Project

Management
 Meaning
 A Project simply means an investment
opportunity exploited for profit.
 It is an idea or plan which is intended to
be carried out or a finite task to be
completed.
 Definition
 In the words of Gillinger “Project is a
whole complex of activities involved in
using resources to gain benefits”.
 The World Bank defines a project as ‘an
approval for a capital investment
develops facilities to provide goods and
services’.
 CHARACTERISTICS OF A PROJECT
 A project involves investment of money
and money’s worth.
 The objective of a project is to earn
profit.
 It is concerned with production of goods
and services.
 Every project has risk and uncertainty
associated with it.
 It has a fixed set of objectives.

 It is subjected to a lot of change.

 It has a definite beginning and an end.

 It has a life cycle reflected by growth,

maturity and decay.
 It is combination of various elements
such as technology, equipment,
materials, machinery and people.
 A project requires team work.
PHASES OF PROJECT MANAGEMENT
It consists of the following stages:
 Project Identification: It refers to
identification of business/investment
opportunities. It involves scanning of
the environment to find out investment
opportunities.
 Project Formulation: It is the translation of
the idea into concrete project with scrutiny
of its important preliminary aspects.
 Project Appraisal: It involves searching,
scrutiny, analysis and evaluation of
market, technical, financial and economic
variables. It examines the viability of the
project.
 Project Selection: It is the process of choosing a
project rationally in the light of objectives and
inherent constraints on the basis of appraisal.
 Project Implementation: It is the stage of birth of
an enterprise. At the end of this stage, the idea
becomes a reality.
 Project Follow Up and Evaluation: It is the
process of assessing the performance of the
project after it started functioning. Project
evaluation simply means assessing the progress
of the project.
Project Identification or Generation of
Project ideas.
 It is the process of collection,
compilation and analysis of economic
data for the purpose of finding out
possible opportunities for investment.
 Emerging of project ideas from different
sources is called generation of project
ideas.
 The idea should be sound and workable,
so that it may be exploited.
 The entrepreneur has to be imaginative
and foresighted to discover a
business/Project idea.
SOURCES OF THE PROJECT IDEAS

The business idea arises from an

opportunity in the market.
Entrepreneurs should have a keen and
open mind to look for opportunities and
generate business ideas.
 Our own needs

 Trade and professional journals. Project

profiles.
 Trade fairs and exhibitions.

 Success stories of friends and relatives.

Prospective consumers.
 Research organization.

 Utilization of waste materials.

SCREENING OF PROJECT IDEAS

The need for screening of the ideas arises

because all the ideas generated may not
be promising. Only the most promising
or most profitable ideas are to be
selected for further study. The following
factors need to be considered:
 Cost of The Project: A study of the cost
structure under material cost, labour
cost, factory overheads etc., will give a
good idea regarding different types of
costs.
 Profitability: The project yielding
higher return must be selected.
 Marketing Facilities: Existing and
potential demand in domestic and
export market, nature of competitions,
sales and distribution system,
consumption trends etc., should be
assessed and evaluated before taking
the final decision.
 Availability of Inputs: The resources
and inputs required for the project must
be reasonably assured. The availability
of skilled workers is to be ensured
before launching an enterprise.
 Consistency with Government
Regulations and Priorities.
 Compatibility with the Entrepreneur:
The idea must suit the interest,
personality and resources of the
entrepreneur. It should not be beyond
his capacity.
 Project Formulation.
 It is the process of examining technical,
economic, financial and commercial
aspects of a project.
 It is the process and steps through which
an opportunity becomes a project in
which the entrepreneur is willing to invest
his time, money and other resources.
 This study is undertaken to find out
whether the proposed project would be
feasible or not.
Elements of project formulation
 It involves a number of elements, they
are summarized as below:
 Feasibility Analysis: It involves an
examination of the project idea in the
light of internal and external constraints.
 Internal constraints arise because of
limitations of the project sponsoring body
and external constraints arise due to the
characteristic of the environment.
 If on feasibility analysis, the project is
found feasible, the same is put to
further analysis.
 Techno-Economic Analysis: It is
mainly concerned with the identification
of the project demand potential and
selection of the optimal technology
suitable for achieving the project
objectives. This study includes:
 Estimation Of Demand Or Market Potential:
The entrepreneur has to estimate the
expected share of the sale in the market,
intensity of competition, mobility of
products to other places etc., The data
collected from various sources are first
complied, tested and tabulated in a form
suitable for interpretation.
Selection Of Technology: It refers to
that combination of controlled
variables which will ensure the
achievement of the project objectives
with minimum expenditure of
resources.
 Project Design and Network Analysis:

