4. project planning & scheduling pm0002 sem-3
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PROJECT PLANNING & SCHEDULING -PM0002
MBA SEMESTER 3
ASSIGNMENT (SET 1)
Q1. Distinguish between value engineering &value analysis. Briefly explain the techniques used in value management?
Ans: Value engineering: (VE) is a systematic method
to improve the "value" of goods or products and services by using an examination of function. Value, as
defined, is the ratio of function to cost . Value can
therefore be increased by either improving the function
or reducing the cost . It is a primary tenet of value
engineering that basic functions be preserved and not be reduced as a consequence of pursuing value
improvements.
VE follows a structured thought process that is
based exclusively on "function", i.e. what something
"does" not what it is. For example a screw driver that isbeing used to stir a can of paint has a "function" of
mixing the contents of paint can and not the original
connotation of securing a screw into a screw-hole. In
value engineering "functions" are always described in a
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two word abridgment of an active verb and measurable
noun (what is being done - the verb - and what it is
being done to - the noun) and to do so in the most non-
prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend
liquid" which is less prescriptive than "stir paint" which
can be seen to limit the action (by stirring) and to limit
the application (only considers paint.) This is the basis
of what value engineering refers to as "function
analysis".
Value analysis is an approach to improving the value of
a product or process by understanding its constituent
components and their associated costs. It then seeks to
find improvements to the components by either reducing their cost or increasing the value of the
functions.
How Does It Work?
To understand value analysis it is necessary to
understand some key concepts:Value: the ratio between a function for customer
satisfaction and the cost of that function.
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Function: the effect produced by a product or by
one of its elements, in order to satisfy customer
needs.
Value analysis: methodology to increase thevalue of an object the object to be analyzed could
be an existing or a new product or process, and it is
usually accomplished by a team following a work
plan.
Need: something that is necessary or desired by
the customer.
Value Management uses a unique combination of
concepts and methods to create sustainable value for
both organizations and their stakeholders.
Some tools and techniques are specific to Value
Management and others are generic tools that many
organizations and individuals use. Detailed below is a
summary of some of the main tools and techniques.
Value = Function or objective / cost i.e. getting what you require/ for what you will pay
Tool Description Benefits
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journey (possible
excursion). Moves
delegated away from a
problem tosomewhere where
creativity flourishes.
The return journey
often releases such
creativity and ideas
that would not
normally be evident
used as a precursor to
brainstorming or other
idea generation tells.
Function
Analysis
System
Technique
(fast)
Identification of
functions (at the heart
of Value Management)
of products, processes, projects or
services. Focused on
client needs and
wants.
Determines what
functions are delivered
i.e. what they do or
must do, not what they are (avoiding solution
mode). The FAST
diagram works by
asking how the
functions (primary and
secondary) relate to
each other by ask How
and Why questions o
check the logic works.
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Later costs are added
to functions to assist in
indentifying any VM
mismatches or areas of over engineering
Objective
s
Hierarchy
Diagrammatic process
for indentifying
objectives in a
hierarchical manner.
Often used in
conjunction with
functions.
Assists in focusing
input where the key
objectives are as the
diagram is constructed
is descending order.
Issues
Generati
ons and
Analysis
A way of eliciting
many issues
connected with a
problem or
opportunity. Team
members write down
their issues on post-it
notes and they are
displayed on the wall
under appropriate
categories or
groupings .e.g.
Voting of the top 10
important issues
follows. Actions to
address issued then
explored.
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superfluous items in
the process for
corrections.
Risk
Analysis
A structured approach
to indentify risks that
could affect project,
product, process or
service success. Risks
are identified,
evaluated (in terms of
cost, time, other
impact) and robust
action planning
applied.
Often used in parallel
with Value
Management as there
are genuine links. Assists decision making
or option selections.
Stake
holder
Analysis
Indentifies those key
stakeholders (group of
individuals) with an
influence or interest in
project, product,
process or service.
Can assist in focusingattention where the
priorities are required
i.e. satisfaction of key
stakeholder interests.
SWOT Analysis
Indentifies strengths,weakness,
opportunities and
threats. A tool used in
many organization to
Assists inunderstanding
strengths, weaknesses,
opportunities and
threats that can impact
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assist in focusing
activities where
required and minimize
those items that canimpact negatively.
on an organization ,
individual, product or
process
Value
Analysis
Structured team based
approach to
indentifying functional
requirements of
projects, products,
processes or services.
Optimization and
maximization or value
to the client or
customer. Optimum
balance between
function and cost
without detriment to
quality 5Ws and
H
A technique for
exploring problems
which provokes further
depth of questioning
about the dimensions
framing the problems
or opportunity
Who- e.g. is
responsible?
Why e.g. is the end
date important?
What e.g. what would
happen if the scheme
were delayed?
When e.g. must the
work start?
