Group 17th Project Work

EMDP02 Project Management (May 2020-August 2020)

Piyush Kulshreshtha
Prasad Tamhane
Prasanna Mynam
 1

CONTENTS
Project Overview ……………………………………2
Project Justification…………………………………3
Scope………………………………………………………4
Cost…………………………………………………………6
Schedule………………………………………………….6
Challenges……………………………………………….8
Analysis……………………………………………………9
Conclusion……………………………………………….11

Company XYZ is an Indian subsidiary of a US multinational having production facility all across the
globe. The company is mainly into food and drug ingredients manufacturing. Company decided to set
up a new product facility in India. The proposed facility will be same as their production facility in
Malaysia. So, the project is deployment project.
Project Overview
Company has an existing plant in Madhya Pradesh along with four more location spanned across India.
Due to confidentiality, the exact location will not be disclosed. After the logistical study done by
company for raw materials and finished goods transportation, the MP plant is found to be most
preferable location. The proposed manufacturing facility would be a multistoried building along with a
finished goods warehouse. Majority of the equipment would be reapplied (no new design) from
company’s Malaysia plant as both the plants are similar in nature in terms of design and capacity.
There will be some differences due to the physical location of manufacturing facility, local legislation
and some utilities availability. The MP plant is located where the land is in liquefaction zone so may
need cast-in-situ pile foundation. Additionally, due to the plant utilities availability an additional
electric steam superheater is required and due to the local climate conditions additional HVAC and
water chillers are required. Other than these differences, both the Malaysian and Indian proposed
manufacturing facility would be identical and hence major equipment can be copied and reapplied.
 2

Same vendors are preferred for the identical equipment as their operation and results have been
proven satisfactory in Malaysian plant.

Project Justification

The proposed manufacturing facility would be producing a key ingredient (designated as Ingredient X
henceforth) for Schedule 3 drug market. It will be a premium grade product and targeted to key
customers of the company, some major pharmaceuticals manufacturers in US, UK, Asia and Japan.
The sales forecast of Ingredient X is around 20000T/year starting in first year and then gradually
increasing up to 40000T/year over five years.

Cost of Capital in Project ₹ 1,500,000,000  

FTE Cost ₹ 40,000,000  
Duration of the Project 3 Years
Cost of Capital in Project/Year ₹ 540,000,000  
Discounted Rate 10%  
Cost of Ingredient Rs. 63-65/Kg  
Capacity of Production 200TPD  
Production Days/Year 300  
Production Capacity/Year 60000 Tons/Year
Product Life 10 Years
NPV Value ₹ 12,551,283,058
ROI 36 Months

Scope

Project scope is divided in to two parts:

1. Upgrading existing manufacturing facility to manufacture the raw material required for the
production of Ingredient X. The raw material will be called “Material A” henceforth. This
requires following work.
a. Modifying the existing building by adding two storied building consisting of two 6m X
 3

3m bays.

6m X 3x
Existing Building
6m X 3m

b. Adding three mixing units and hooking up with existing manufacturing unit and utilities.
c. Adding one additional storage tank which will be storing Material A before sending it to
Ingredient X manufacturing unit.
2. Construction of six story manufacturing unit for Ingredient X. This includes following work.
a. Construction of manufacturing plant. The plant construction is on “in-situ” pile
foundation.
b. Installation of three raw material storage tanks in tank farm.
c. Installation of manufacturing machineries required for Ingredient X.
d. Construction/Erection of “Pre-Engineered Building” – PEB structure for finished goods
warehouse.
e. Modifying of existing approach roads for trucks to pick up finished goods from
warehouse and deliver packaging material to manufacturing unit.
f. New pipe rack for transferring raw material and utilities from Material A storage tank
and plant utility area.
g. Steam pipelines from boiler area to new manufacturing unit.

Project was initiated in April 2017. As the modification work to raw material manufacturing unit was to
be done earlier and many of the equipment required for the ingredient X manufacturing were having
long delivery time, it was decided that the project will be divided in to two phases. This would also help
avoid any work stoppages due to heavy rain.

Phase 1:
 4

1. Soil Study and design of piling foundation for main manufacturing plant.
2. Detail engineering of raw material manufacturing unit modification.
3. Detail engineering of main unit (For Ingredient X).
4. Execution of piling foundation.
5. Execution of modification of raw material manufacturing unit.
6. Ordering of all manufacturing machineries for main unit.
7. Detail engineering and ordering of PEB structure required for finished goods warehouse.
8. Commissioning of raw material manufacturing unit.

