Module: 05

Establishing An Enterprise and Click to edit Master subtitle style Project Management

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Project
A temporary endeavor undertaken to create a unique product or service. Defined as scientifically evolved work plan devised to achieve a specificClick to edit Masterspecifiedstyle of time objective with the subtitle period

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Project Management:
The application of knowledge, skills, tools, and techniques to project objectives to meet stakeholder needs and expectations. Click to edit Master subtitle style

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Characteristics and features

Investment patter Benefits of gains location Objectives Life span Single entity Team work Life cycle

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Knowledge Areas:

Scope Management Time Management Cost Management Quality Management Human Resources Management Communications Management Risk Management Procurement Management
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Integration Management

Project life Cycle Stages

1.

Conception Stage or Project Identification Definition stage or project formulation Planning and Organizing stage or project design Implementation Project clean up stage

2.

3.

4. 5.

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1. Conception Stage or Project Identification

Idea generation Problem identification Project identification

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2. Definition stage or project formulation In this stage the project will develop the idea generated
during the conception stage The areas examined in this stage are (Eg ..cement plant)

Raw materials Plant size Location Technology Project layout Plant layout Electrical works Civil works Utilities fuel, power,

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3. Planning and Organizing stage or project design

Prepare project execution plan 8% of the work done Take necessary action for realization of project like,

Project infrastructure System design Licensing Identification of project manager

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4. Implementation

85% of the work done in this stage

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5.Project Clean-up stage

3 % effort needed Drawing, documents, files, operation and maintenance manuals are catalogued and handed over to the customer Handing over

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Project Management and other disciplines

Finance HRM Operations Purchase and logistics R&D Marketing

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Project Classification
1.

Quantifiable and Non-Quantifiable projects Sector projects Techno-economic projects Financial institutions classification Services projects

2. 3. 4. 5.

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1. Quantifiable and NonQuantifiable projects

Quantifiable projects are those in which a reasonable quantitative assessment of benefits can be made Non-quantifiable projects are those where such an assessment not possible

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2. Sector Projects

Agriculture Industry and mining Transport Social services

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3. Techno-economic projects
1. 2.

Causation-oriented classification Factor intensity oriented classification Magnitude oriented classification

3.

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4. Financial Institutions classification

1. 2. 3.

New projects Expansion projects Diversification projects

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5. Services Projects
1. 2. 3.

Welfare services Service projects Educational projects

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Project Formulation

Defined as taking a first look carefully and critically at a project idea by an entrepreneur to build up an all round beneficial to project after carefully weighing its carious components

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Phases of Project formulation

CONCEPTIO N OF AN IDEA

ANALYSIS OF RELATED ASPECTS

FORMULATI ON OF A PROJECT

DESIGN OF A PROJECT

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Steps in Project Formulation

1. 2.

General Objectives Operational Objectives

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Sequential Stages in Project Formulation

1. 2. 3. 4. 5. 6. 7.

Feasibility study Techno-economic analysis Project Design and Network analysis Input Analysis Financial analysis Social cost benefit analysis Pre-investment analysis

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Project Planning

Project Planning

is a formal, approved document used to manage and control project execution

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Project Plan Development

Output of Planning processes in other knowledge areas _______________________ Historic Information _______________________ Stakeholder skills and knowledge _______________________ Organizational Policies _______________________ Limitations and Assumptions

Project Planning Methodology

Project Plan

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Project Scope

To whom is the project is prepared The target audience The usefulness the stakeholders

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Project Planning Objectives

To satisfy the stakeholder To show ones expertise To get the approval

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What is a Feasibility Study?

A feasibility study is an analysis of the viability of an idea through a disciplined and documented process of thinking through the idea from its logical beginning to its logical end. A feasibility study provides an Investigating function that helps answer Should we proceed with the proposed project idea? Is it a viable business venture? A feasibility study should be conducted to determine the viability of an idea BEFORE proceeding with the development of a business.

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Distinction between prefeasibility study and FeasibilityPre-Feasibility study Study Deeper Feasibility No thoughts on

knowledge on Studyviability of The various the project from feasibility, such economic, social, astechnical,

managerial, economic, social, market and technical, financial point of managerial, view market and financial

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Various Feasibility Studies

Socio-Economic Feasibility Technical Feasibility Managerial Feasibility Market Feasibility Financial Feasibility

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Socio-Economic Feasibility

Identify and Estimate all Capital Expenditures Identify and Estimate all Variable Costs related to the Proposed Business Venture

Identify People and Skills required to operate

Determine Wages, Salaries, and Benefits

Identify and Estimate Project Related Costs

Infrastructure development or improvements Advertising and Promotion Legal Fees Municipal & State Development taxes

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Identify and Estimate all Fixed Costs

Technical Feasibility

Manufacturing process/technology selected Technical collaboration Capacity/size of the project/ scale of operation Location of the project Availability of physical and social infrastructure Plant layout

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Managerial Feasibility

The levels of Management Designing about the posting and recruitment Allocating of power

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Market Feasibility

The target audience Segments of your projects The end users The cost of the project The competitors Market entry Supply chain management
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Financial Feasibility

Capital and operating costs Funds flow Cash flow Ratio analysis Break-even Profitability Investment process
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Feasibility Reports presentation

A feasibility report provides primary economic information, financial data and technical details which serves as the basis for carrying out the project successfully The feasibility report should cover the following important aspects

all the feasibilities studies such as market, financial, economic, social etc

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Project Feasibility Report Checklist

Socio-Economic Feasibility Technical Feasibility Managerial Feasibility Market Feasibility Financial Feasibility HR feasibility Operational Feasibility
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Sources of Finance
1. 2. 3.

