Section 1: Simple Procurement Resource Module Objectives...3 Part 1: Welcome and Introductions... 3

Transcription

1 Simple Resource Module: Project Management Section 1: Simple Resource Module Objectives...3 Part 1: Welcome and Introductions... 3 Section 2: Project Management and...6 Key Competencies for you to Consider... 6 Part 1: Project Management Key Terms... 7 Part 2: The Purpose of Project Management in Part 3: What is Successful Project Management Part 4: Project Management in your Organisation Part 5: Modern Objectives Part 6: How do we Introduce Project Management into Project Stage 1: The Project Lifecycle Key Competencies for you to Consider Section 2: Project Management Plan (PMP) Contents Part 1: Project Management Plan (PMP) Complex Part 2: Project Management Plan (PMP) Light Section 3: Project Management Plan (PMP) Light Example Contents Project Plan 1. Project Overview Part 1: Vision Part 2: Project Objectives Part 3: Project Management Plan Purpose Part 4: Scope of Works Part 5: Business Case Part 6: Business Case II Part 7: Business Case Template: Financial Benefits Part 8: Business Case: Program Financial Benefits Part 9: Non Financial Benefits Part 10: Major Risks Assessment Part 11: All Risks Assessment Part 12: Project Risk Assessment Blank Part 13: Project Risk Assessment Blank II Part 14: Meeting Agenda, Minutes, and Action Items Part 15: Project KPIs Part 16: Project Management Reviews Project Plan 2. Project Execution Part 1: Work Breakdown Structure and Work Packages (WBS & WP)

2 Part 2: Work Breakdown Structure Diagram (WBS) Part 3: Organisational Breakdown Structure (OBS) Part 4: Organisational Breakdown Structure Diagram (OBS) Part 5: Project Cost Codes Diagram with Work Breakdown Structure (WBS) Part 6: Project Schedule and Key Milestones Part 7: Project Key Resources, Duration, and Cost... Error! Bookmark not defined. Part 8: Project Plan... Error! Bookmark not defined. Part 9: Microsoft Project Plan Gantt Tracking View... Error! Bookmark not defined. Part 10: Project Plan in Microsoft Excel Example... Error! Bookmark not defined. Part 11: Project Management Budget... Error! Bookmark not defined. Part 12: Customer and Regulatory Approvals Required... Error! Bookmark not defined. Part 13: Communications Plan... Error! Bookmark not defined. 2

3 Section 1: Simple Resource Module Objectives Part 1: Welcome and Introductions Welcome to the Simple Resource Modules. This Module is part of the Simple Training and Resource series. We will do everything we can to ensure this Module is as effective and enjoyable as possible. This Module is: Part of the Simple Resource series available; Written by an experienced Professional; Designed to provide a strong framework for Learning; Inclusive of Templates to assist your immediate success. 3

4 Part 2: Project Management Let us briefly take turns to describe our role in our organisation s Project Management. If we answer a few simple questions we can initiate a brief but useful discussion. Does your organisation have a Project Management Office or Department; Who owns the Project Management as it exists today; Does understand the importance of a Project Management approach; Does the organisation support Project Management development in ; What is successful Project Management to your organisation; Are you responsible for creating Projects and Project Management; Are you required to seek approval for Projects and Category Reviews; What are your expectations of success by using Project Management. The purpose of Project Management in : 1. Project Management increases success by defined processes for planning and executing tasks. The Project Management approach is universally respected. 2. can benefit from increased success and respect. Adopting a Project Management approach requires consideration and planning. 4

5 Part 3: Review Objectives The strategy of this Resource Module is to offer both training to achieve success in your Project Management, and to provide the materials and templates necessary for you to make immediate progress. The Simple Templates are important by providing the right tools to do the job successfully. This will make Project approval paths easier to achieve, and managing Projects more fruitful. This leads to improved financial and service benefits. In particular the objectives include: Project Management Introduction Objectives: Understanding the role of Project Management in organisations; The role of Project Management in ; What is successful Project Management; The Project Lifecycle; Project Management Framework and Planning; Project Plans; A Project Plan Template for your use; Milestones, Tasks, Resources, Budget, Duration; WBS and OBS; Project Briefs and gaining Approval; Creating and managing Project Budgets; Creating and managing Project Resources; Identifying and managing Project Risks; Project Management reports; Project Management Tools and Templates; Provide advice on specific Project Management issues. 5

6 Section 2: Project Management and Key Competencies for you to Consider 1 Understand When a Project is required and its benefits 2 Plan the Project 3 Implement, and track progress of the Project 4 Project Manage the Project on a daily basis 5 Own and manage Project Change Control 6 Integrate your position as Project Manager in your company The purpose of Project Management in : 1. Projects are required generally when something new is being achieved that requires planning, time, and cost. 2. Project Management increases success by defined processes for planning and executing tasks. The Project Management approach is universally respected. 3. can benefit from increased success and respect. Adopting a Project Management approach requires consideration and planning. 6