Where e.g. might the
problem occur?
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How e.g. might we do
this seemingly
impossible thing?
SCAMPER
Used as checklist todevelop ideas by
applying separate
verbs to chosen ideas
singly or together with
others. E.g. combine,amend, modify, put to
other use, expand,
reverse /reduce.
This could help with
moving an idea from a
creative thought to a
more practical use,
expand on the concept
behind ideas, find
different ways of
expressing the idea,
provoked new ideas,
etc.
Value Management is a structured team based
approach to identify functional requirements of projects/contracts to achieve Optimum Function for
Minimum Cost
Q2. What is meant by project viability? How do
you assess financial viability of a project?
Project viability
The rationale for the project is set out in the business
case which will be expressed in terms of a set of
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benefits which contribute towards strategic goal(s). The
project framework and planning should be written to
ensure that achievement of those benefits is
maximized.
Many things can affect project viability
1. Cost overruns. If the project is based on a rate of
return on capital invested, then an increase in
project costs can eliminate this
2. Time overruns. Some projects have to be delivered
within a certain time frame to deliver benefits.
Extending time may completely eliminate the
benefits.
3. Changes to specifications and scope. As projects
progress changes to the plan or even the scope will
inevitably be requested. These need to be carefully
assessed against the continued ability to deliver the
benefits
4. Quality problems. It may become clear during the
project life cycle that the original quality
expectations cannot be met. This can have an
impact on the acceptability and hence the usability
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of the project's outputs by the end user. Changes to
quality must be assessed against the benefits.
5. Change in the business environment. Sometimes
organisations have to take a different strategic
path, making the need for the project obsolete.
There is little point carrying on committing
resources to a project for which there is no longer a
need.
Assessing Financial Viability of the Project
Certain tools help us assess the financial viability of any
project where investment is contemplated. We will
discuss some tools in brief.Tools that determine the adequacy of the surplus:
RETURN ON INVESTMENT (ROI)
As we know, a project collects funds from two sources
for long-term investment.
The amount collected is used to create assets and
operation, which generates surplus for the enterprise.
Surplus is required to be distributed to the contributors
of the funds. Interest is the compensation given to
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contributors of borrowed capital, and net profit and
depreciation are given to contributors of own capital.
Why should one add depreciation here? Though
depreciation reduces profit, it is a non-cash provisionmade to recover the original investment. Thus, the cash
profit of the enterprise is increased to the extent of
depreciation.
Acceptance Rule
For the investment to be financially viable, the RoI
should be greater than the cost of investment.
DEBT SERVICE COVERAGE RATIO (DSCR)
Running an enterprise with financial support from
banks/financial institutions requires their loans to be
repaid with interest. Therefore, an entrepreneur must
generate surplus, adequate to meet repayment
obligations
Acceptance Rule
A project is considered financially viable if the
cumulative DSCR during repayment period is at least
2:1
BREAK-EVEN POINT (BEP)
This is another important tool. The break-even point is
the level of activity where the total contribution is equal
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to the total fixed cost. Contribution is the excess of
sales over variable cost,
DEBT-EQUITY RATIO
This ratio indicates the extent to which the promotersfunds are leveraged to procure loans. The formula of
DER is:
Contribution = Sales Variable Cost
A higher debt equity ratio indicates more risk due to a
higher fixed cost of interest. The BEP of such enterprises
will go up.
Q3. Explain work breakdown structure of aconstruction activity with example.
Ans: A work breakdown structure (WBS) in project
management and systems engineering , is a tool used to
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define and group a project 's discrete work elements (or
tasks ) in a way that helps organize and define the total
work scope of the project
A work breakdown structure element may be a product ,
data , a service , or any combination. A WBS also
provides the necessary framework for detailed cost
estimating and control along with providing guidance for
schedule development and control. Additionally the WBS
is a dynamic tool and can be revised and updated asneeded by the project manager .
The Work Breakdown Structure is a tree structure , which
shows a subdivision of effort required to achieve an
objective; for example a program , project , and contract .
In a project or contract, the WBS is developed by
starting with
the end objective and
successively subdividing it into manageable
components
in terms of size, duration, and responsibility (e.g.,
systems, subsystems, components, tasks, subtasks,
and work packages)
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which include all steps necessary to achieve the
objective
W ork is effort performed by people to transform or create
products, to solve identified problems or to satisfy specific
needs. Just as the Implementing Agency hierarchically
structures the people who perform work, so the work
breakdown structure hierarchically structures the products/
deliverables to be produced.
In order to use the work breakdown structure as a
framework for structuring the technical objectives of a
project in addition to its use as a management tool for cost
and schedule control- it is important that the work
breakdown structure be productoriented. Its elements
should represent identifiable work products whether they
are goods, equipment, software, data, infrastructure
elements or service products.
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Sample WBS of Construction:
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