Short term finance Mid-term finance Long term finance

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Sources of Finance
Short Term Medium Term
1. 2. 3. 4.

Long Term
Issue of shares Issue of debentures Loans form financial institutions Ploughing back of profits

Bank credit 1. Trade credit 2. Installment credit Customer 3. advances

4.

5.

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Issue of shares 1. Issue of 2. debentures Loans form banks 3. and other financial institutions 4. Public deposits (For existing concerns) Ploughing back of profits

Break Even Analysis

Refers to determining the level of activity where total cost is equal to the total sale Break even is a point of zero profit and zero loss BEP in terms of sales =
amount of sales Total Contribution
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Fixed Cost * Total

Utility of BE Analysis

It serves as the most useful and important managerial tool to study cost-output-relationship at varying levels of output It is useful in reviewing pricing policies It aids in planning capitalization of the enterprise It provides the entrepreneur to 4/13/12 decide whether to acquire or not

Project Design

In project design, the entrepreneur is expected to design prototypes, testing them Design is the new weapon and key driver is innovation to fight out the competition For design to become culturally embedded in an organization three forces have to be considered
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1.

A deeper user understanding

Steps in design thinking

1. 2. 3.

Make a long term commitment Build it into your corporate strategy Assign a leader, but do not limit it to a function Collaborative and internalize it Inspire, dont legislate Feed it and reward it

4. 5. 6. 7.

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Network Design

Is a system which plans both large and small projects by analyzing the project activities Projects are broken down into simple activities, which are then arranged in a logical sequence Network Tools
1.

PERT CPM

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2.

History of CPM/PERT

Critical Path Method (CPM)

E I Du Pont de Nemours & Co. (1957) for construction of new chemical plant and maintenance shut-down Deterministic task times Activity-on-node network construction Repetitive nature of jobs

Project Evaluation and Review Technique (PERT)

U S Navy (1958) for the POLARIS missile program Multiple task time estimates (probabilistic nature) Activity-on-arrow network construction
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Network analysis is the general name given to certain specific techniques which can be used for the planning, management and control of projects

Project Network

Use of nodes and arrows Arrows

An arrow leads from tail to head directionally

Indicate ACTIVITY, a time consuming effort that is required to perform a part of the work. A node is represented by a circle

Nodes

- Indicate EVENT, a point in time where one or more activities Activity start and/or finish. A task or a certain amount of work required in the project Requires time to complete Represented by an arrow Dummy Activity Indicates only precedence relationships Does not require any time of effort
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Project Network

Event

Signals the beginning or ending of an activity Designates a point in time Represented by a circle (node) Shows the sequential relationships among activities using nodes and arrows

Network

Activity-on-node (AON)

nodes represent activities, and arrows show precedence relationships

w

Activity-on-arrow (AOA) arrows represent activities and nodes are events for points in time

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AOA Project Network for House

Lay foundation

3
2 1 Order and receive materials 0

Dummy Build house 3 1 1 Finish work 1

3 Design house and obtain financing

4
Select paint

6
Select carpet

AON Project Network for House

Lay foundations Build house

2 2 Start 1 3 3 1 5 1

4 3

Finish work

7 1 6 1
Select carpet

Design house and obtain financing

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Order and receive darla/smbs/vit Select paint materials

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Situations in network diagram

A A B A B A B Dummy C
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B
A must finish before either B or C can start

C C
both A and B must finish before C can start

C D

both A and C must finish before either of B or D can start

A must finish before B can start both A and C must finish before D can start

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Network example
Illustration of network analysis of a minor redesign of a product and its associated packaging. The key question is: How long will it take to complete this project ?

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CPM calculation

Path

A connected sequence of activities leading from the starting event to the ending event The longest path (time); determines the project duration All of the activities that make up the critical path
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Critical Path

Critical Activities

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Advantages of CPM

It helps in ascertaining the time schedule With its aid, control by the management is made easy It makes better and detailed planning possible It provides a standard method for communicating project plan, schedule, time and cost performance

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Limitations of CPM

Fails to incorporate statistical analysis in determining the time estimates It operates on the assumption It is difficult to use CPM as a controlling device for the simple reason that one must repeat the entire evaluation of the project each time
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PERT

PERT is based on the assumption that an activitys duration follows a probability distribution instead of being a single value Three time estimates are required to compute the parameters of an activitys duration distribution:

pessimistic time (tp ) - the time the activity would take if things did not go well most likely time (tm ) - the consensus best estimate of the activitys duration optimistic time (to ) - the time the activity would take if things did go well

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PERT analysis

Draw the network. Analyze the paths through the network and find the critical path. The length of the critical path is the mean of the project duration probability distribution which is assumed to be normal The standard deviation of the project duration probability distribution is computed by adding the variances of the critical activities (all of the activities that make up the critical path) and taking the square root of that sum Probability computations can now be made using the normal distribution table.
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Steps in PERT
1. 2. 3.

Development of project network Time estimation Determination of critical path, event slacks and activity floats Development of project schedule Calculation of variability duration and the probability of completion in a given time

4. 5.

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Advantages of PERT

It gives the management the ability to plan the best possible use of resources to achieve a given goal within the overall time and cost limitations Helps management to handle the uncertainties involved in programmes where no standard time data of the Taylor-Gantt variety are available 4/13/12

Disadvantages of PERT
1.

The basic difficulty comes in the way of time estimates for the completion of activities because activities are of non-repetitive It does not consider resources required at various stages of the project Needs frequent updating

2.

3.

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