TM 665 Project Planning - PowerPoint PPT Presentation

1 / 58
About This Presentation
Title:

TM 665 Project Planning

Description:

19-Jan Holiday 29-Mar 5, 6(start) 26-Jan 2 Problems 3-7 page 93 05-Apr 6, 7 ... Compare the project with other investments such as those available at a bank. ... – PowerPoint PPT presentation

Number of Views:47
Avg rating:3.0/5.0
Slides: 59
Provided by: SDSM
Learn more at: http://www.hpcnet.org
Category:
Tags: planning | project

less

Transcript and Presenter's Notes

Title: TM 665 Project Planning


1
TM 665Project Planning Control Dr. Frank
Joseph Matejcik
2nd Session Project Selection
  • South Dakota School of Mines and Technology
  • Rapid City

2
Agenda
  • Attendance
  • Assignments
  • Syllabus comments
  • Answer Link is given
  • M M (2 Project Selection)

3
First and 2nd Assignment
  • Problems 3-7 page 93 (page 7576 4th ed)
  • Send me a contact info e-mail. Include all
    important contact information phones, fax,
    e-mail, mail addresses. Preferred mode. Also,
    our technician for now is Amy.Gab_at_sdsmt.edu
  • Questions page 24

4
Tentative Schedule
Chapters Assigned Chapters 12-Jan 1 e-mail
22-Mar 4 contact, p24 questions 19-Jan Holiday
29-Mar 5, 6(start) 26-Jan 2 Problems 3-7 page
93 05-Apr 6, 7 02-Feb 8 12-Apr Holiday
09-Feb 9 19-Apr 11 16-Feb Holiday
26-Apr 12,13 23-Feb 10 3-May Final 01-Mar Tes
t 08-Mar Break 15-Mar 3
Attendance Policy Help me work with you.
5
Syllabus (regulated document)
  • Much more information than I would like.
  • Objectives are rather general. Not Stu Kelloggs
    exam study guide. I will do a study guide for
    the exams.
  • Must be kept up to date. A regulation.
    Annually, when minor details change.
  • This year the conversion to DVDs was made.
  • Also, I will upload the answers.
  • Give the Username and Password

6
Ch. 2 Strategic Managementand Project Selection
  • Maturity of Project Management
  • Criteria for PS Models
  • Nature of PS Models
  • Types of PS Models
  • Uncertainty Analysis and Risk Management
  • Information Base for PS Models
  • Project Portfolio Process (PPP)
  • Project Proposal
  • Strategic Selection of Projects(Added)

7
Project Management Maturity
  • (Fincher Levin, 1997) Measured by
  • PMIs PMBOK Guide
  • ISO 9001 standards
  • Carnegie Mellon Universitys PM3
  • Ibbs and Kwak, 2000
  • Multiple levels such as ad-hoc, abbreviated,
    organized, managed,and adaptive

8
Ch. 2.0 Overview of PS Process
  • Project Management Office (PMO) Aligning
    corporate needs and project goals
  • Project Selection Chose candidate project using
    Evaluation Criteria
  • Dealing with Uncertainty Risk Analysis
  • Strategically selecting best Projects Project
    Portfolio Process (PPP)
  • Locking up the deal Writing a Project Proposal

9
Project Selection
  • M M hear management by projects
    project management maturity
  • Common problems with projects (Cleland King)
  • they fall outside the organization's stated
    mission
  • they completely unrelated to the strategy and
    goals of the organization
  • they have funding levels that are excessive
    relative to their expected benefits.

10
Project Selection
  • Problems in organizations with many projects
  • 1. Delays in one project delay other projects
    because of common resource needs technological
    dependencies.
  • 2. The inefficient use of corporate resources
    results in peaks and valleys of resource
    utilization.
  • 3. Bottlenecks in resource availability or lack
    of required technological inputs rest in project
    delays that depend on those scarce resources or
    technology.

11
Project Selection
  • Project selection is the process of evaluating
    individual projects or groups of projects, and
    then choosing to implement some set of them so
    that the objectives of the parent organization
    will be achieved
  • Managers often use decision-aiding models to
    extract the relevant issues of a problem from the
    details in which the problem is embedded
  • Models represent the problems structure and can
    be useful in selecting and evaluating projects

12
Project Selection and Criteria of Choice
Realists cant solve problems, only Idealists
can do that.
  • Realism - reality of managers decision situation
    (common measurement)
  • Capability- able to simulate different scenarios
    and optimize the decision
  • Flexibility - provide valid results within the
    range of conditions
  • Ease of Use - reasonably convenient, easy
    execution, and easily understood
  • Cost - Data gathering and modeling costs should
    be low relative to the cost of the project
  • Easy Computerization - must be easy and
    convenient to gather, store and manipulate data
    in the model. Standard programs help.

