Establishing an Enterprise and Project Management

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Module: 05

Establishing An Enterprise and

Project Management



Project

A temporary endeavor undertaken to create a

unique product or service.

Defined as scientifically evolved work plan

devised to achieve a specific objective with the

specified period of time



Project Management:

The application of knowledge, skills, tools,

and techniques to project objectives to

meet stakeholder needs and expectations.



Characteristics and features

Investment patter

Benefits of gains

location

Objectives

Life span

Single entity

Team work

Life cycle interrelated

Uniqueness

Change

Successive principles

Made to order or

customer specific Unity in diversity

High levels of sub-contracting

Risk and uncertainty



Knowledge Areas:

Scope Management

Time Management

Cost Management

Quality Management

Human Resources Management

Communications Management

Risk Management Procurement Management

Integration Management



Project life Cycle Stages

1. Conception Stage or Project Identification

2. Definition stage or project formulation

3. Planning and Organizing stage or projectdesign

4. Implementation

5. Project clean up stage



. oncep on age or ro ec

Identification

Idea germination

Problem identification

Project identification



.

formulation

In this stage the project will develop the idea generated during the conception stage

The areas examined in this stage are (Eg ..cementplant) ± Raw materials

±Plant size

± Location

± Technology

± Project layout

± Plant layout

± Electrical works

± Civil works

± Utilities fuel, power,

± Manpower

±

Financial ± Im lementation schedule



. ann ng an rgan z ng s age or

project design

Prepare project execution plan

8% of the work done

Take necessary action for realization of projectlike,

± Project inf rastructure

± System design

± Licensing

± Identification of project manager



4. Implementation

85% of the work done in this stage



5.Project Clean-up stage

3 % effort needed

Drawing, documents, files, operation and

maintenance manuals are catalogued andhanded over to the customer

Handing over



Project Management and other

disciplines

Finance

HRM

Operations

Purchase and logistics

R & D

Marketing



Project Classification

1. Quantifiable and Non-Quantifiable projects

2. Sector projects

3. Techno-economic projects4. Financial institutions classification

5. Services projects



1. Quantifiable and Non-Quantifiable

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



2. Sector Projects

Agriculture

Industry and mining

Transport

Social services



3. Techno-economic projects

1. Causation-oriented classification

2. Factor intensity oriented classification

3. Magnitude oriented classification



4. Financial Institutions classification

1. New projects

2. Expansion projects

3. Diversification projects



5. Services Projects

1. Welf are services

2. Service projects

3. Educational projects



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



Phases of Project formulation

CONCEPTION

OF AN IDEA

ANALYSIS OF

RELATED ASPECTS

FORMULATION

OF A PROJECT

DESIGN OF A

PROJECT



Steps in Project Formulation

1. General Objectives

2. Operational Objectives



Sequential Stages in Project

Formulation

1. Feasibility study

2. Techno-economic analysis

3. Project Design and Network analysis4. Input Analysis

5. Financial analysis

6. Social cost benefit analysis7. Pre-investment analysis



Project Planning

Project Planning

± is a formal, approved document used to manage

and control project execution



Project Plan Development

Output of Planning

processes in other

knowledge areas _______________________

Historic Information

_______________________

Stakeholder skills and

knowledge

_______________________Organizational Policies

_______________________

Limitations and Assumptions

P

M

I

S

Project Planning

Methodology

Project

Plan



Project Scope

To whom is the project is prepared

The target audience

The usefulness

the stakeholders



Project Planning Objectives

To satisf y the stakeholder

To show ones expertise

To get the approval



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 f rom its logical beginning to its logical end.

A feasibility study provides an Investigating function thathelps answer Should we proc eed with the proposed proj ec t idea? Is it a viable business venture?

A feasibility study should be conducted to determine theviability of an idea BEFORE proceeding with the developmentof a business.



Distinction between pre-feasibility

study and Feasibility study

Pre-Feasibility Study

No thoughts on

± The viability of the project

f rom economic, social,technical, managerial, market

and financial point of view

Feasibility Study

Deeper knowledge on

various feasibility, such as

± economic, social, technical,managerial, market and

financial



Various Feasibility Studies

Socio-Economic Feasibility

Technical Feasibility

Managerial Feasibility

Market Feasibility

Financial Feasibility




Identif y and Estimate all Capital Expenditures

Identif y and Estimate all Variable Costs related to the

Proposed Business Venture

±

Identif y People and Skills required to operate Determine Wages, Salaries, and Benefits

