4. project planning & scheduling pm0002 sem-3

8/9/2019 4. Project Planning & Scheduling PM0002 Sem-3

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Sikkim Manipal University ProjectPlanning & Scheduling PM0002

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

LEARNING CENTRE JEDDAH Page 1 of 18MBA III Semester Assignment
http://en.wikipedia.org/wiki/Costhttp://en.wikipedia.org/wiki/Costhttp://en.wikipedia.org/wiki/Costhttp://en.wikipedia.org/wiki/Cost


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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

http://en.wikipedia.org/wiki/Project_managementhttp://en.wikipedia.org/wiki/Project_managementhttp://en.wikipedia.org/wiki/Systems_engineeringhttp://en.wikipedia.org/wiki/Project_managementhttp://en.wikipedia.org/wiki/Project_managementhttp://en.wikipedia.org/wiki/Systems_engineering


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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)

http://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Task_(project_management)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Datahttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Project_managerhttp://en.wikipedia.org/wiki/Tree_structurehttp://en.wikipedia.org/wiki/Program_managementhttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Task_(project_management)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Datahttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Project_managerhttp://en.wikipedia.org/wiki/Tree_structurehttp://en.wikipedia.org/wiki/Program_managementhttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Contract


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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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