Phase 2:

1. Construction of main manufacturing unit.

2. Erection of PEB structure for finished goods warehouse.
3. Erection of manufacturing machinery within main unit.
4. Piping network construction for raw material and utilities.
5. Commissioning of plant

Cost

Details of Project cost

1. Project Cost – Rs. 145 Cr
2. Contingencies – Rs. 14.5 Cr (10%)
3. Total Cost – 159.5 Cr
 5

Annexure 1: Project Schedule

Stakeholders
Schedule

This was an internal project taken up by company to explore the market opportunity for Ingredient X
targeted for schedule 3 drug market. Following were the stake holders of this project
Internal Stakeholders
1. Production Team
2. Sales Team
3. Marketing Team
4. Legal office
5. Project Team/Functional Teams
6. Indian cost center/Management
7. Global/Central management
8. Utilities Department
External Stakeholder
1. Drug Manufacturing customers
2. Design consultants
3. Equipment suppliers/Fabricators and Equipment manufacturers
4. Local Administrative and Permitting authorities
5. Local population/villagers
During the kickoff meeting stakeholders were identified. However, stakeholder register was not
maintained. Various stakeholders were involved during different stage of the project.
e.g. The sales team was involved during the project selection and pre-project market study. Production
team was involved during the requirements gathering and planning of phase 1 and 2 of the project.
They were also involved throughout the project as end users and provided inputs for the operability of
the manufacturing unit. Project team and functional team members were actively involved in the
execution project.

Monitoring and Control

 6

1. Weekly progress review meetings:

a. Design Review Meeting – Project Manager, design/engineering team, design consultant
and main contractor. Design review log maintained.
b. Purchase Review Meeting – Project Manager, Design Manager, Capital Purchase
Manager. Project Procurement Log maintained.
c. Schedule Review meeting – Project Manager, PMO and Respective design leads
2. Monthly progress review meetings:
a. Funding Review Meeting – Project Manager, India Finance Manager, Design Manager
and Project Sponsor. S- curve is prepared and discussed.
b. Monthly Progress Review Meeting – Project Manager, Project Sponsor, Engineering
Head, India Manufacturing Manager, India Country Coordinator, Finance Manager.
3. Quarterly meeting
a. Sponsor Committee Meeting – Project Sponsor and Global Sponsor Committee.

Challenges

Cost Escalations
1. After the conclusion of design of pile foundation, it was discovered that the 451 piles required
whereas only 200 piles were considered for costing. Additional Rs. 1.1 Cr will be required for
additional work. Contingency used – 7.5%.
2. While executing piling work – 8 x pile hole in the ground collapsed while doing the concrete
pouring. 14 piles where not dug at the exact coordinates. Due to these two events, redesigning
of piling was done and additional 18 piles were required to ensure stability of the foundation of
the building.
The redesign and additional piles could cost an additional Rs. 24L (Cost of redesign + Additional
piles + Additional stay of piling machines)
 7

3. The erection of one of the key equipment needed “Erection in place”. This requirement was
causing delay of additional 35 days. It was decided to erect this equipment outside the building,
and they move in place using 450T crane. The cost of 450T crane for intended 5 days would
cost an additional 45L.
4. Requirement of two additional dust collectors were came into picture late during execution
phase due to additional local requirements. Redesign of top floor of the building + two dust
collectors – Rs. 12L
5. The civil contractor for main unit defaulted from the scope of work and had to be released.
Getting the new contractor and renegotiations and re-contracting caused the company an
additional Rs. 3Cr.
6. Additional Misc. Cost escalation – Rs. 1.2 Cr. (Includes – currency fluctuations, additional
requirements added during the execution stage, additional piping material and involvement of
additional engineers and their visits).
7. While on hold, many FTE’s continued to work on the design and detail engineering of the
project. Some of the key contractors – PMC, Phase 1 and 2 design consultants could not be
released. The cost of the delay – Rs. 1.75Cr.
Total Additional Project Cost: Rs. 6.1 Cr. Contingency used – Approx. 55%