13
Nature of Project Selection Models
  • 2 Basic Types of Models
  • Numeric (Financial, Scoring)
  • Nonnumeric
  • Two Critical Facts
  • Models do not make decisions - People do!
  • All models, however sophisticated, are only
    partial representations of the reality the are
    meant to reflectThere is a need for buy in.

14
Ch 2.3 Project Evaluation Factors (PEFs)
  • Production Factors
  • Marketing Factors
  • Financial Factors
  • Personnel Factors
  • Administrative and Misc. Factors

15
Project Evaluation Factors
16
Nonnumeric Models
  • Sacred Cow - project is suggested by a senior and
    powerful official in the organization. RCS
    literacy program. Get the intern to do the
    analysis.
  • Operating Necessity - the project is required to
    keep the system running. The system may become
    illegal without it! Go directly to jail!
  • Competitive Necessity - project is necessary to
    sustain a competitive position. Necessity
    projects bypass usual evaluations. ABET.
  • Product Line Extension - projects are judged on
    how they fit with current product line, fill a
    gap, strengthen a weak link, or extend the line
    in a new desirable way.
  • Comparative Benefit Model - several projects are
    considered and the one with the most benefit to
    the firm is selected Q-sort on page 47 is one
    such method

17
Numeric Models Profit/Profitability Engineering
Economics
  • Payback period - initial fixed investment/estimate
    d annual cash inflows from the project.
    Discounted method.
  • Average Rate of Return - average annual
    profit/average investment

18
Numeric Models Profit/Profitability Engineering
Economics
  • Discounted Cash Flow - Present Value Method

19
Numeric Models Profit/Profitability Engineering
Economics
  • Internal Rate of Return - Finds rate of return
    that equates present value of inflows and
    outflows
  • Or Solve NPV(k) 0. With an assumed rate of
    return. Compare the project with other
    investments such as those available at a bank.
  • Profitability Index - NPV of all future expected
    cash flows/initial cash investment

20
Comments on Profitability Models
  • 1. The undiscounted models are simple to use and
    understand.
  • 2. All use readily available accounting data to
    determine the cash flows.
  • 3. Model output is in terms familiar to business
    decision makers.
  • 4. With a few exceptions, model output is on an
    "absolute" profit/profitability scale allows
    "absolute" go/no-go decisions.
  • 5. Some profit models include risk.

21
Disadvantages of these Models
  • 1. These models ignore all nonmonetary factors
    except risk.
  • 2. Models that do not include discounting ignore
    the timing of the cash flows and the time-value
    of money.
  • 3. Models that reduce cash flows to their present
    value are strongly biased toward the short run.
  • 4. Payback-type models ignore affects beyond the
    payback period.

22
Disadvantages of these Models
  • 5. The internal rate of return model can result
    in multiple solutions.
  • 6. All are sensitive to errors in the input data
    for the early years of the project.
  • 7. The effects of changes discounting models are
    generally not obvious.
  • 8. All these models depend on a determination of
    cash flows for input, but it isnt clear how to
    properly define them for projects.

23
Scoring Models Simple EX
24
Numeric Models Scoring
  • Unweighted 0-1 Factor Model
  • Unweighted Factor Scoring Model
  • Weighted Factor Scoring Model
  • Resist using marginally relevant factors
  • Constrained Weighted Factor Scoring Model
  • Includes 0-1 criteria
  • Goal Programming with Multiple Objectives

25
Advantages of Scoring Models
  • 1. These models allow multiple criteria to be
    used for evaluation and decision making,
    including profit/profitability models and both
    tangible and intangible criteria.
  • 2. They are structurally simple and therefore
    easy to understand and use.
  • 3. They reflect managerial policy.
  • 4. They are easily altered for changes in
    environment or policy.
  • 5. Weights importance.
  • 6. Easy sensitivity analysis.

