluation of operational, environmental and regulatory factors to be considered by Board
.....................................................................................................................................................1
(b) Identification of Financing Needs and evaluation of alternative sources of finance.............4
(c) Critical Evaluation of Financial Worth of Current Proposal and Alternative Evaluation of
Proposal including all incomes and expenditures........................................................................6
(d) Recommendations..................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management of Finance and Operations is a crucial component of the overall corporate
performance. This is due to the fact that while finance is mainly related to the accumulation of
various sources of funds, operations is related to the actual application of such funding sources.
Hence, it is very important for the business to integrate the two functions so as to enhance
enterprise performance in a sustainable manner (Berenguer and Shen, 2019). Effective Fleet
Management is mainly concerned with minimization of overall costs through optimum utilisation
of resources available to a given corporate organization. Hence, it is important for an
organization to assess the replacement time and methodology for each vehicle so as to derive
maximum benefits on their usage and disposition.
This report aims to provide recommendations on the Optimal Vehicle Replacement cycle
Policy for New Life Logistics and Transportation Group PLC. This group is a holding company
of 8 Depots located in South and East UK. The report takes into account Legal and Regulatory
factors, Operational issues and restrictions, Reputational risk management. Additionally, it
provides a vehicle management policy along with clear statements of budgeted capital and
revenue costs as well as proposed service performance measures.
MAIN BODY
(a) Evaluation of operational, environmental and regulatory factors to be considered by Board
For the formulation as well as implementation of a sustainable Vehicle Replacement
Policy, it is highly essential that one should keep in mind the impact of using an old vehicle in
relation to legal, operational, environmental and regulatory purposes. This is mainly due to the
fact that running an old vehicle for long period of time result in an increase in maintenance costs
as well as uneconomical fuel consumption on the part of the business entity. In addition to this, it
is also the responsibility of the company management to ensure such policy is being followed
diligently across all organizational levels. In the context of given case scenario, it is the policy of
New Life Group to replace all assets within five years of their usage (Bredmar, 2015). However,
it has come to the notice of company's Board Members that this policy has not been fully
adhered to.
Currently, New Life Logistics and Transportation Group expends £1,800,000 on hire
vehicles annually. However, the management is of the view that heavy reliance on external
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conveyance has damaging impact on company's image. Thus, the company faces a reputational
risk at the expense of frequently utilised hire vehicles. In order to resolve this issue, it is crucial
for the Board to review its current vehicle replacement policy as well as evaluate its legal,
operational as well as environmental implications in a detailed manner. These factors have been
discussed as under:
 Operational Factors:
These factors are mainly concerned with the managerial functions which include strategy
planning, alignment of organizational goals with systems and processes as well as maintenance
of quality of service provided by New Life Logistics group towards its clients (Venkataraman
and Pinto, 2016). For this purpose, it is important for the Board Members to consider various
Operations Management Theories such as Six Sigma and Total Quality Management so as to
minimize any sort of errors as well as quality of transportation service delivered by it (Butler,
2016). These have been discussed as under:
 Transport Management System (TMS) and Six Sigma:
Essentially, Six Sigma is an operational management theory which facilitates improvisation of
overall capabilities of an organization's business processes and systems. Each and every transport
enterprise follows TMS irrespective of the fact that whether or not they operate their own fleet of
vehicles or hire them from an external agency (Transport Management System, 2014). A detailed
analysis of this system in relation to the Six Sigma Methodology can help company such as New
Life Logistics to ensure that the vehicle traceability as well as historical data on mileage, break-
downs and repairs are easily accessible to the management authorities. Thus, enabling the
identification of any variations occurring among the business processes that result in the
development of bottlenecks and disruption of excellent service to New Life's clients. Also, it will
enable the Board members to know that whether the costs incurred previously on the hire
vehicles would be minimized if a this system is replaced by another vehicle replacement policy.