7 Part 1: Project Management Key Terms Key terms and references are useful to understand. This helps professionals communicate effectively with Project Management Professionals and understand the jargon talk. It can help individuals feel part of the Project Management community in organisations, and this is not always easy. What is a Project: A project is a set of tasks with a defined objective, a start and finish including time, budget, resources, and risks. The nature of a project is temporary whether short or long term. What is Project Management: Project Management is the application of knowledge, skills, tools, and techniques to project activities to meet project requirements. Project management is accomplished through the appropriate application of: Initiating; Planning; Executing; Monitoring and Controlling; Closing. Project Management Institute (2008) Pennsylvania: USA The Project Lifecycle: The Project Lifecycle can vary in different organisations. But generally follows the following basic high level steps: Starting or Commencing the Project; Preparing and Planning; Executing the Project; Monitoring and Controlling; Closing the Project. Managing a Project: In managing a project there are the following key elements: Scope; Quality; Schedule; Budget; Resources; Risk. 7

8 Project Management Institute (2008) Pennsylvania: USA Role of Project Manager: This person assumes the responsibility for managing the expected outcomes and results from the project for the organisation, i.e. the overall responsible person. Project Management Institute (PMI): This is a Not for Profit organisation set up in late 1960s with the goal to advance standards, and practices through a membership environment. Australia has memberships in most states where events are run to support member development. PMBOK Guide (Published by Project Management Institute): PMBOK is the recognised standard in Project Management providing guidelines and processes in good practice. First published in the late 1980s, it has been released in later editions. Project Management Professional (PMP): This is a credential offered by Project Management Institute (PMI). PMP is a recognised development certificate that shows the individual has completed certain modules and passed exam material on Project Management skills. Project Management Qualifications: There are a number of Diploma and other University related qualifications available. These include part time, full time, short and longer term, depending on the commitment and cost accepted by the individual. Studying Project Management on an ongoing basis to is a good way to continue development and career growth. Project Management Consultants: There are many PM consultants who can assist in the set up of PM activities for your department. As always we need to be careful not to be oversold by salespersons. Consultants can be very useful to set up processes, policy, training, and development for beginner, intermediate, or more advanced PM activities. Program Management: This is a set of Projects to be managed together. Managing these together helps if they are related, have co-dependent issues, or can achieve significant efficiencies if managed together. Each organisation will need to arrange a structure to manage a number of projects. Grouping projects under a manager is required and so Programs can be established. It makes sense to group similar projects that have efficiencies, or make sense to group as a Program. 8

9 Portfolio Management: This is a set of Projects or Programs that when managed together can achieve significant efficiencies. The difference with Program Management is that Portfolio can contain Programs as well. Generally in organisational structures will create Program Management and Portfolio Management if there are enough Projects and Programs. Project Sponsor: The Project Sponsor will provide the support, recommendation, and possibly financial approval for the project go-ahead. With a Project Review Board the Sponsor is the senior person who will take responsibility for vouching for the project. This provides other senior management confidence the project has accountability from a senior person. Project Review Board: Review Boards may serve a number or purposes. Key objectives can include: 1. The Board made of senior management will be responsible for review and approval of Project briefs and business cases including funding and expected returns. This means they give the go-ahead and monitor performance. 2. The Project Review Board also provides governance to projects. This means project reporting and key issues are regularly reported to the Review Board for information and action. It also allows Board members to contribute to Project recommendations and support the project. Project Management Office: Generally speaking the Project Management Office (PMO) is a centralised function that supports or and may provide direct ownership for projects. It may well govern the Project Management approach and support training, development, policy, and include the senior project management individuals. The PMO office will be a key relationship for Project Management, and may even govern projects. and Project Management: Project Management increases success by defined processes for planning and executing tasks. The Project Management approach is universally respected, and so can benefit from increased success and respect. Adopting a Project Management approach requires consideration and planning. Staff Structures and Culture: These two points are key to successfully introducing Project Management into or into a person s role in managing projects. Existing staff structures may or may not suit a Project Management environment, and may have to be altered to incorporate Project Management. The culture or organisational culture is also another key element in the acceptance of the Project Management approach. 9

10 Functional, Matrix and Project Orientated Structures: Organisations managing projects may have one or a mix of structures which may or may not support Project Management. These structures are good to understand how they will support a project. Where traditional structures are used with a hierarchy with management and works, budgets and regulations, it can create issues in managing projects. If the organisations has a Project focus in part or more, then understanding of project requirements, budgets, resources, ROI, controls, and required autonomy in decision making can be very helpful to managing projects. Project Stakeholders: Stakeholders include the Sponsor, Management, Review Board, internal and external customers, and third parties who have an active interest in the Project outcomes. Stakeholder identification is important to understand who will exert pressure or control over project decisions and performance. Performance Measurement Methods Projects may have many performance measures. % Complete; Milestones Complete; % Budget Complete to % Work Complete, i.e. 30% and 55%; Measure performance independently through Internal Audit, external audit. Earned Value Concept Earned Value measures the progress / performance of a Project by calculations based on cost and progress. Earned Value is sometimes described as the actual Budget position (cost) compared to the Work Performed. It is ideal to measure each Work Packages and measure its performance by one measure only. It may be better to measure all Work Packages by the same performance measure. Organisations will have different measures for Earned Value. These can be displayed in numbers or graphically. Measures may include: 1. Budget Cost to Work Package Schedule; 2. Budget Cost to Work Package Progress; 3. Actual Cost to Work Package Schedule/ Progress. 10