26
Disadvantages of Scoring Models
  • 1. The output of a scoring model is strictly a
    relative measure. No value nor "utility"
  • 2. In general, scoring models are linear in form
    and the elements of such models are assumed to be
    independent.
  • 3. Can easily include marginal criteria.
  • 4. Unweighted scoring models assume all criteria
    are of equal importance.
  • 5. Profit/profitability portions have
    disadvantages noted earlier.

27
Ch 2.4 Choosing the PS Model
  • Dependent on wishes and philosophy of management
  • 80 of Fortune 500 firms choose nonnumeric PS
    models
  • Firms with outside funding often chose scoring PS
    models
  • Firms without outside funding often chose profit
    / profitability PS models

28
Risk Versus Uncertainty
  • Analysis Under Uncertainty - The Management of
    Risk
  • The difference between risk and uncertainty
  • Risk - when the decision maker knows the
    probability of each and every state of nature and
    thus each and every outcome. An expected value
    of each alternative action can be determined
  • Uncertainty - when a decision maker has
    information that is not complete and therefore
    cannot determine the expected value of each
    alternative

29
Risk Analysis
  • Principal contribution of risk analysis is to
    focus the attention on understanding the nature
    and extent of the uncertainty associated with
    some variables used in a decision making process
  • Usually understood to use financial measures in
    determining the desirability of an investment
    project

30
Risk Analysis
  • Probability distributions are determined or
    subjectively estimated for each of the
    uncertain variables
  • The probability distribution for the rate of
    return (or net present value) is then found by
    simulation
  • Both the expectation and its variability are
    important criteria in the evaluation of a project

31
Risk Analysis we wont do CB
32
Risk Analysis
33
Risk Analysis
34
Risk Analysis
35
Information Base for Selections
  • Accounting Data
  • Often linear assumptions
  • Standardized assumptions may be off
  • May neglect overhead
  • Measurements
  • Subjective vs. Objective
  • Quantitative vs. Qualitative
  • Reliable vs. Unreliable
  • Valid vs. Invalid
  • Models for Tech Forecasting, too

36
Project Portfolio Process (PPP)
  • After a SWOT (strengths, weaknesses,
    opportunities, threats) analysis
  • Purposes include
  • To identify proposed projects that are not really
    projects and should be handled through other
    processes
  • To prioritize the list of available projects
  • To intentionally limit the number of overall
    projects being managed so the important projects
    get the resources and attention they need

37
Project Portfolio Process (PPP)
  • Purposes include
  • To identify projects that best fit the
    organization's goals and strategy
  • To identify projects that support multiple
    organizational goals and cross-reim force other
    important projects
  • To eliminate projects that incur excessive risk
    and/or cost
  • To eliminate projects that bypassed a formal
    selection process and may not provide benefits
    corresponding to their risks and/or costs

38
Project Portfolio Process (PPP)
  • Purposes include
  • To keep from overloading the organization's
    resource availability
  • To balance the resources with the needs
  • To balance short, medium, and long term returns

39
Project Portfolio Process (PPP)
  • Step 1 Establish a Project Council (Strategic)
  • senior management
  • project managers of major projects
  • head of the Project Management Office
  • particularly relevant general managers
  • those who can identify key opportunities and
    risks
  • anyone who can derail the progress of the PPP
    later on in the process

40
Project Portfolio Process (PPP)
  • Step 2 Identify Categories and Criteria
  • Categories of process change
  • 1. Derivative projects. These are projects with
    objectives that are only incrementally different
    from existing offerings. (lower priced version).
  • 2. Platform projects. The planned outputs of
    these projects represent major departures in
    terms of either the product/service itself or
    the process used to make and deliver it, or
    both. They become "platforms" for the next
    generation, such as a new model of auto

41
Project Portfolio Process (PPP)
  • Categories of process change
  • 3. Breakthrough projects. Breakthrough projects
    typically involve a newer technology than
    platform projects. It may be a 'disruptive"
    technology. Examples here include the use of
    fiber-optic cables for data transmission,
    cash-balance pension plans, and hybrid
    gasoline-electric automobiles.
  • 4. RD projects. "blue-sky," visionary newly
    developed technologies

42
Project Portfolio Process (PPP)
  • We plot also against a time frame
  • The purposes of an aggregate plan include
  • To view the mix of projects within each
    illustrated aspect (shape)
  • To analyze and adjust the mix of projects within
    each category or aspect
  • To assess the resource demands on the
    organization, indicated by the size, timing, and
    number of projects shown