 Total Quality Management (TQM):
This tool can be defined as a Quality Management Process that is implied by the organizations so
as to ensure that factors of production such as available Human resources and Capital are
employed in a sustainable manner. Apart from this, Total Quality management also makes sure
that all the activities are conformed to the requirements which serve as a measuring yardstick for
excellent customer service. Since this theory of Operational Management is concerned with
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increasing customer satisfaction, review of this operational factor becomes paramount for New
Life Logistics who is considering the revision of its vehicle replacement policy.
 Environmental Factors:
With an increasing awareness regarding issues such as Global Warming, Pollution, in present
day scenario, every organization is required to be aware and socially responsible towards the
environment. Being a logistics and transportation business, New Life needs to ensure that its
carbon footprint does not increase (Wolf and et.al., 2016). Hence, the company's Board Members
must consider these factors while evaluating their options to introduce a new vehicle replacement
system as well as policy. Another important reason to consider environmental factors is that with
the advent in technology, new greener versions of vehicles are introduced that enable reduction
in carbon footprints and are in accordance with the changes in legislative acts in the form of
amendments.
 Regulatory Factors:
While determining ways to formulate an optimal vehicle replacement policy for the company, it
is important for the Board members to keep in mind the legal impact and consequences that can
be faced by New Life Logistics in current as well as future. For this purpose, analysis of the
following two factors is essential:
 Schedule 2 of VERA, 1994:
As per this clause of the Vehicle Excise and Regulation (VERA) Act of 1994, a wide variety of
vehicles such as trams, fire engines, electrically propelled vehicles and mowing machines among
others may be exempted from taxation of Excise Duty under VED. In the context of New Life
Logistics, the Board Members are required to critically evaluate the Electrically Propelled
vehicle section 20G of this Schedule 2. As per Section 20G(2)(a) and (b), such a mode of
conveyance is subjected to excise duty if the vehicle is governed by Part 1AA of Schedule 1 that
talks about light passenger vehicles registered on or before April 1, 2017 and cost more than
£40,000 (Schedule 2 of VERA, 2019). As New Life already owns 8 Depots in South and East
regions of United Kingdom, the Board needs to ensure that the hire vehicles do not result in
acquisition of high costs on the company's part. In addition to this, they also need to make sure
that the light weight passenger vehicles employed by the company are in adherence with the
terms and conditions prescribed by VERA, specifically, Schedule 2. Being a large logistics and
transportation group, compliance with this regulation becomes paramount. Mainly because this
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schedule helps in providing valuable insights on how the business can save on taxes by way of
receiving exemptions on vehicles utilised by the company for operational purposes.
 Provision and Use of Work Equipment Regulations (PUWER), 1998:
This regulatory framework is another important factor to consider in relation to the Corporate
Act of 2006 which legally governs the day-to-day operational activities of a business besides its
formation. As per PUWER, all work equipment maintained by a business needs to be in a
workable state (PUWER, 2019). This means that the tools or other equipments utilised for the
successful and smooth operation of the business needs to be properly maintained so as to not
jeopardize the health and safety of its users. In this context, New Life Logistics' Board Members
need to evaluate that whether or not the hire vehicles utilised by the company are even safe
enough or not. This is due to the fact that the main product offered by the business are its
vehicles which operate both on weekends as well as weekdays for 24 hours. Hence, it becomes
paramount for the business to check that the services provided through such vehicles does not
put the clients, employers as well as the company at risk due to deterioration and decline in
quality of the mode of conveyance provided (Cook and Billig, 2017).
(b) Identification of Financing Needs and evaluation of alternative sources of finance
For any business venture to succeed, it is critical for the organisation to first identify
various needs that are required to be addressed by the top management. Once these have been
duly recognized, it is important to ascertain the most suitable sources of finance that may
facilitate the fulfilment of such needs in an effective manner and within stipulated time-period.
In the context of given case scenario, the existing gearing ratio of New Life Logistics is 50%
wherein the Paid-Up Share Capital is £80mn and rest of the capital structure includes 6%
Debenture Stock. Hence, one can conclude that current gearing structure of the company is
inclusive of only debt and shareholder's equity. Looking at the advises of Group Logistics
Manager in combination of the financial information provided by the Director Of Procurement,
the following financing needs have been identified:
 Fully Staffed and Equipped Vehicles:
As per the Group Logistics Manager, it has been observed that there is a need for 100
fully staffed and equipped vehicles that would provide service on weekdays. On the other hand,
weekend requirements demand availability of 80 such vehicles (Fahimnia and et.al., 2015).