11 Part 2: The Purpose of Project Management in? The purpose of Project Management in could be described as: 4. Project Management increases success by defined processes for planning and executing tasks. The Project Management approach is universally respected. 5. can benefit from increased success and respect. Adopting a Project Management approach requires consideration and planning. Key Questions for Professionals: 1. Why does need Project Management expertise? 2. How long would it take to set up Project Management in? 3. What outside help would be needed to set up Project Management? 4. What Projects already exist that could move into Project Management? 5. What staff could be moved into Project Management? Project Management provides a Successful Framework to Achieve; 1. Successful Projects result in better financial returns; 2. Improved access to funding and larger scale Projects; 3. An opportunity for a Portfolio of Projects; 4. Elevation of in the organisation hierarchy; 5. Respect from stakeholders by using a recognised Project Management approach; 6. Creating clear projects and resources for future years; 11

12 Part 3: What is Successful Project Management? The modern department is responsible for creating and managing successful Projects. This includes Savings or Efficiency Plans to make significant financial and quality improvements to your company. Successful Project Management consists of: A clear mandate or Scope of Project work; Good practice Project Management operating in including; Project Management Framework and Planning; Project Briefs and gaining Approval; The Project Plan; The Project Schedule; Managing Project Budgets; Managing Project Resources; Identifying and managing Project Risks; Project Change controls; Project Management reports; Project Performance KPIs; Project Management Tools and Templates; Independent assessment/ audit proving good practice; Project Management training, development, and accreditation. Part 4: Project Management in your Organisation Again let s discuss the role of the Project Management in your organisation 12

13 Part 5: Modern Objectives 1. Improve your Company s Financial Position The Competitive Model and Price Competition for key supply Categories; Benchmark Price Testing; Expenditure Review and Negotiation schedules; 2. Increasing Success in Sales by Supply Options Strategic Supply Research (SSR); Multiple supply Contract Options with tiered pricing; 3. Low Cost Supply Options Low Cost Supply to meet low price requirements; 4. Flexible Capacity and Reduced Complexity Build Supply Capacity to provide choices in the future; Develop suppliers through a Supplier Development Program; Reduce complexity in-house by outsourcing; 5. Reducing Supplier Risk Risk Profiling for key suppliers; Supplier Performance Reporting; Performance Incentives in Supply Agreements; 6. Catalogues and Supply Pricing Module (Bidding and Estimation) Catalogues and Contracted Price Options; Costing Templates and Price Reverse Engineering; 7. Contracts Contract Repository Module with Review Notification and Workflow; Contract Clause Library for drafting Agreements; 8. Performance, Policy and Process Measuring performance; Policy and Process redesign; Policy and Process Training Program for all or key staff; 9. Training Program Induction, Training, and Coaching on Systems, Processes and Policy; Intranet Page, Helpdesk, Learning Links, and online Catalogues. 13

14 Part 6: How do we Introduce Project Management into? What are the main issues do you feel your company suffers from and what possible solutions do you think are available.. Start a Project Management approach alone using a PM methodology agreed, i.e. PMBOK. You may choose to use a coach to support you, say 1-2 times per week. This method might allow you to feel out any issues before you involve your staff; Pilot 2 to 3 Projects through a Project Management approach using a consultant to Coach key staff as Project Managers; Invite consultants to recommend and price an option to introduce a Project Management approach into the department perhaps staged over several months including Training and Development; 14

15 Project Stage 1: The Project Lifecycle Key Competencies for you to Consider 1 Understand When a Project is required and its benefits 2 Plan the Project 3 Implement, and track progress of the Project 4 Project Manage the Project on a daily basis 5 Own and manage Project Change Control 6 Integrate your position as Project Manager in your company The purpose of Project Management in : 1. Projects are required generally when something new is being achieved that requires planning, time, and cost. 2. Project Management increases success by defined processes for planning and executing tasks. The Project Management approach is universally respected. 3. can benefit from increased success and respect. Adopting a Project Management approach requires consideration and planning. 15

16 Section 1: The Project Lifecycle and Part 1: The Project Management Lifecycle The Project Management lifecycle is shown in many diagrams. It can be overcomplicated. The below diagram by Simple Training 2010, shows the simplicity of the Lifecycle. The lifecycle is important because it provides the professional with the framework for success. Starting or Initiating Planning Executing Simple : Project Management 2010 Monitoring & Controlling Closing The Project Lifecycle Assists Understanding Project Management Processes: The Project management approach will assist to accomplish projects results through the appropriate framework of the 5 key stages. All Project Management processes to be managed by will fit into one of these 5 phases of the Project Lifecycle: Initiating; Planning; Executing; Monitoring and Controlling; Closing. 16

17 Section 2: Project Management Plan (PMP) Contents Part 1: Project Management Plan (PMP) Complex Project Management Plan: Project Type: Complex (Light/ Medium/ Complex) Page break.. The Project Management Plan (Word Document and MS Project Chart) should include the following: 1. Project Overview; 1. Vision; 2. Project Objectives; 3. Project Management Plan Purpose; 4. Documents; 5. Scope of Works: a) Scope Management; b) Out of Scope; 6. Business Case including: a) Total financial benefits; b) Net Present Value (NPV); c) Rate of Return (IRR); d) Payback Period; e) Return as % Gross Margin/ Return as % EBIT/ NP; 7. Non Financial Benefits; 8. Assumptions & Constraints; 9. Major Risk and Opportunity Assessment; 17

