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WHAT IS PROJECT?
Projects are temporary in nature and have definitive start dates and definitive end dates. The project is completed when its goals and objectives are accomplished. Projects exist to bring about a product, service or result that didnt exist before. In this sense, a project is unique. Thus a project produce the unique, tangible or intangible, product or service or result. Project Vs Operations: Operations are ongoing & repetitive where as projects are temporary. A project is successful when it achieves its objectives and meets or exceeds the expectations of stakeholders. The stakeholders are the people who are actively involved with the work of the project or have something to gain or lose as a result of the project. The stakeholders are thus: Project manager, Project sponsor, Customer, Board of directors, Executive managers, Department mangers, Vendors, Suppliers, Project management office etc.
Skills Contd
3. Budgeting Skills : Project managers establish and manage budgets and therefore need some knowledge of finance and accounting principles. Especially important in this skill area is the ability to perform cost estimates for project budgeting. 4. Conflict Management Skills : Conflict management involves solving problems. Problem solving is really a twofold process. First, you must define the problem by separating the causes from the symptoms. Often when defining problems, you end up just describing the symptoms instead of really getting to the heart of whats causing the problem. To avoid that, ask yourself questions lie Is it an internal or external problem? To avoid that, ask yourself questions like Is it an internal or between team members? And Is is managerial? and What are the potential impacts or consequences? These kinds of questions will help you get to the cause of the problem. Next, after you have defined the problem, you have some decisions to make. It will take a little time to examine and analyze the problem, the situation causing it, and the alternatives available. After this analysis, the project manager will determine the best course of action to take and implement the decision. The timing of the decision is often as important as the decision itself. If you make a good decision but implement it too lake, it might turn into a bad decision.
Skills contd
5. Negotiation and Influencing Skills : Effective problem solving requires negotiation and influencing skills. Simply put, negotiating is working with others to come to an agreement. Negotiation on projects is necessary in almost every area of the project, from scope definition to budgets, contracts, resource assignments, and more. This might involve one-on-one negotiation or with teams of people, and it can occur many times throughout the project. Power and politics are techniques used to influence people to perform. Power is the ability to get people to do things they would not do otherwise. It is also the ability to change minds and the course of events and to influence outcomes. Politics involve getting groups of people with different interest to cooperate creatively even in the midst of conflict and disorder. 6. Leadership Skills : Leaders and managers are not synonymous terms. Leaders impart vision, gain consensus for strategic goals, establish direction, and inspire and motivate others. Even though leaders and managers are not the same, project managers must exhibit the characteristics of both during different times on the project. Understanding when to switch from leadership to management and then back again is a finely tuned and necessary talent.
Skills Contd.
7. Team-Building and Motivating Skills :
Project managers will rely heavily on team-building and motivational skills. Teams often formed with people from different parts of the organization. These people might or might not have worked together before, so some component of team-building groundwork might involve the project manager. The project manager will set the tone for the project team and will help the team members work through the various stages of team development to become fully functional. Motivating the team, especially during long projects or when experiencing a lot of bumps along the way, is another important role the project manager fulfills during the course of the project.
PM Process Group
Initiating Initiating Planning Executing Monitoring & controlling Monitoring & controlling Closing
PM Process Group
Planning Planning Planning Monitoring & Controlling Monitoring & Controlling
PM Process Group
Planning Planning Planning Planning Planning Monitoring & Controlling
PM Process Group
Planning Executing Executing Monitoring & Controlling
PM Process Group
Planning Executing Monitoring & Controlling Monitoring & Controlling
PM Process Group
Planning Planning Planning Planning Planning Monitoring & Controlling
PM Process Group
Planning Planning Executing Executing Monitoring & Controlling Closing
Model Questions
Project Identification
Understanding How Projects Come About Needs & Demand
Market Demand: The demands of the market place can drive the need of the project. Business Need: Need sensed by Input Process Output system of business. Consumer Request: Consumer request can drive the project. The consumer can be internal or external. Technological Advances: Technological advances in various fields brings in new projects. Legal Requirement: Private agencies and government agencies generate new projects as a result of legislative amendments. Social Need: Projects come up as a result of social needs.
Feasibility
Feasibility Report: Before starting a small-scale industry, it is mandatory for entrepreneurs to consult the Director of Industries Service Institute (SISI) located in the state. The SISI guides entrepreneurs as to the type of industry to start, where to start and how to start it. SISI suggests the lines on which the project reports for the proposed units should be prepared for the consideration of various financial institutions with a view to securing financial assistance. It also provides technical guidance related to selection of raw material, type of machinery & information about various incentives available to the small scale industries from various organizations.