Identif y and Estimate Project Related Costs

± Inf rastructure development or improvements

± Advertising and Promotion

± Legal Fees

± Municipal & State Development taxes

Identif y and Estimate all Fixed Costs




Manuf acturing process/technology selected

Technical collaboration

Capacity/size of the project/ scale of operation

Location of the project

Availability of physical and socialinf rastructure

Plant layout

Factory building



Managerial Feasibility

The levels of Management

Designing about the posting and recruitment

Allocating of power



Market Feasibility

The target audience

Segments of your projects

The end users The cost of the project

The competitors

Market entry Supply chain management




Capital and operating costs

Funds flow

Cash flow

Ratio analysis

Break-even

Profitability Investment process



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



Project Feasibility Report Checklist



Managerial Feasibility Market Feasibility


HR feasibility Operational Feasibility



Sources of Finance

1. Short term finance

2. Mid-term finance

3. Long term finance



Sources of Finance

Short Term MediumTerm Long Term

1. Bank credit

2. Trade credit

3. Installment credit

4. Customer advances

1. Issue of shares

2. Issue of debentures

3. Loans form banks

and other financial

institutions

4. Public deposits (For

existing concerns)5. Ploughing back of

profits

1. Issue of shares

2. Issue of debentures

3. Loans form financial

institutions

4. 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 = Fixed Cost * Total amount of sales

Total Contribution



Utility of BE Analysis

It serves as the most useful and importantmanagerial tool to study cost-output-relationship at varying levels of output

It is useful in reviewing pricing policies

It aids in planning capitalization of theenterprise

It provides the entrepreneur to decidewhether to acquire or not assets involving additional fixed costs



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

1. A deeper user understanding2. Multiple prototyping

3. Strategic business design



Steps in design thinking

1. Make a long term commitment

2. Build it into your corporate strategy

3. Assign a leader, but do not limit it to a function

4. Collaborative and internalize it

5. Inspire, dont legislate

6. Feed it and reward it

7. The future starts today



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

2. CPM



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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

± Non-repetitive jobs (R & D work)



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Project Network Network analysis is the general name given to certain specific techniques which can be

used for the planning, management and control of projects

Use of nodes and arrows

Arrows An arrow leads f rom tail to head directionally

± Indicate ACTIVITY, a time consuming effort that is required to perform a part of the work.

Nodes A node is represented by a circle- Indicate EVENT, a point in time where one or more activities start and/or

finish.

Activity

A t ask 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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Event

± Signals the beginning or ending of an activity

± Designates a point in time

± Represented by a circle (node)

Network

± Shows the sequential relationships among activities using

nodes and arrows

Activity-on-node (AON)

nodes represent activities, and arrows show precedence relationships

Activity-on-arrow (AOA)

arrows represent activities and nodes are events for points in time

Project Network

AOA P j t N t k f H



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AOA Project Network for House

32 0

1

3

1 1

11 2 4 6 7

3

5

Lay foundation

Design house

and obtain

financing

Order and

receive

materials

Dummy

Finishwork

Select

carpet

Select

paint

Buildhouse

AON Project Network for House

1

3

22

43

31 5

1

61

71Start

Design house and

obtain financing

Order and receive

materials Select paint

Select carpet

Lay foundations Build house

Finish work

Sit ti i t k di



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Situations in network diagram

AB

C

A must finish before either B or C can start

A

B

C both A and B must finish before C can start

D

C

B

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

A

C

B

D

Dummy

A must finish before B can start

both A and C must finish before D can start



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Network exampleIllustration of network analysis of a minor redesign of a product and its associated

packaging.

T he key questi on is: H ow l ong will it take t o complete this proj ec t ?



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CPM calculation

Path

± A connected sequence of activities leading f rom

the starting event to the ending event

Critical Path

± The longest path (time); determines the project

duration

Critical Activities

± All of the activities that make up the critical path



Advantages of CPM

It helps in ascertaining the time schedule

With its aid, control by the management is madeeasy

It makes better and detailed planning possible

It provides a standard method for communicating project plan, schedule, time and costperformance

It identifies the most critical elements and thus more attention can be paid to these activities



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 theactivitys 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.



Steps in PERT

1. Development of project network

2. Time estimation

3. Determination of critical path, event slacks and activity floats

4. Development of project schedule

5.C

alculation of variability duration and theprobability of completion in a given time



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

It presses for the right action, at the right pointand at the right time in the organization



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

2. It does not consider resources required at

various stages of the project

3. Needs f requent updating

Documents

Establishing an Enterprise and Project Management