18 10. Project KPIs; 11. Project Management Reviews; 12. Project and Financial Reporting; 2. Project Execution 1. Delivery Strategy; 2. Implementation; 3. WBS (Work Breakdown Structure) and Work Packages; 4. OBS (Organisational Breakdown Structure); 5. Resources Requirements and Duration; 6. Project Schedule: a) Key Milestones; 7. Resource Allocation Matrix; 8. Project Plan (Microsoft Project/ Excel); 9. Budget; 10. Key Payment Milestones; 11. Strategy: a) Materials and Services; b) Subcontracts; c) Client Approvals; 12. Risk Management: a) Risk Identification and Register; b) Risk Assessment and Mitigation; 13. Communications Plan: a) Internal Project Team; b) Key Stakeholders; c) External Parties; 14. HR Plan; 3. Project Change Control and Monitoring 1. Change Control: a) Change Processes and Approval; b) Scope Change; c) Budget Change; d) Schedule Change; 2. Project Review Committee; 3. Project Performance Measurement: a) Project KPIs; b) Stakeholder Satisfaction; c) Contract Performance; d) Contract Variation & Claims or Disputes; 18

19 e) Financial Performance; f) Budget, Forecast Revenue, Cost, & Margin; g) Cashflow; 4. Project Close 1. Project Close Checklist: a) Documentation Required; b) Financial Review; c) Customer/ Stakeholder Review; d) Lessons Learned; e) Approval to Close; 19

20 Part 2: Project Management Plan (PMP) Light Project Management Plan: Project Type: Light (Light/ Medium/ Complex) Page break.. 1. Project Overview; 1. Vision; 2. Project Objectives; 3. Project Management Plan Purpose; 4. Scope of Works: a) Scope Management; b) Out of Scope; 5. Business Case including: a) Total financial benefits; b) Net Present Value (NPV); c) Rate of Return (IRR); d) Payback Period; e) Return as % Gross Margin/ Return as % EBIT/ NP; 6. Non Financial Benefits; 7. Major Risk Assessment; 8. Commercial Risk of Recommended Suppliers; 9. Strategic Fit of Recommended Suppliers; 10. Project KPIs; 11. Project Management Reviews; 12. Project and Financial Reporting; 2. Project Execution 1. Implementation; 2. WBS (Work Breakdown Structure) and Work Packages; 3. OBS (Organisational Breakdown Structure); 4. Resources Requirements and Duration; 5. Project Schedule: b) Key Milestones; 6. Project Plan (Microsoft Project/ Excel); 20

21 7. Budget; 8. Customer Approvals (Customer, or Legal Notification, Request for Change); 9. Communications Plan: a) Internal Project Team; b) Key Stakeholders; c) External Parties; 3. Project Change Control and Monitoring 1. Change Control: a) Change Processes and Approval; b) Scope Change; c) Budget Change; d) Schedule Change; 2. Project Review Committee; 3. Project Performance Measurement: a) Project KPIs; b) Financial Performance; 4. Project Close 1. Project Close Checklist: a) Documentation Required; b) Financial Review; c) Approval to Close; 21

22 Section 3: Project Management Plan (PMP) Light Example Contents Project Management Plan: Low Cost Sourcing Project Type: Light 1. Project Overview; 1. Vision; 2. Project Objectives; 3. Project Management Plan Purpose; 4. Scope of Works: a) Scope Management; b) Out of Scope; 5. Business Case including: a) Total financial benefits; b) Net Present Value (NPV); c) Rate of Return (IRR); d) Payback Period; e) Return as % Gross Margin/ Return as % EBIT/ NP; 6. Non Financial Benefits; 7. Major Risk Assessment; 8. Strategic Fit of Recommended Suppliers; 9. Commercial Risk of Recommended Suppliers; 10. Project KPIs; 11. Project Management Reviews; 12. Project and Financial Reporting; 2. Project Execution 1. WBS (Work Breakdown Structure) and Work Packages; 2. OBS (Organisational Breakdown Structure); 3. Project Schedule: 22

23 a) Key Milestones; b) Project Schedule Dependencies; c) Project Duration; 4. Resources Requirements and Duration; a) Resources Identified and Duration; b) Resource Day Rates and Cost; 5. Project Plan (Microsoft Project/ Excel); 6. Budget; 7. Customer Approvals (Customer, or Legal Notification, Request for Change); 8. Communications Plan: a) Internal Project Team; b) Key Stakeholders; c) External Parties; 3. Project Change Control and Monitoring 1. Change Control: a) Change Processes and Approval; b) Scope Change; c) Budget Change; d) Schedule Change; 2. Project Review Committee; 3. Project Performance Measurement: a) Project KPIs; b) Financial Performance; 4. Project Close 1. Project Close Checklist: a) Documentation Required; b) Financial Review; c) Approval to Close; 23

24 Project Plan 1. Project Overview Part 1: Vision The Vision is to provide true low cost manufacturing options to increase revenue, profit margin, and competitive advantage to our products in the marketplace. Part 2: Project Objectives This project has objectives to achieve the Vision, namely these are; Provide options for low cost manufacturing; Establish a competitive supply model ensuring low cost product and capacity for supply; Benchmark prices in low cost countries to identify the most attractive markets; Increase revenue opportunities and product margins; Increase length of time in market for our products; Complete the above within project budget, and schedule; Achieve a professional project image and review from stakeholders; Part 3: Project Management Plan Purpose The purpose of this Project Management Plan is to document and communicate the strategy, intended outputs, responsibilities, accountabilities, and resources needed to achieve this project s objectives. This Project Management Plan details the Work Breakdown Structure, organisational structure, budgets, business case and required returns, key stakeholders, and more to clearly explain the project structure, objectives, and expectations. This Project Management Plan is the overall control document defining the project, and will be continuously updated to reflect changes. It is intended this document is always the key reference point. 24