43
Project Portfolio Process (PPP)
  • The purposes of an aggregate plan include
  • To identify and adjust the gaps in the
    categories, aspects, sizes, and timing the
    projects
  • To identify potential career paths for developing
    project managers, such as team member of a
    derivative project, then team member of a
    platform project, manager of a derivative
    project, member of a breakthrough project, and
    so on

44
Project Portfolio Process (PPP)
  • Step 3 Collect Project Data
  • Step 4 Assess Resource Availability (labor)
  • Step 5 Reduce Project and Criteria Set
  • Whether the competence is in the organization
  • Whether there is a market for the offering
  • How profitable the offering is likely to be
  • How risky the project is
  • If there is a potential partner to help with the
    project
  • If the right resources are available at the
    right times

45
Project Portfolio Process (PPP)
  • Step 5 Reduce Project Criteria Set (cont.)
  • If the project is a good technological/knowledge
    fit with the organization
  • If the project uses the organizations strengths,
    or depends on its weaknesses
  • If the project is synergistic with other
    important projects
  • If the project is dominated by another existing
    or proposed project
  • If the project has slipped in its desirability
    since the last evaluation

46
Project Portfolio Process (PPP)
  • Step 6 Prioritize the Projects within Categories
  • Step 7 Select the Projects to be Funded and Held
    in Reserve (save some resources)
  • Step 8 Implement the Process
  • Senior Management Task

47
Project Proposals
  • Which projects should be bid on?
  • How should the proposal-preparation process be
    organized and staffed?
  • How much should be spent on preparing proposals
    for bids?
  • How should the bid prices be set?
  • What is the bidding strategy? Is it ethical?

48
Project ProposalContents
  • Executive Summary
  • Cover Letter
  • Nature of the technical problem
  • Plan for Implementation of Project
  • Plan for Logistic Support Administration of the
    project (change orders)
  • Description of group proposing to do the work
  • Any relevant past experience that can be applied

49
Ch 2.8 Project ProposalCover letter
Executive summary
  • Compose a cover letter as key marketing
    instrument
  • Explain fundamental nature and general benefits
    of project
  • Minimally technical language

50
Ch 2.8 Project ProposalPast Experience of
Project Team
  • List all key project personnel with titles and
    qualifications
  • Include full resume of each principal
  • Provide all pertinent references

51
Ch 2.8 Project ProposalTechnical Approach
  • General description of problem to be addressed or
    project to be undertaken
  • Major subsystems of problem or project
  • Methodology of solving the problem
  • Special client requirements
  • Test and inspection procedures

52
Ch 2.8 Project ProposalImplementation Plan
  • Estimates of time, cost and materials for each
    subsystem and the whole project
  • Establish major milestones to break project into
    phases
  • List equipment, overhead and administrative cost
  • Develop contingency plans (incl. slack time)

53
Ch 2.8 Project ProposalPlan for Administration
and Logistic Support
  • Control over subcontractors
  • Nature and Timing of all reports (progress,
    budget, audits)
  • Change management
  • Termination Procedures
  • touch of class capabilities (artists
    renderings, meeting facilities,video
    conferencing, computer graphics)

54
Strategic Selection of Projects
  • Portfolio Classification Matrix
  • Characteristics of Benefits
  • Quality of Resources

55
Strategic Selection of Projects
56
Summary
  • Primary selection criteria are realism,
    capability,flexibility, ease of use, and cost
  • In preparing to use a model, a firm must identify
    its objectives, weighting them relative to each
    other, and determining the probable impacts of
    the project on the firms competitive abilities.
  • Models can be numeric or nonnumeric

57
Summary
  • Numeric Models can be subdivided into
    profitability and scoring models
  • To handle uncertainty, pro forma documents, risk
    analysis, and simulation with sensitivity
    analysis are helpful
  • Special care should be given to data in project
    selection models. Of concern are data taken
    from accounting data base and the effect of
    technological shock

58
Summary
  • Project proposals generally consist of several
    sections the technical approach, the
    implementation plan, the plan for logistics
    support and administration, and past experience.
  • The history of project selection models has shown
    an increase in the use of formal models,
    particularly profitability models.
  • Project Selection may also be viewedas strategic
    activity.
  • Setting Objectives
  • Appropriately using resources
Write a Comment
User Comments (0)
About PowerShow.com