Project Management Introduction

Project management refers to the application of man, machinery, money and knowledge to achieve objectives of a project.

A Project may be defined as “a system involving coordination of different departments throughout the organization which must be completed within prescribed schedule and budget constraints.”

A Project is essentially an organized unit dedicated towards achieving predetermined objectives related to development of a certain asset, in a systematic manner with limited budget and time.

Types of Project

A Project can be classified on the basis of –

(1) Type of Activity 

  • Industrial Project Opening up of a factory, office, shop etc.
  • Non – Industrial Project Healthcare, educational, pollution control projects etc.

(2) Location of Project

  • National Project A project setup within the national boundaries of a country.
  • International Project A project setup or extending outside the domestic borders of a country.

(3) Time constraints

  • Normal Project Projects which do not have a strict timeline.
  • Crash Project Projects which have to be completed within a fixed time period.

(4) Ownership

  • Private Sector Project Projects setup by promoters and private investors with the objective of profit maximization.
  • Public Sector Project Project owned and controlled by the government of the country with the objective of development and welfare of the society.
  • Joint Sector Project Projects which are owned partly by the government and partly by private entrepreneurs.

(5) Size of Investment

  • Small Project Projects involving an investment of less than Rs. 1 crore.
  • Medium Project Projects involving an investment ranging between Rs. 1 crore to Rs. 100 crore.
  • Large Project Projects which involve an investment of more than Rs. 100 crore

(6) Needs and requirements

  • New Project A project with the objective of launching a new product or service in the market.
  • Balancing Project A project setup to meet the shortages in existing production unit
  • Expansion Project A project setup to increase the existing plant capacity
  • Modernization Project Projects which aim at updating the existing plant & machinery, infrastructure, technology etc.
  • Replacement Project Projects which are setup to replace an old plant or machinery
  • Diversification Project A project setup with the objective to introduce a new product line
  • Backward Integration Project These projects are setup by manufactures of a product. In such a project the manufacturer starts producing raw materials required for production himself.
  • Forward Integration Project These projects are setup by producers of raw materials. It involves value addition to the existing raw material in production to make a final product. Manufacturing facilities are added at the end of the product line to make a saleable product.

 

Project Life Cycle 

It refers to a logical sequence of activities conducted to accomplish project goals or objectives. For each stage in the project life cycle, accurate estimation of manpower, finance, material etc. is done by the project manager to ensure smooth-running of the project.

(a) Conception Stage It includes generation of the project idea. An idea may come from employees, market source, consultant or entrepreneur.

(b) Project Initiation It involves –

  • Starting up of project development of a detailed project report
  • Undertaking a feasibility study
  • And Establishing a project team

(c) Project Planning It involves preparation of plans and guidelines for project delivery.

(d) Project Execution It involves the actual execution of the project i.e. building up of premises, manufacturing of product etc.

(e) Project Closure – When the project objectives are achieved the project is reviewed to know whether it has been completed within the given time constraint and budget limitations.

 

Project Management

Project Management is an organization venture for managing projects which involves application of modern tools and techniques in planning, financing, implementing, monitoring, controlling and coordinating unique activities to produce desirable output according to the pre-determined objectives within the constraints of time and cost.

Project Management may be also defined as an capital expenditure that involves a current outlay of funds in expectation of streams of benefit in the future.

 

Steps in Project Management

Project management involves six sequential steps which are to be followed for successful project implementation. They are:

Planning → Analysis → Selection → Financing → Implementation → Review

 

Planning It involves generation of project idea and screening of project proposals. Feasibility studies are conducted to determine whether a project will be profitable or not.

 

Analysis A detailed analysis of the selected projects is conducted and all relevant market, technical, financial and economic aspects are taken into consideration.

Economic Analysis – It is also called social-cost benefit analysis. It is conducted to determine the impact of the project on the society in terms of income distribution, level of savings and investment, employment, social and cultural order.

Ecological Analysis – An ecological analysis may also be conducted in case of big industrial projects like dams, power projects, nuclear plant, production of drugs and chemicals etc. It helps in determining any damage, threat or loss to the environment due to the project and the restoration measures and cost related to it.

Market Analysis – It involves estimating the potential market and future market share related to the project.

Technical Analysis – It involves analysis of the technology available and technical viability and feasibility of the project.

Financial Analysis – It involves analysis of risks and returns associated with the project.

 

Selection

The most attractive project in terms of profitability and feasibility is chosen by the company. Capital budgeting techniques are used to appraise each project and various discounting and non-discounting techniques are used to determine the most profitable one in terms of –

  Accept Project Reject Project
Payback Period PBP<Target Period PBP>Target Period
Accounting Rate of Return ARR>Target Rate of return ARR<Target Rate of return
Net Present value NPV>0 NPV<0
Internal Rate of Return IRR>Cost of Capital IRR<Cost of Capital
Benefit-cost Ratio BCR>1 BCR<1

                                                        

Financing All short term and long term needs of the project are considered before preparing a budget for the project. Margin money for contingencies is also added to the total budget. Various sources of short and long term funds are explored and the selected project is financed with an optimum mix of debt and equity.

 

Implementation It involves the actual execution of the project in a systematic manner according to the project plans and guidelines.

  

Review – The project has to be reviewed periodically to compare to actual performance with the projected performance, for this purpose a feedback mechanism is developed which helps in future decision making and taking corrective measures to improve performance.

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