Hence, a financing need for obtaining such modes of conveyance arises in front of New Life
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Logistics' Board Members. It is also deemed to be a practical operational target from Company's
point of view that such vehicles would be in operation 85% of the time on weekdays and 75% on
weekends respectively. As per the information provided by the Logistics Manager, the current
workable condition of the hire vehicles is that they are 7 years old. This is contrary to the
company policy which states that all the assets need to be replaced after 5 years. Thus, indicating
that the vehicular replacement policy is not diligently being adhered to by the internal
management of New Life Logistics Group.
 Additional Sources of Funding to meet costs:
Currently the company incurs an annual expenditure on the hire vehicles worth
£1,800,000. As per Logistics Manager a Fully Staffing includes one qualified driver plus two
support staff per 10 vehicles. This means that if 100 vehicles are bought by the company, the
following combination of qualified and support staff will be required to be hired by the business:
Number of employees required (per 10 vehicles)
Full Staff Weekdays Weekends
Qualified Drivers 10 (=(100*1)/10) 8 (=(80*1)/10)
Support Staff 20 (=(2*100)/10) 16 (=(2*80)/10)
Based on the above table, it is important to ensure that New Life Logistics is able to incur
the hiring costs, maintenance costs of the vehicles, operational costs that arise in the form of
additional £15,000 per vehicle on an annual basis. Apart from this, the salaries and wages of the
Drivers as well as Support Staff also needs to be financed in the initial years so as to not lock in
existing working capital and result in ineffective operations of the business.
Alternative sources of Finance:
The organization needs access to finance to enable them to grow and develop their
businesses. While traditional sources of finance, including invoice discounting, overdrafts, bank
loans and private equity remain the solution for many, in recent years we have seen considerable
growth in alternative sources of finance, such as crowd funding, peer-to-peer lending, and retail
bonds (Gregory, 2015). Some of the alternative financial sources that may help respective
company in order to increase its funds, are discussed below:
Crowd funding: This method is widely used by start-ups or relatively young businesses;
equity crowd funding program allows companies to approach to potential investors, saying they
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need to raise a certain amount of money to develop their business and offering to give up a
percentage of their shares in return. Potential investors can then choose whether or not to pledge
funds on that basis. New Life Logistics and Transportation Company can opt crowd funding
method to raise its funds for the purpose.
Retail Bonds: Bonds are essentially debt instrument issued by a company. The purchaser
of the bond receives a fixed return each year for a set number of years, at the end of which time
the bond can be redeemed. Some businesses have chosen to market retail bonds via one of the
crowd funding platforms mentioned above, taking advantage of the marketing reach that these
platforms have, while other companies have chosen to market these bonds themselves, typically
via their existing customer databases. Respective firm can increase its funds with help of retail
bonds to meet operating expenses (Ivanov, Tsipoulanidis and Schönberger, ).
Angel Investors: One of the most regular forms of secondary finance for start-ups and
emerging companies is via a group of ‘business angels’. These tend to dimension highly-
successful, self-made entrepreneurs who look to assume shares in potentially profitable early-
stage companies using their own funds. Management of New Life Logistics may receive extra
funds for purchasing new vehicles by searching Angel investors for investing in its newly
emerging profitable company.
Peer-to-peer Lending: Peer-to-peer lending platforms allow established business
concerns with fairly foreseeable earnings and a credit history to state their needs for funding. The
platform then proceeds some due diligence and effectively credit scores the business and assigns
it a certain level of risk. Potential investors bid in a reverse auction to show their interest in
lending and what rate they want on their money. The interest rates that come out of this process
are higher than the wholesale banking market (James and Goldberg, 2017). This source is a bit
expensive but nay be consider to raise funds for purchasing and maintaining vehicles.