Schedule Escalations:
1. During piling design stage 1 month delayed due to cross verification for the actual number of
piles required.
2. During the piling stage the contractor failed to provide second piling machine on time. The
piling got delayed by one month. Further to this additional three months delayed due to issue
highlighted in point no. 2 of cost escalation.
3. Project was on hold due to funding issues 14 months after the project started for six months.
Management of the company wanted additional clarity on the sales forecast.
4. During Covid lock down piping material got delayed.
5. Ordering and delivery of additional dust collector was completed within the buffer period
however installation costed 1-week delay on overall project schedule.
6. Many equipment was imported and caused schedule delay which were unforeseen.
Overall project delay – 16 months.
 8

1. The project selection was done using NPV and ROI calculations. Market study was done for
the feasibility study and sales projections. Considering the research done on the project to
evaluate the market feasibility, it is safe to assume that the selection of project was in line
with company’s vision and direction for next 5-10 years.
2. Project phase distribution was done to optimize the schedule and ensure that the project can
be completed within two years (as per the management direction). Decision of distributing
the design and construction scope within outside agencies was to ensure that their expertise
can be utilized for the best outcome.
3. Decision to expedite the piling work before the monsoon was an excellent decision as that
Analysis
could have given project team solid start before the onset of monsoon. Also it involves heavy
machinery which could not be used during the rainy season.
4. Purchase and contracting of the right contractor was not done for the piling work. This is
partially due to the fact that the site location is quite remote and also a huge number of metro
projects are going on at various cities across India at the moment. In these projects the
contract is long term and more beneficial for piling contractor rather than for Ingredient X
project where the engagement was hardly for three to four months. The commercial gain is
probably very less to make this project attractive for piling contractor.
5. The delay in getting the second piling machine caused enormous pressure on the project team
and cause the piling work to be extended during the monsoon. Many work stoppages
happened during the monsoon period.
6. Error of piling placements caused an additional work and cost for the project. Funding from
contingencies was used to cover up the additional cost. It also caused schedule delay.
7. The project schedule was created using Microsoft Project. The schedule was tracked regularly
and dedicated PMO was assigned for this project.
 9

8. Project organization was complex yet effective. Engineers from different functional group such
as – Global Engineering group, operations, productions and India Engineering were pulled in
at various stages and as their work got completed released back in their functions. This is a
sign of matrix organization. For the company mainly involved in production – matrix
organization is best suited.

The decision to hold the project for 6 months was taken by management. During this period some of
the key project team members continued to work on the project. Some of the key contractors also
were not released. In such case, the cost got escalated.

Conclusion

The project to develop a manufacturing unit for Ingredient X was a deployment project. Usually
deployment project is less complex than the development project. However, many complexities arose
due to the geographical location and different environment affecting the project such as – foreign
currency issues, geo-political differences.

Project Manager would like to work on the projects like this for following reasons:
 10

1. Project management maturity of the organization. The project selection and funding process
involves in-depth analysis and ensuring that only the most profitable expansion takes place
within organization.
2. Risk identification was done at the start of the project and updated at a regular basis.
Mitigation plan was identified and put in place.
3. Matrix organization – It ensures that we get support of right organization at the right time.
This causes less cost burden of FTEs on the project. This also poses a risk of getting less
competent engineer however, if identified on time we can also get either the replacement of
additional support from their respective functional heads.
4. Reporting structure is crisp and clear. There are multiple levels of project reporting. At the
weekly review meetings, the data pertaining to project is collected. PM supported by PMO will
prepare the project reports for management meetings.

Things we could have done differently:

1. Project schedule should have been done with resource allocation. It may not be possible to
allocate every project resource e.g. construction team may have 200-300 labors. However,
tasks like design and engineering, ordering, contracting etc. can be done with resource
allocation to have more clarity on actual schedule and resource requirement.
2. Cost planning could be done more comprehensively. E.g. every delay has a cost associated
with it. Although S-Curve is being prepared and shared during management review, we feel
that Earned value management could also been more helpful in addition to S-Curve.
3. More monitoring and control/Quality control at the initial stages (during piling) could have
been more helpful in curbing the initial delays.
4. Project learnings from past Indian projects could have been utilized to give a better/clear
picture of actual schedule.
5. WBS register and definition could have been maintained.
 11

6. Engineering changes were recorded however, more formal change request procedures would
really help managing projects of such a large scale.