 A project comprises certain sequential

activities which are interrelated. These
activities can be shown in the form of a
diagram, which is called network
diagram.
 Project design is concerned with the
development of a detailed work plan of the
project and its time estimates.
 When a network is designed, its analysis is
carried out to identify the optimal course of
action so as to complete the project with the
minimum of time and cost, subject to the
available resources.
 Important network analysis techniques
are PERT (Programme Evaluation
Review Technique) and CPM (Critical
Path Method).
 Input Analysis:

 The objective of input analysis is to

identify nature of resources needed to
estimate the quality of the required
resources and to ensure that there is
continuous and adequate supply of
inputs.
 Input analysis is the basis for financial
analysis and cost benefit analysis.
 Financial Analysis:

 It involves estimates about the project costs

and the funds required for the project.
 It seeks to find out whether the project will
generate income to realize the ultimate
objective for which it is undertaken.
 Social Cost Benefit Analysis:

 Under cost benefit analysis the investment

projects are evaluated from the point of
view of the society as a whole. The cost
benefit analysis aims at analyzing the real
contribution of an investment project
towards welfare of the country as a whole.
 Pre-Investment Appraisal:

 The proposal gets the final and formal

shape.
 The purpose of pre-investment appraisal
is to enable the concerned authorities to
take an investment decision about the
project i.e. to accept or reject.
 Technical Analysis
 Technical analysis of a project is
essential to ensure that necessary
physical facilities required for production
will be available and the best possible
alternative is selected to procure them.
 Technical analysis includes the study of
the following:
 MATERIAL INPUTS:

It is essential to assess the availability

of materials, inputs and utilities.
Utilities include power, water, steam,
fuel, communication facilities,
transport facilities etc.
The feasibility study of material
should include the following
variables:
 The availability of quality and
quantity of raw material.
 Perishable time of raw material.
 MANUFACTURING PROCESS/TECHNOLOGY:

Technologies simply refers to the tools, devices and

knowledge that help in the transformation of inputs
into outputs.
It is the application of scientific knowledge to
practical commercial purpose.

.
 Factors Influencing the Choice of
Technology:
Plant capacity.
Inputs.
Investment outlay.
Product mix.
Latest developments.
Cost.
 Sources of Technology:
 Foreign Collaboration.

 Consultancy Organizations.

 Machinery Suppliers.

 Promoter’s knowledge and experience.

 Recruitment of suitable technical personnel.

 CSIR Laboratories and National Research and Development

Corporation (NRDC).
An entrepreneur may use either indigenous
technology or imported technology.
When he is not satisfied with indigenous
technology, he can make use of imported
technology.
This process of availing global technology is
called technology transfer.
 PLANT CAPACITY:
CAPACITY
It refers to the volume or number of units
that can be manufactured during a given
period. Plant capacity is also called
production capacity.
 Considerations for Plant Capacity

The following factors should be taken into

consideration:
 Technological requirement, Input constraints.

 Investment cost, Market consideration.

 Resources of the firm.

 Government policy.
 PLANT LOCATION:

It refers to a fairly broad area where the enterprise

is to be established like city, industrial zone or
coastal area.
The success of a project depends on the location, to
a certain extent.
They are discussed as follows
 Proximity to raw material.