25 Part 4: Scope of Works a) In Scope Selling manufactured product depends on brand, market position, price, and sustainable margins to keep the product in the marketplace. Since price is a significant part of the sales potential equation, any ability to decrease price, increase margins, or both will add financial returns, and increased product life in the marketplace. The specific Scope of this project includes: Research of low cost manufacturing regions, and low cost countries to determine pricing estimates; Research technology options to understand if technology is able to reduce cost, and if so, how this compares to low cost manufacturing; Determine appropriate suppliers who can meet the requirements including any legislative requirements, and capacity concerns; Estimate final pricing after competitive price testing of at least 3 suppliers; Provide quality audits proving quality criteria can be achieved; Provide Intellectual Property protection assurance; Assess Manufacturing Transfer capability; Determine key Terms and Conditions; Establish acceptance of draft manufacturing subcontracts; b) Scope Management; The Scope of this project will be maintained in accordance with the project controls. Scope changes must go through the Change Control processes to ensure satisfactory documentation and requirement are met, and there is approval for the change. c) Out of Scope; Intellectual Property, and Manufacturing Process Transfer; Legislative quality requirements such as Government agency audits; 25

26 Part 5: Business Case The Project basic Cost Benefit analysis can be seen below. This Project shows strong financial returns derived from significantly lower manufacturing costs. This is achieved because the manufacturing zone provides: Low cost labour; Low cost materials; Reasonable price on imported materials; Tax Free Zone (TFZ), or Special Economic Zone (SEZ) benefits. a) Financial Benefits The Cost Benefit analysis contains the following elements to satisfy the Project Sponsor, Project Review Board and stake holders. Net Cost Benefit; Initial Investment Costs; Discounted Cash Flows (DCF); Net Present Value (NPV); Internal Rate of Return (IRR). b) Net Present Value (NPV) The Net Present Value of benefits for this Project is $AUD1.860 million over three years. See Low cost Manufacturing Cost Benefit table over page. c) Rate of Return (IRR) The Rate of Return (IRR) of this Project is 253%. See Low cost Manufacturing Cost Benefit table over page. d) Payback Period The Payback Period is Seven (7) months for this Project. See Low cost Manufacturing Cost Benefit table over page e) Return (NPV) as % EBIT/ Net Profit The NPV% of EBIT is 30%, & 25% of Net Profit. See Low cost Manufacturing Cost Benefit table. 26

27 Part 6: Business Case Low Cost Manufacturing Cost Benefit Discount Rate 7% Invest Year 1 Year 2 Year 3 Total Benefits Reduced Cost on Manufactured Items 500, ,000 1,000,000 2,200,000 / Admin Saving: 1 FTE 60,000 65,000 68, ,000 Total Benefits 560, ,000 1,068,000 2,393,000 Costs Capital Cost (2@150,000) -60,000 Manufacturing Transfer -150,000 Annual Auditing Cost -25,000-26,000-27,000-78,000 Total Costs -210,000-25,000-26,000-27,000-78,000 Net Benefits/ Cash Flow -210, , ,000 1,095,000 2,211,000 Discounted Cash Flow -$224,700 $500,000 $739,252 $1,023,364 2,037,917 Net present Value (NPV) $1,860,036 Internal Rate of Return (IRR) 253% Payback Period 7 Months NPV % EBIT (Years 1-3) 30% 27

28 Part 7: Business Case Template: Financial Benefits 2012 Category Review & Efficiency Targets Revenue Employee Costs Materials and Services Cost Target % In 2012 Saving 2012 Category 1: Widgets % 84% 2.45 Category 2: Boards % 100% 1.00 Category 3: Tools % 50% 1.35 Category 4: Travel % 50% 1.00 Category 5: Motor Vehicle % 100% 1.30 Category 6: Hire Equipment % 100% 0.45 Category 7: Stationery % 50% 0.90 Total % 10% Financial Improvement Cost Reduction (Efficiency) 8.45 Cost Reduction 10% 10% Forecast EBIT Savings to EBIT 24% Direct Costs to Implement 0.80 Return on Investment 1056% 2013 Financial Improvement Cost Reduction (Efficiency) Cost Reduction % 14% Forecast EBIT Savings to EBIT 26% Direct Costs to Implement 0.60 Return on Investment 1950% 28

29 Part 8: Business Case: Program Financial Benefits Program Summary Report Date Value % Revenue 2012 $ 150,000,000 Cost of Goods and Services (G&S) 2012 & % Revenue $ 80,000,000 53% EBIT 2012 & % Revenue $ 18,000,000 12% Program Improvement to EBIT Annual Savings Target Improvement to EBIT $ 7,200,000 40% 2012 Savings Target Efficiency to EBIT $ 5,400,000 30% Program of Projects Program % Complete 20% Estimated Completion Date 20-Jul-10 G&S Expense Targeted & as % Total G&S $ 60,000,000 75% Target Efficiency Gain Full Year Annual Benefit $ 7,200,000 12% Number Projects & Top 5 as % Savings 15 78% Return on Investment (ROI) Resource Investment to Achieve Target $ 650,000 Investment % Benefit 9% Payback Period 2012 Estimated (Months)