(c) Critical Evaluation of Financial Worth of Current Proposal and Alternative Evaluation of
Proposal including all incomes and expenditures
It has been critically evaluated from the entire information that new life logistics and
transportation Plc is one of the leading company dealing in number different services. The
company have is spending £1800000 to acquire vehicles so that needs of customer can be
satisfied. There are number of employees working within company that are playing a crucial role
in order to deliver the best transportation services to desired client so that profitability can be
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maintain for a long time and company would be able to get success in long run (Laffy and
Walters, 2016). In the recent time the management is deciding to invest a subsequent amount to
purchase their personal vehicles which would result in providing valuable transportation and
logistics services to customer at reasonable price and will be able to maintain a good profit
margin. Now respective management of company decide to buy 20 new product at cost of
£105000 so that required services can be delivered to existing customer base and new clients can
enjoy this special features at faithful price (Lindström, Madsen and Nielsen, 2015). There are
basically some relevant expenses that are needed to be consider while purchasing new vehicles
such as maintenance cost for each year, depreciation that are implement on the values of each
vehicle at the reducing balance methods, operational expense per annual are £15000 and average
group that is around £1000000. It is observed that manager are liable to consider each expense as
the part of valuation so that actual cost for the particular year can be identified and they are able
make important decision whether to buy the same vehicle or just move to other option that will
give better profitability to business. The underneath table shows that crucial information about
the number of expenses and total cost of new transport vehicles that are purchased by new life
logistics and transportation Plc:
Particulars £
Total cost
of vehicle
Cost of each vehicle 105000 20 2100000
From the above, it is clear that company is willing to purchase 20 new vehicle so that more
and improvised services can be given to customer. The per cost of vehicle is 105000 GBP so that
total cost is equals to 2100000.
Maintenance Costs per vehicle
Year 1 8000
Year 2 10000
Year 3 150003
Depreciation of vehicles
Year 1 50.00%
Year 2 30.00%
Year 3 10.00%
Year 4 5%4
Annual Operational
Costs per vehicle 15000
Average Group spend 1000000
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on maintenance and
repairs
With fully functioning
fleet, avoidance of hire
fees
Year 1 75.00% 750000
Year 2 75.00% 750000
Year 3 75.00% 750000
Year 4 75.00% 750000
Year 5 50.00%
Year 6 50.00%
The table of different linked expenses shows that company must be able to cover these
expenses so that they are able to maintain a profit and stop the hiring of vehicles from other
distributer. Maintenance cost for year 1 is £8000, £10000 in year 2 and after that it will remain
unchanged at £15000. The deprecation is liable on the actual value of vehicle that keeps on
diminishing at a particular rate as it is 50% in year 1, 30% in year 2, 10% in year 3 and remain
unchanged to 5% in rest of the time. It has been also analyses that the annual cost of entire
operation is around £15000 and company has to pay average amount of repairing and
maintenance £1000000. Management has also obtained that by full functioning fleet the
company will be able to avoid 75% of the fees relevant with hire in first 4 year and after that it
would be 50% respectively.
Year Cost Maintenance Depreciation Total
1 105000 8000 250000 363000
2 315000 10000 250000 575000
3 78500 15000 250000 343500
4 33075 15000 250000 298075
Rate 7%
Year NPV
Initial
year -2100000
1 1308000
2 575000
3 338500
4 283075
It has been analyses from the above that the with average cost of capital of 7%, predicted
maintenance cost and depreciation at reducing rate the total spending of company keeps on
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varying. Such as in year 1 the total is 363000, in next year it is 575000, in 3 year it is 343500 an
in last year it changes to 298075. The difference in the amount for each year is basically due to
changes in depreciation rate and repair and maintenance charges are also not same.
(d) Recommendations
From the above understanding and case scenario it has been recommended to new life logistics
and transportation Plc that they must acquire new vehicles for improving the brand image and
extending business to large number of audience. Recently company use to hire needed cars,
trucks, buses and other transportation vehicles from other small or big supplier in order to fulfil
the demand of customer (Simons, 2016). While new life logistics and transportation Plc have to
more of their amount on hiring subsequent vehicles thus they are not able to maintain a good
profit for a longer period. therefore it is ascertained that company in case of purchasing there
known vehicles would more be able to provide valuable services to desired client in specific
period which would result increasing the entire profitability of business and makes them
implement more effective or favourable discount schemes which would increase list of customer
in nearby future. Having their personal vehicles would be advantageous to respective firm in
number of ways as they can appoint new worker and driver at by introducing new favourable
term from them and pay more amount as salary which makes them more involved in company
business so that they put their entire effort on attainment of predetermined goals and objective in
particular time period.
