OPERATION MANAGEMENT Project life cycle and types Project Management 1) Five steps of project life cycle, Input

output / processes of each stage, CPM / PERT / Guntt chart 1) 2) 3) 4) 5) What is project Types of project Project Management Life cycle of the project Project Management tools like PERT / CPM / Guntt chart

Project Life Cycle: 1) The sequence of stages through which a project passes from conception to competition is known as life cycle. 2) Project consists of nos of activities, each of them having work content. The various activities are spread over a period of time which is known as life cycle. 3) These activities are systematically and logically linked with each other forming a sequence. 4) The stages are formed by considering the nature of activities involved in project. The Life Cycle consists of 5 stages. Project Conception Stage 1) Project Security and Establishment of need 2) Identification of Project and preliminary screening 3) Feasibility Testing Project Definition Phase 1) Visualization of Project Features 2) Preparation of Project Report Project Planning and Organization Phase 1) Appraisal of Project - examination of Technical, Organizational, Marketing, Financial, Economic and social aspects of a project. 2) Final selection and investment decision

Implementation Phase 1) Implementation / Execution of project consists of (a) Establishment of project organization for planning and management. (b) Project follow-up monitoring and control. Project clearing Phase 1) Project Frustration - Production service, Distribution and consumer service. 2) Ex-post Evaluation Conception Stages

Definition Phase

Project Planning & Organization

Project Implementation

Project clearing

Establishment of Need: to prepare scope for project data can be made available from 1. Government Department of Revenue Agriculture, Industries, Trades. 2. Reports of specialized agencies such as Central Bank, Geological Survey, Ministry of Finance, Planning Commission. Scouting for Projects: ideas for new project can come from a variety of sources. 1) Within the organization 2) Outside organization

Identification of Project 1. Adequate understanding of physical features, resource base demand base of the region, its people their socio economic profile. 2. Adequate knowledge of government plans, programs and development programs. 3. Knowledge of fiscal policy, industrial policy, export import policy, credit policy and their implications government laws and regulatory frame work. Foreign exchange regulation act (FERA), MRTP companies act. 4. Performance of existing industries in terms of profitability and capacity of utilization. 5. Plan out tags, priorities and programmer for different sectors and industries. 6. Guide line for setting up new projects 7. SWOT analysis of company 1. Internal finance resources 2) Top Management 3) Employee Morale, Market Share / Extent of competitor faces, cost structure of profitability. Feasibility Testing It is safety device used by the project promoter to convince themselves that they are proceeding forward on safe assumption. Feasibility approval is based on actual data this is generally done by a group of experts. Who are expected to be fully conversant with various aspect of the project. The process involves into following aspects. 1) 2) 3) 4) 5) 6) 7) Technical Feasibility Financial Feasibility Economic Feasibility Managerial Feasibility Social Feasibility Degree of Risk Preliminary Screening

The project which do not satisfy the minimal essential requirements of which should be eliminated. The idea here is to focus particularly on the following features of the project. 1) Project matches with the objectives, resources available, receives clearance from top management. Project is expected to generate adequate profits and gives a reasonable R.O.I. Risk of the project is within acceptable limits. Reasonable assurance of funding for project. 2) Defining Project Phase: In the initial stage of project formulation there is some element of uncertainty with regards to its different aspects. However before drafting the project report

all people have to come to view which may be acceptable to all. This is considered essential for defining project. Detailed Project Report 1. Back ground of the project 2. Objectives of the project 3. Justification of the project in terms of marketing technical, financial economic and social feasibility of the project 4. Salient features of the project a. Project cost b. Sources of fund for the project and cost of capital c. Estimate of sales revenue d. Estimation of production cost e. R.O.I. and cash flow projections f. Social costs and benefits etc. 5. Program of activities of project which comprehends a) Implementation requirements b) Time schedule of then project c) Critical activities and events d) Schedule of activities and drawing network / charts e) Resource requirement for different activities resource scheduling, resource balancing and resource smoothing. 6. Organization of project giving details of a) Organization structure and chart b) Personnel, their qualifications and functions c) Line of control d) Authority, responsible and delegation 7. Implementation details of the project a) Sequence of tasks and activities b) Requirement of time and resources c) Precautions and safety requirements at each stage of implications 8. Project Result