30 Part 9: Non Financial Benefits There are many non financial benefits from this project. Some of these include: 1. Reduced product portfolio and complexity including undesirable manufacturing processes; 2. Benchmarking data to understand Asia Pacific s markets; 3. Additional capacity when circumstances require it; 4. Sustainable reductions in many areas of manufacturing cost; 5. Understand Internal versus External costs known as the Make or Buy Model more precisely through this costing exercise; 6. Understand our own costs, direct and overhead better; 7. Access higher skills in certain manufacturing process; 8. Understand advantages competitors have in low cost markets and future market trends; Part 10: Major Risks Assessment Project Risk assessment and Risk mitigation planning is important to professionals to demonstrate risks have been identified and solutions are proposed to reduce these risks. Risk management, reporting, and Contingency planning are included here to properly plan this projects. Management and stakeholders require to see Risk identified in a way they can understand with financial and non financial values attached. This provides for Risk to be accepted when it becomes real, and for Contingency planning where financial allocations can be made to accept this Risk. In this Project we are seeking to: 1. Identify Major Risks in formal Risk Registers; 2. Assess financial Risks, their likelihood, and potential cost; 3. Assess non financial Risks, or critical events which may threaten the project benefits, costs, & schedule; 4. Identifying preventive measures to avoid or reduce Risks; 5. Identifying measures to transfer/share Risk; 6. Plan Risk allowances called Contingency Budgets in the budget; 30

31 Part 11: All Risks Assessment Project Risk Assessment Estimated Impact Contingency Prob Risk Category No. Description Reduce Strategies Owner Time Cost Tech CxP % Customer Perceived Changes 1 Lower Value Education J.M % - - Approval 2 Required Achieve Approval J.M - $30,000-10% $3,000 - Commercial Price 6 Price Inclusions Price Detail Review B.I - $500,000-40% $200,000 $200,000 Contract Terms 7 Contract Inclusions Risk Detail Review B.I Yes $300,000-30% $90,000 $90,000 Exchange Rate 8 Exchange Risk Rate Hedge J.M - $200,000-50% $100,000 - Quality Manufacturing Quality 9 Quality Control QC Processes B.I Yes TBA - 50% - - Testing Budget 10 Budget Low Increase Budget B.I Yes $100, % $100,000 $100,000 Testing Skills 11 Skills Low Increase Budget B.I Yes $100,000 Yes 100% $100,000 $100,000 Manufacturing Transfer Timeframe 16 Timeline Low Increase Timeframe J.M Yes $200,000-75% $150,000 $50,000 Skills Available 17 Skills Low Increase Budget J.M Yes $50,000 Yes 75% $37,500 $37,500 Technical Skills Available 20 Skills Low Increase Skills J.M - $60,000 Yes 75% $45,000 $45,000 Regulatory Approval Timeframe 23 Timeline Insufficient Increase Resources J.M Yes $80,000-50% $40,000 - Risk Contingency Total $915,500 $667,500 Final 31

32 Part 12: Project Risk Assessment Blank Project Risk Assessment Estimated Impact Contingency Risk Category No. Description Reduce Strategies Owner Time Cost Tech Prob % CxP Final Customer Commercial Quality Manufacturing Transfer Technical Regulatory Risk Contingency Total 32

33 Part 13: Project Risk Assessment Blank Project Name: Project Sponsor: Project Number: Project Owner: Identification Major Risk Assessment Management Evaluation ID Description Risk (1 5) Impact (1 5) Resource Strategy Who Outcomes Comments 33

34 Part 14: Meeting Agenda, Minutes, and Action Items Meeting Date: Activity #: Attendees: ID Agenda Items Key Discussion Points Activity Name: Functional Manager: Absent: Decisions Agreed Action Items Who Due Date 34

35 Part 15: Project KPIs This Project has set KPIs to be used to improve performance and help understanding. This will assist the Project responsibility and strategy. The KPIs below can be considered a basic starting point which will evolve to create meaningful KPIs to show Project performance. Low cost Sourcing Project KPIs YTD/ F/Cast Budget Benchmark Financial 1. Return on Investment (ROI) 2. Net Present Value (NPV) 3. Rate of Return (IRR)/ Payback Period 4. Return as % EBIT/ NP 5. EBIT Benefit Current Year/ 3 Years 6. Cash Flow Current Year/ 3 Years 7. Earned Value Progress Schedule 1. % Work Schedule Complete 2. Forecast Final Completion against Schedule Budget 3. % Budget to Date Expensed 4. % Budget Expensed v % Work Schedule Complete 5. % Budget Expensed as % of Total 6. Forecast Final Cost against Budget Strategy & Project Management 1. Improved Competitive Ability through Cost 2. Reduction in Category Supplier Number Reducing Supplier Risk 1. Performance Bonds/ Supplier Incentives in place 2. % Quality Testing framework Complete 3. % Risk Impacts Identified 4. % Audits Completed 35

36 Part 16: Project Management Reviews 1. Monthly Review Meetings A Project KPI report will be provided by the Project Manager for each monthly review. In addition a full progress report will be provided with details of each Work Package progress and commercial status including Schedule and Budget. All reports are provided to stakeholders and attendees one week before the review meeting. 2. Quarterly Review Meetings The Project KPI report will be provided by the Project Manager, with a full progress report with details of each Work Package progress. All reports are provided to stakeholders and attendees one week before the review meeting. In addition the following will also be provided: 1. % Complete by Work Package or Milestone or similar; 2. % Work Schedule complete; 3. Forecast Final Completion against Schedule; 4. % Budget Used by Work Package or Milestone or similar; 5. Forecast Cost to Complete against budget; 6. A full Cashflow report 7. Forecast Return on Investment; 8. Forecast Payback Period/ Internal Rate of Return. Simple versions of KPIs for Performance Review Meetings 1. % complete; 2. Milestones complete; 3. % budget complete to % work complete, i.e. 30% and 55%; 4. Measure performance independently through Internal Audit, external audit, etc. Project reporting Templates can include a number of formats depending on requirements. Often there are many common performance criteria to be reported in Project Reports. These might include the following: 36