Project Formulation
Project formulation is a process whereby the entrepreneur makes an objective and independent assessment of various aspects of an investment proposition of a project idea for determining its total impact and also its liability. This forms an important stage in the pre-investment phase that is the period from the conception of an idea until the final analysis to decide about the future of the project idea. This makes it an analytical management aid. The aim of project formulation is to achieve the project objectives with the minimum expenditure and adequate resources.
Stages of (cont.)
1. Feasibility analysis: At this stage, the project idea is examined from the point of view of whether to go for detailed investment proposal or not. The project idea is examined in the context of internal & external constraints three alternatives could be considered Project idea seems to be feasible or not feasible or unable to arrive at conclusion. If project idea is feasible we go to second step else abandon the idea.
Stages of (cont.)
2. Techno-economic analysis: In this step, estimation of project demand potential and choice of optimal technology is made. It is necessary to know the market for the goods/services produced by the project implementation. Therefore market analysis is also in-built in this step. Techno-economic analysis gives the project a unique individuality and sets the stage for detailed design development.
Stages of (cont.)
3. Project design and network analysis: This important step defines individual activities which constitute the project and their interrelationship with each other. The sequence of events of the project is presented. Detailed work plan of the project is prepared with time allocation for each activity and presented in a network drawing. Project design is the heart of the project as based on this resources required can be detailed and provided to the project.
Stages of (cont.)
4. Input analysis: This step assesses input requirement during construction of the project and also during the operation of the project. The input requirements on quantitative and qualitative basis for each activity is determined and total input requirements are worked out. This determines project feasibility from the point of view of resource requirements. This analysis also helps in assessing the cost and helps financial analysis and cost-benefit analysis.
Stages of (cont.)
5. Financial analysis: This stage involves in estimating project cost, operating cost & funds requirements. Financial analysis also helps in comparing various project proposals on common scale, thereby aiding the decision maker. Some of the analytical tools used in financial analysis are discounted cash flow, cost-volume-profit analysis and ratio analysis. Since the costs & benefits as the out come of the project has long time-horizon it is necessary to exercise due care & foresight in financial forecasts.
Stages of (cont.)
6. Cost-Benefit Analysis: Overall worth of the project is the main consideration. There are three categories Primary Cost-benefit analysis from the point of view of project implementing body. Secondary Cost-benefit from the point of view of other than project implementing boy. Also called as spill-over or multiplier affect. Tertiary Non quantifiable spill-over or multiplier effect.
Stages of (cont.)
7. Pre-investment analysis: The project proposal gets a formal and final shape at this stage. All the results obtained in the above steps are consolidated and various conclusions arrive at to present a clear picture. Now, at this stage the project sponsoring body, project implementing body and the external consulting agencies are able to decide whether to accept the proposal or not. And investment decision regarding the project can be taken by project implementing body.
Project Risks
Types of project risks
1. Design risk 2. Implementation risk 3. Operational risk 4. Environmental risk 5. Finance risk 6. Interest rate risk 7. Structural risk 8. Human resource risk 9. Execution risk 10.Management risk 11.Technology risk 12.Disruption risk
Focusing on Constraints
Theory of constraints recommends the managers focus on constraints or bottlenecks. For projects, the constraint is critical path. Once managers identify bottlenecks the techniques of resource allocation, resource leveling, monitoring, crashing etc. can be used to reduce the risk of not completing project in the planned time. But goldratt adds an important second constraint to this framework that managers often overlook: scares resources needed by tasks not only on and off critical path but also by the other projects.
Risk Analysis
Projects with quantified benefits: The internal rate of return (IRR) is the measure most often used to indicate the economic viability of Bank financed projects. Calculation of IRR requires a set of assumptions regarding the conditions faced by the project which prevail during its life. However, such projects have very long life and conditions faced by the project may change due to various reasons. Sensitivity analysis is carried out to determine the effects of possible changes in the values of key variables ( costs, yields, and price of inputs and outputs) on projects IRR. Risks are generally higher in projects for which the base-case IRR is only marginally higher than opportunity cost of capital.