It has been further recommended that company have number of sources for raising fund
in nearby future which makes easy for them to purchase required vehicles and modify their old
services and add more unique one which makes customer more satisfied. New life logistics and
transportation Plc might adopt the option of crowd funding and Peer to Peer lending which
makes them get enough fund to purchase new vehicles and modify their transportation services.
Crowd funding is mainly used by start-ups or new businesses such as the process of equity crowd
subsidy program allocate new company to move towards to probable investors, in order to tell
them that they require raising a positive total of currency to expand their production and offering
to provide up a proportion of their allocate in return. Potential shareholder can then decide
whether or not to promise funds accordingly. New Life Logistics and Transportation Company
can adopt crowd funding method to raise its funds for the purpose
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Peer-to-peer lending platforms allow established business concerns with fairly foreseeable
earnings and a credit history to state their needs for funding. The platform then precedes some
due diligence and effectively credit scores the business and assigns it a certain level of risk.
Potential investors bid in a reverse auction to show their interest in lending and what rate they
want on their money. The interest rates that come out of this process are higher than the
wholesale banking market. This source is a bit expensive but nay be consider to raise funds for
purchasing and maintaining vehicles.
CONCLUSION
From the above project report it has been concluded that for all the business entities it is
very important to manage finance and operations appropriately so that the operational activities
could be conducted appropriately. For this purpose managers of the companies are required to
analyse each and every step which is taken by employees to complete all the tasks on time. It can
help them to formulate strategic decisions for betterment organisations. In order to manage
financial resources top level executives of enterprises are required to form appropriate business
decisions. While conducting operational activities it is very important for managers to make sure
that each and every department is having sufficient funds for executing their activities. If an
organisation is willing to make changes in its strategies that are related to operations then
managers are mainly liable to figure out that company is having appropriate funds or not.
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REFERENCES
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Management Control. Global Business and Management Research. 7(3). p.44.
Butler, K. C., 2016. Multinational Finance: Evaluating the Opportunities, Costs, and Risks of
Multinational Operations. John Wiley & Sons.
Cook, G. N. and Billig, B., 2017. Airline operations and management: a management textbook.
Routledge.
Fahimnia, B., and et.al., 2015. Quantitative models for managing supply chain risks: A
review. European Journal of Operational Research. 247(1). pp.1-15.
Gregory, A., 2015. Planning and managing public relations campaigns: A strategic approach.
Kogan Page Publishers.
Ivanov, D., Tsipoulanidis, A. and Schönberger, J., 2017. Global supply chain and operations
management. A Decision-Oriented Introduction to the Creation of Value.
James, E. H. and Goldberg, R., 2017. Managing Energy: A Team in Crisis.
Laffy, D. and Walters, D., 2016. Managing retail productivity and profitability. Springer.
Lindström, E., Madsen, H. and Nielsen, J. N., 2015. Statistics for Finance. Chapman and
Hall/CRC.
Simons, R., 2016. Strategy Execution Module 1: Managing Organizational Tensions.
Venkataraman, R. R. and Pinto, J. K., 2016. Operations management: Managing global supply
chains. SAGE Publications.
Wolf, E. B., and et.al., 2016. Managing Perceptions of Distress at Work.
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<https://www.asean.org/wp-content/uploads/images/2015/september/transport-
facilitation/batch-1/Transport-Operations-Management/AFFA%20chapter
%20file.rev2_ASEAN%20disclaimer.pdf>
Schedule 2 of VERA. 2019. [Online]. Available Through:
<https://www.legislation.gov.uk/ukpga/1994/22/schedule/2>
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<http://www.hse.gov.uk/work-equipment-machinery/maintenance.htm>
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