37 Project % Work Schedule Complete Budget Actual % Budget Spent Forecast Work Package/ Milestone 1 100% $6,000 $7, % $7,000 Work Package/ Milestone 2 100% $4,000 $4, % $4,500 Work Package/ Milestone 3 50% $4,000 $1,000 $3,000 Work Package/ Milestone 4 30% $2,000 $500 $2,000 Work Package/ Milestone 5 0 $4,000 $4,000 Total $20,000 $20,500 37

38 Project Plan 2. Project Execution Part 1: Work Breakdown Structure and Work Packages (WBS & WP) The WBS (Work Breakdown Structure) for this Project includes: The Work Breakdown Structure has been identified in the Project Organisation stage. It has identified tasks from the Scope of Work that make up the project. The Work Breakdown will start at the high level and be broken down further and further in a descending order to more defined tasks or components. The WBS is defined as the most detailed parts called Work Packages which have been assigned to parties for work, and the WBS has allocated responsibility for these tasks to those accountable. This breakdown and assigned accountability is important to this project as it aligns required work by technical parties/ departments to commercial objectives, milestones and targets/ budgets. This will prove important when variance analysis is performed if the project is not on target, to identify which party/ task is behind schedule; The Work Packages for this Project The Work Packages are documented in line with our company standards and procedures. Where our company has Project Management standards and procedures these have been used. Where none existed then the following has been used to ensure good Project Management practice. Work Packages have been: Separately identified and clearly defined; Assigned to one department; Start and Complete dates, and Milestones at a detailed level to allow controls and reporting analysis against targets to be performed; Budget which should be agreed including internal costs, external costs, materials; Subcontract or similar activities should be able to be identified to determine cost and risk to the project; Resource commitments may be requested and agreed at this stage to ensure the assigned department is capable of delivering the Work Package; Work Packages may be broken down further by the assigned department under their organisation structure, however this is their choice and does not change the assigned ownership, schedule of dates and responsibilities; 38

39 Part 2: Work Breakdown Structure Diagram (WBS) Level One Level Two Level Three Level Four (Organisation) Level Five (Work Package & Assignment) v The Simple Training Work Breakdown Structure by v Analysis Auditing Expense Analysis Interim Report Audit Validation RFP/ RFQ/ Tender Supplier Qualification Price Testing Project (Freight) Price/ T&C Negotiation RFP/ RFQ/ Tender GL Reconcile Validated Supplier Selection Further breakdown 2-3 of each if needed Technical Dept. Legal Dept. Analysis CFO/ CEO/ Board Legal Dept. Business Case Supplier Selection Legal Works Performance Probation Period Quality Dept. Performance Period Performance Validated Interim Report v 39

40 Part 3: Organisational Breakdown Structure (OBS) The Project OBS (Organisational Breakdown Structure) The project organisation is shown; Cost allocation is shown; Responsibility for Work Packages is assigned including the departments responsible and how cost is allocated to them to perform tasks, even if these are coded back to the project; Responsibilities need to be made clear so that Single Ownership Principle applies even where several departments may work together to achieve Work Packages; Outsourced Costs and Subcontract Costs are able to be identified within the departments responsibility; The OBS can identify the Project organisation, which typically includes: Program Manager if multiple Projects belong to the Program, so if there are several Projects, then there may be a need for a Program Manage role Project Manager for the individual Project; Contract and Risk function; Technology function; Quality function, and Corporate function such as HR, IT, Purchasing;. Why Create WBS and Work Package detail in your Project? This will provide key credibility, accuracy, and respect for this Project. It may take some time and study to perform this correctly. Your organisation might not understand Project Management, and you may be leading the way. In either case, managing Projects to an acknowledged professional standard will help greatly. 1. Work Package Examples Work Package examples include the most defined work assignments such as price negotiation, Technical assessment, Quality Standard Operating Procedure (SOP) implementation, auditing, etc. 2. Earned Value Analysis This covers project performance compared to budget based on forecast progress and current performance. Earned Value is a universal concept along with Gross Margin, Net Margin, Return on Investment, and Payback period. 40

41 Part 4: Organisational Breakdown Structure Diagram (OBS) Level One Level Two Level Three Level Four (Organisation) Level Five (Work Package & Assignment) v The Simple Training Organisation Breakdown Structure by v Analysis Auditing Expense Analysis Interim Report Audit Validation RFP/ RFQ/ Tender Technical Dept. Legal Dept. Supplier Qualification Project (Freight) Price/ T&C Negotiation Price Testing RFP/ RFQ/ Tender Analysis Supplier Selection Further breakdown 2-3 of each if needed Tech. Dept. Legal Dept. CFO/ CEO/ Board Legal Dept. Business Case Supplier Selection Legal Works Legal Dept. Performance Probation Period Quality Dept. Performance Period Performance Validated Quality Dept. Interim Report v 41