Location of an Enterprise
Location considerations for the establishment of manufacturing plants is critical. An ideal site certainly contributes to the smooth and efficient functioning of an enterprise. The study of location forms an important branch of economic geography. The need for plant location arises for new enterprise as well as established enterprise. The established enterprise need it for various reasons such as expansion, decentralization, diversification, end of lease contract, abandoning undesirable location, shifting of market, depletion of raw materials etc. Selection of most economic site: According to Kimball & Kimbal, the most advantageous location is that at which the cost of gathering material, fabricating it into finished product and the cost of distributing finished product to final consumer is minimum. The three parameters form the three apex of triangle & location of enterprise is at the most appropriate place within the triangle.
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Importance of Layout
The importance of layout lies in enhancing manufacturing functions and supervision and control. Some advantages are: 1. Economies in material handling 2. Reduction in accidents, 3. Effective use of available area, 4. Minimization of production delays, 5. Avoidance of bottlenecks, 6. Better production control, 7. Maximization of production, 8. Improved quality control, 9. Improved utilization of labour, 10. Better supervision, and, 11. Increased revenues and profits.
Project Report
1. Objective & scope of project 2. Product characteristic 3. Market position & trend 4. Raw material 5. Manufacturing process 6. Plant & machinery 7. Land & building 8. Financial implications 9. Marketing channels 10. Personnel
Calculations
Land cost
Required machine area Area for looms = Area per loom X 96 = 6 X 96 = 576 m2 Area for Pirn winding = 4 X 2 = 8 m2 Total machine area = 576 + 8 = 584 m2 Additional area = 30% + 20% + 50% = 100% Total built-up area = 584 + 584 = 1168 m2 Land area = Built-up area + Area for future expansion = 1168 + 1168 = 2336 m2 Land cost = ( Land area 100) X 50000 = 11,68,000
Calculations (cont.)
Building cost
Cost of building = Built-up area X construction rate = 1168 X 10000 = 1,16,80,000
Machines cost
Cost of looms = Cost per loom X number of looms = 2,00,000 X 96 = 1,92,00,000 Cost of one pirn winding machine = 3,00,000 Total machine cost = 1,92,00,000 + 3,00,000 = 1,95,00,000
Calculations (cont.)
Total Non-recurring expenditure
Total expenditure = Land cost + Building cost + Machine cost = 11,68,000 + 1,16,80,000 + 1,95,00,000 = 3,23,48,000 Note: Material handling area = 30% of machine area Storage (Raw material + Work in process + Finished goods) area = 20% of machine area Cloth inspection, Grey folding, Adm. Etc area = 50% of machine area Ratio of land area: Built-up area = 1:1 Ratio current area: area for future expansion = 1:1
Calculations (cont.)
Maintenance cost = 5% of machine cost = 5% of 1,95,00,000 = 9,75,000 Depreciation By straight line method Total machine cost = 1,95,00,000 Expected life = 10 years Depreciation Charge = 19,50,000 Power Bill Motive Power: Total 97 machines & power rate 5 / unit = 97 X 18 = 1746 KWH
Calculations (cont.)
Motive power bill = 1746 X 5 = 8730 per day Non-motive power = 5 % motive power = 5% of 1746 = 87.30 KWH Non-motive power bill = 87.30 X 3 = 261.90 per day
Calculations (cont.)
Labour cost per month = 15 X 3 X 6000 = 2,70,000
Calculations (cont.)
Managerial expenses = 30% of labour cost = 30% of 2,70,000 = 81000
Calculations (cont.)
Long term capital requirement = Land cost + Building cost + Machine = 11,68,000 + 1,16,80,000 + 1,95,00,000 = 3,23,48,000 Long term loan from financial institutions = 80% of 3,23,48,000 = 2,58,78,400 Interest charges on long term loan 8.5% = 21,99,664 Working capital requirement for 3 months = Power bill + Wages & salaries + Maintenance Charge = 8,09,280 + 10,53,000 + 2,43,750 = 21,06,030
Calculations (cont.)
Total earning per day = 96 X 100 X 10 = 96,000 per day Yearly income from job work charges = 96,000 X 300 = 2,88,00,000 Expenditure per year = 21,99,664+ ( 57,915.8 + 21,06,030) X 4 = 1,08,55,447.20
Financial Institutions
Over the years, financial institutions are playing a key role in providing finance and counseling to the entrepreneurs to start new ventures as well as modernize, diversify and even rehabilitate sick enterprises. With the launching of the Five Year Plans, in the absence of a sufficiently broad domestic capital market, there was a need for adopting and enlarging institutional structure to meet the medium and long term credit requirements of the industrial sector. In this context RBI took the initiative in setting-up statutory corporation at the all-India and regional levels to function as specialised financial agency purveying term credit.