 Nearness to market.

 Availability of infrastructure facilities.

 Transport and communication facilities.

 Effluent disposal.

 Labour.
 Government policies.

 Climatic condition.

 Environmental considerations.

 Other factors.
 SIZE OF THE PLANT:

The efficiency and profitability of a project

are very much influenced by its size.
Size of the plant depends on the
manufacturing process, availability of raw
materials, capital investment needed and
the size of the market.
Size of the plant depends on:
 Availability of raw materials and power.

 Technology/process to be adopted.

 Size of the market.

 Size of the plant and machinery.

 The location of the project.

 The product mix.

 Capital investment required.

 PRODUCT MIX:

Product mix or range is decided according

to market requirement.
It refers to the set of all the products offered
by a firm for sale.
The range of products to be marketed
depends on the following:
 Nature of business.

Nature of product.

Competition.

Tastes of consumers.

Size of target market.

Plant capacity.
 FACTORY DESIGN:

It refers to the plan for a particular type of

building, arrangement of machinery and
equipment and provision of service
facilities, lighting, heating etc. in the
building.
Factory design comprises layout of building
and layout of factory.
 Important benefits of a good factory design
are summarized as follows:
 Storage and movement of material.

 Service facilities.

 Supervision.
  Employee morale.

 Productivity.

 Factors Affecting Factory Design

While designing a factory the following

factors should be considered:
Location.

Nature of the manufacturing process.

Plant layout.

Smoothness in operation.

Service facilities.

Material handling.

Cost of construction of building.

Future expansion.

Nature of product.
 MACHINERIES AND EQUIPMENTS:

The requirement of machinery and

equipment is dependent on production
technology and plant capacity.
It is also influenced by the type of project.
To determine the kind of machinery and
equipments required for manufacturing
industry the following procedure may be
followed.
 Estimate the likely levels of production
over time.
 Define the various machinery and other
operations.
 Calculate the machinery hours required
for each type of operation.
 Select machineries and equipments
required for each function.
The equipments required for the project may
be classified into the following types:
 Plant equipments.

 Mechanical equipments.

 Electrical equipments.

 Instruments.
 Controls.

 Internal transportation system.

 PLANT LAYOUT:

Proper plant layout can reduce

manufacturing cost by saving money and
time.
It refers to the arrangement of the
machines, equipments and other physical
facilities within the factory premises.
 It is a floor plan for determining and arranging
the desired machinery and equipment in the best
place to permit the quickest flow of material at
the lowest cost with least amount of material
handling in processing the product from the
receipt of raw materials to shipment of the
finished product.
There are five types of plant layout, they are
as follows:

Product Layout: It is also called line layout.

In this type machines and equipments are
arranged in the sequence or order in which
they are used in the manufacture of a given
product.
It is best suited in mass production, because
it allows continuous flow of material in
process towards the finished product stage.
Process Layout:
It is also called as functional layout.

 In this type similar machines are placed in

one place according to the operations or
functions they perform.
Combined Layout:
Here some of the machines may be
arranged in product layout and some others
in process layout.
It combines the advantages of both the
layout forms.
Stationary Layout:
 The men and equipment are moved to the materials
which remain in one place.
 The product is completed at that place where
material lies.
 It is also called fixed position layout.

 It is necessary in ship building, aircraft

manufacturing, job welding shops etc.
Cellular Layout:
This is an innovative layout, and based on
group technology principles.
In this type machines dedicated to
sequences of production are grouped into
cells.
FACTORS INFLUENCING PLANT LAYOUT.

While deciding the layout the following factors

should be considered:
 Nature of industry.

 Volume of production.

 Type of production.

 Location.
 Material handling

 Type of equipment

 Factory building.

 Service facilities.

 Lighting and ventilation

 Future expenses

 Environment aspects