42 Notes: The Net Cost Benefit is simply the benefits minus the costs including the initial investment. Initial Investment Costs are the one off payments for the capital investment. The payments may be one off or staggered over the years and included in the cost benefit. They should be clearly separated for review. The Discounted Cash Flows (DCF) is simply the Net Benefits or Cash Flow, but discounted (reduced) at a rate which takes into account Finance/ Inflation and other costs. This means the benefits in future years must be reduced to give a value for today, i.e. $100 next year is discounted because it is only worth $93 today, and so on year after year. In the case below, a 7% rate issued. The formula easily calculates the Discounted Cash Flow. Bear in mind if each year is discounted at 7% then the benefit for a number of years is eroded, so the discount rate does have a significant impact in reducing the benefit. Always argue the discount rate to 7% or less if possible. 10% may greatly reduce benefits for some investment decisions. The Net Present Value (NPV) is the sum of Discounted Cash Flows and again is easily calculated with a formula. The Internal Rate of Return (IRR) is the return of the Investment for the generated Discounted Cash Flows (DCF). We can see all these terms in the Cost Benefit following. Notes: Investments/ initial costs should be separate and increased by discount factor not decreased (as they are already negative outflows) so use 1*1.07 instead / 1.07; Discounting cash flows year by year separately gives a lower value than the NPV (discounted together); NPV with Investment discounted formula might be =NPV(7%,B41:D41)+(A41*1.07) IRR uses all DCF in formula as range including initial investment. 42

43 Part 5: Project Cost Codes Diagram with Work Breakdown Structure (WBS) Level One Level Two Level Three Level Four (Organisation) Level Five (Work Package & Assignment) v The Simple Training Work Breakdown Structure & Cost Code by v Analysis Auditing RFP/ RFQ/ Tender Technical Dept. Legal Dept. Supplier Qualification Price Testing Project (Freight) RFP/ RFQ/ Tender Analysis Supplier Selection Further breakdown 2-3 of each if needed Tech. Dept. Legal Dept. CFO/ CEO/ Board Legal Dept. Cost Code Consultancy Cost Code Timesheet Cost Code Travel Cost Code Timesheet Cost Code Timesheet Cost Code Timesheet Cost Code Timesheet Performance Probation Period Quality Dept. Interim Report Cost Code Timesheet v 43

44 Part 6: Project Schedule and Key Milestones The Schedule can be seen below. The Project Milestones can be seen below including the duration to achieve each. The duration of the Project is 256 days. This can be altered by changing the activity list or durations if necessary. There are 12 Activity Lists. Dependencies are listed inside the Activity Lists. Generally Dependencies are limited to inside Activity Lists. Contingency estimated at 10% is built in to each task. Low Cost Sourcing Activities ID Milestone List Milestone Type Activity Duration Activity Cumulative 1 Determine Products to be Outsourced Finance 57 Days 2 Finalise Commercial Key Terms and Conditions; Mgmnt. 161 Days 3 Regulatory Audit Regulatory 191 Days 4 Final Shortlist of 4 Suppliers Mgmnt. 205 Days 5 Quality Audit Report including Risks Quality 235 Days 6 Select Successful Two Suppliers Mgmnt. 242 Days 7 Report Status & Timing for Manufacturing Transfer Directors 249 Days 8 Commence Manufacturing Transfer Transfer 256 Days ID Activity List Depend 1 Determine Products to be Outsourced - 57 Days 1.1 Target Revenue, Margin & Market Share Agreed - 10 Days 1.2 Costing/ Margins to be Complete & Validated Days 1.3 Product List Agreed by Management Days 57 2 Parent Company Check for Existing Strategies - 7 Days 57 3 Research Technology for Cost Reducing Options - 20 Days 57 4 Research Low Cost Manufacturing Countries 30 Days Determine First Supplier List Days 4.2 First Assess Commercial, Regulatory, & Capacity Days 4.3 Assess Manufacturing Transfer Capability - 15 Days 4.4 Assess Manufacturing Capacity - 5 Days 5 Create Product Specification Packages 14 Days Product Specs, Pack Sizes, Forecast Volumes Days 5.2 Bill of Materials, Key Material Prices Days 44

45 5.3 Method of Manufacture Days 5.4 Quality Testing Methods, Specs., Packaging Days 5.5 Logistics Information Days 6 Finalise Commercial Key Terms and Conditions 74 Days Create Competitive Pricing Process 12 + Companies 5 30 Days 6.2 Estimate Final Unit Pricing Days 6.3 Determine Site Transfer Costs and Process Days 6.4 Establish Agreement of Manufacturing Subcontracts 6.2, Days 6.5 Risk Agreement Signed 6.2, Days 7 Regulatory Audit 30 Days Review Licensing Days 7.2 Capability to Meet Regulatory Requirements Days 7.3 Performance Bonds. Incentives Agreed. Intell. Prop Days 8 Final Shortlist of 4 Suppliers 7 14 Days Quality Audit Report incl. Risks 8 30 Days Quality Audit. Supplier Response & Risk Assess - 30 Days 10 Due Diligence Report 7 Days Establish Ownership, Financial Status, Credit Report 7 7 Days 11 Select Successful Two Suppliers 7 Days Contract Award to 2 Successful Suppliers 10 3 Days 11.2 Technical Agreement to 2 Successful Suppliers Days 12 Report Status & Timing for Manuf. Transfer Days Commence Manufacturing Transfer 12 7 Days 256 Project Summary Minimum Days Required 256 Days