8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 1/57
Module: 05
Establishing An Enterprise and
Project Management
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 2/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 3/57
Project Management:
The application of knowledge, skills, tools,
and techniques to project objectives to
meet stakeholder needs and expectations.
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 4/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 5/57
Knowledge Areas:
Scope Management
Time Management
Cost Management
Quality Management
Human Resources Management
Communications Management
Risk Management Procurement Management
Integration Management
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 6/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 7/57
. oncep on age or ro ec
Identification
Idea germination
Problem identification
Project identification
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 8/57
.
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 9/57
. 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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 10/57
4. Implementation
85% of the work done in this stage
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 11/57
5.Project Clean-up stage
3 % effort needed
Drawing, documents, files, operation and
maintenance manuals are catalogued andhanded over to the customer
Handing over
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 12/57
Project Management and other
disciplines
Finance
HRM
Operations
Purchase and logistics
R & D
Marketing
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 13/57
Project Classification
1. Quantifiable and Non-Quantifiable projects
2. Sector projects
3. Techno-economic projects4. Financial institutions classification
5. Services projects
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 14/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 15/57
2. Sector Projects
Agriculture
Industry and mining
Transport
Social services
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 16/57
3. Techno-economic projects
1. Causation-oriented classification
2. Factor intensity oriented classification
3. Magnitude oriented classification
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 17/57
4. Financial Institutions classification
1. New projects
2. Expansion projects
3. Diversification projects
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 18/57
5. Services Projects
1. Welf are services
2. Service projects
3. Educational projects
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 19/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 20/57
Phases of Project formulation
CONCEPTION
OF AN IDEA
ANALYSIS OF
RELATED ASPECTS
FORMULATION
OF A PROJECT
DESIGN OF A
PROJECT
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 21/57
Steps in Project Formulation
1. General Objectives
2. Operational Objectives
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 22/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 23/57
Project Planning
Project Planning
± is a formal, approved document used to manage
and control project execution
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 24/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 25/57
Project Scope
To whom is the project is prepared
The target audience
The usefulness
the stakeholders
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 26/57
Project Planning Objectives
To satisf y the stakeholder
To show ones expertise
To get the approval
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 27/57
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.
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 28/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 29/57
Various Feasibility Studies
Socio-Economic Feasibility
Technical Feasibility
Managerial Feasibility
Market Feasibility
Financial Feasibility
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 30/57
Socio-Economic 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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 31/57
Technical Feasibility
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 32/57
Managerial Feasibility
The levels of Management
Designing about the posting and recruitment
Allocating of power
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 33/57
Market Feasibility
The target audience
Segments of your projects
The end users The cost of the project
The competitors
Market entry Supply chain management
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 34/57
Financial Feasibility
Capital and operating costs
Funds flow
Cash flow
Ratio analysis
Break-even
Profitability Investment process
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 35/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 36/57
Project Feasibility Report Checklist
Socio-Economic Feasibility
Technical Feasibility
Managerial Feasibility Market Feasibility
Financial Feasibility
HR feasibility Operational Feasibility
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 37/57
Sources of Finance
1. Short term finance
2. Mid-term finance
3. Long term finance
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 38/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 39/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 40/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 41/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 42/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 43/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 44/57
darla/smbs/vit 44
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)
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 45/57
darla/smbs/vit 45
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 46/57
darla/smbs/vit 46
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 47/57
darla/smbs/vit 47
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 48/57
darla/smbs/vit 48
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 49/57
darla/smbs/vit 49
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 ?
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 50/57
darla/smbs/vit 50
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 51/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 52/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 53/57
darla/smbs/vit 53
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 54/57
darla/smbs/vit 54
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.
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 55/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 56/57
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
8/8/2019 Establishing an Enterprise and Project Management
http://slidepdf.com/reader/full/establishing-an-enterprise-and-project-management 57/57
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