PROJECT APPRAISAL Project appraisal involves detailed and in-depth analysis of the results of the project in this process technical, markets, financial economic social aspects of the project are examined one by one to ensure technical, market, financial economic visibility. It is feasible i.e. WORTHWHILE then go further. Generally the appraisal is done by different agencies at different stages. 1. 2. 3. 4. Initially it is done by promoters to satisfy about potentially of the project. When project is submitted for financial commitment it is done by Financial Institutions. Appraisal is done by investors when the company enters market for raising equity. Regulatory bodies also do appraisal before clearing the project from technical or environmental angle.

Technical Feasibility: This is to examine technical feasibility. This is based on the examination of technical parameters of project. a. b. c. d. e. f. g. h. Location Site Technology Layout Process of Production Product Mix Plant Capacity Consultants their previous record capability.

MARKET APPRAISAL This is done to ascertain that estimates of demands have been properly worked out and with in permissible limits. 1) 2) 3) 4) 5) 6) Estimates existing and future demand Estimate of future price Method of sale distribution Expected competitors and the extend of competition Perspective customers their socio-economic background, consumption habits etc. Govt. policy the expected changes in the policy and its likely effect.

ORGANIZED APPRAISAL The objective of this appraisal is to test strength of the organization and its suitability for the project. The success of a project during implementation as well as operation depends upon suitability and compatibility of the organization with the project. 1) Type of organization 2) Strength of organization in terms of background and motivation, credit, worthiness, integrity, reliability system of accountability, leadership, personnel. 3) Personnel policies including method of recruitment, training, placement, incentives, quality of manpower, extent of professionalization. 4) Structure of the organization. FINANCIAL APPRAISAL The objective of this of a project is to ascertain whether adequate arrangement has been made to meet financial requirement of project. To ensure capital structure design is appropriate Sources at appropriate time and minimum cost Investment will ensure maximum return and optimum utilization of the capacity various aspects are worked into following. 1. Proper estimation of project cost 2. Designing of a suitable capital structure considering the aspects of RISK, PROFITABILITY AND CONTROL. 3. Identification of most appropriate sources of funds. 4. Sound investment decision to ensure optimum utilization and funds. 5. To get maximum return on investment. Economic Appraisal This is done to ascertain its economic viability for i.e. 1) Adequacy of R.O.I. on capital employed as well as cash flows to cover the cost of funds and provide for the payment of dividend on share holders and also future growth of an enterprise. This aspects of project examined are as follows. 1. 2. 3. 4. 5. Estimation of market revenue Exanimation of return or surplus generated from the above Element of risk and uncertainty involved Tax factor R.O.I and expected cash flows

Commonly used criteria for economic appraisal 1. Pay based period 2. Accounting rate of return (ARR) 3. Internal rate of return (IRR) and net present value. OVERALL SOCIAL COST BENEFIT APPRAISAL This is done to assess desirability and utility of the project from social point of view. 1. Use of scare resources (natural) 2. Pollution and environmental hazards. PROJECT SELECTION AND INVESTMENT DECISION/CLEARANCE A project needs clearance and approval at various levels before it can be taken for implementation 1. Approval of project in total 2. Approval with some changes 3. Approval of the project in principle for taken up at letter date. 4. Rejection of project for present but reconsidered after certain changes as suggested at latter date 5. Rejection of project outright Selection is based on to give higher rate of return within the resources available within the organization with minimum risk and having intangible benefits also investment decision criteria PROFITABLE TAX = -------------------------------NETWORTH

PROFITABILITY

PROJECT IMPLEMENTATION 1. This requires networking with different teams 2. Co-ordination with multi discipline teams 3. Setting up of a suitable project organization head by project manager capable of achieving the results from the different people. 4. Preparation of network of activities scheduling of the activities finding out critical path 5. Accurate projections and estimate of resources should be prepared and made available of right quality at right time. 6. Effective monitoring and supervision over the project completion should be ensured by setting up of project information system provides responsibility centers and responsibility reporting. 7. Delegation of authority and responsibility at various levels. 8. Continuously monitor project and taking corrective action if and when needed