Project Management Scenario a Global

Project Management

Scenario

A global consumer electronics company is interested in expanding its business by developing vehicle-mounted PDAs (Personal Digital Assistant). The vehicle-mounted PDA is the compact computer terminals that can be used to be mounted on field service vehicles, forklifts, transport vehicle and construction truck. Organizations also use Vehicle-mounted PDAs for many purpose including logistics, industrial monitoring and control, warehouse vehicles and for roadside assistance. Employees also use the PDA communicates progress of business transaction with the information systems as well as recording organizational business transactions. Meanwhile, PDA serves double purpose for assessing databases for services and for the application purpose by which a field's service engineer uses PDA for fixing equipment at the customer site. For effective application purpose, Vehicle-mounted PDAs may possess wireless connectivity such as a wireless LAN interface, Bluetooth, and mobile or cellular connectivity.

Project Objective

The objective of the project is to plan the development and installation of a wireless network to support PDA operation for an airport application -- (John Kennedy Airport application).

To enhance greater understanding of the proposed PDA, the project defines the wireless and the proposed PDA to be used at an airport.

Proposed PDA and Wireless Network

The proposed PDA for the airport wireless application will be Cisco Aironet 3600 Cisco. The Cisco Aironet 3600 Series Access is designed to provide the best performances. By allowing the optimal network performances, Cisco Aironet 3600 provides multiple-input multiple-output (MIMO) designed with four transceiver 802.11n. The Cisco Aironet 3600 Series offers high capacity, versatility and enterprises-class features that are adapted with wireless LAN as well as supporting 802.11n wireless standard.

A unit priced for a Cisco Aironet 3600 is £1,100. The price is proposed for £1,100 because the Cisco 3600 series boost performances at the range 802.11n and 802.11a/g devices. Typically, the Cisco Aironet 3600 assists PDA to scan airport baggage via the wireless LAN. The technology offers network infrastructure with switching technology and network routing which assist airport to offer passengers with business speed.

The proposal provides the project feasibility and management to identify the stakeholders for the airport-based project.

"Part a -- Project Feasibility and Management (Q1). Identify the various stakeholders for the airport-based project and examine their likely viewpoints and concerns by conducting a Force-field analysis."

The stakeholders for the airport-based project are management of a global consumer electronic company, airport management, airport employee, airport customers, PDA producer, and project manager. Using a Force-field analysis, the proposal examines the likely viewpoint and concern of the stakeholders.

Fig 1: Force-Field Analysis for the Stakeholders

The Force-Field analysis has been able to determine the viability of the project. With the identification of the stakeholders, it is revealed that the management of the Global Consumer Electronic Company believes that the new project is likely to improve the productivity of the sales of the company as well as increasing the company revenue. Employee of the Global Consumer also believes that the new technology will increase the company productivity and this make the company to increase their salary. However, the new technology will make employees of the airport to be frighten on the ground that the new technology might lead to the laid off on non-it workers or non-technical workers. On the other had the project manager and the PDA producer will like the project to start because they are likely derive financial benefits from the project. Based on the project analysis using Force-Field analysis, it is revealed that the project is likely to viable because only a stakeholder is likely to oppose the project.

Q2). "The firm will invest £5 Million in Year 0 to develop the product and expect Sales

during Years 1 -- 4. Fixed costs are to be £7 Million annually (not negotiable) and the items comprising the variable costs should be identified and discussed. Assumptions are to be clearly stated."

Meanwhile, the sale forecast and the project cash flow are critical to determine the feasibility of the project. Thus, the project cash flow is provided in Table 1.

Table 1: Project Cash Flow

Pro Forma Cash Flow

Year 0

Year 1

Year 2

Year 3

Year 4

Cash Received

Cash from Operations

Cash Sales

£2,700,000

£2,975,750

£4,036,250

£5,923,063

£6,923,063

Cash from Receivables

£2.300,000

£2,745,583

£3,786,092

£3,713,875

£4,813,875

Subtotal Cash from Operations

£5,000,000

£6,721,333

$7,822,342

£9,636,938

£11,736,938

Additional Cash Received

Sales Tax, VAT, HST/GST Received

£0

£0

£0

£0

£0

New Current Borrowing

£0

£0

£0

£0

£0

New Other Liabilities (interest-free)

£0

£0

£0

£0

£0

New Long-term Liabilities

£0

£0

£0

£0

£0

Sales of Other Current Assets

£0

£0

£0

£0

£0

Sales of Long-term Assets

£0

£0

£0

£0

£0

New Investment Received

£0

£0

£0

£0

Subtotal Cash Received

£5,000,000

£6,721,333

£7,822,342

£9,636,938

£11,736,938

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

£125,000

£215,000

£570,000

£755,000

Bill Payments

£850,000

£1,648,592

£3,071,925

£4,134,180

Subtotal Spent on Operations

£957,000

£1,863,592

£3,641,925

£4,889,180

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

£0

£0

$0

£0

Principal Repayment of Current Borrowing

£0

£0

£0

£0

Other Liabilities Principal Repayment

£0

£0

£0

£0

Long-term Liabilities Principal Repayment

£0

£0

£0

£0

Purchase Other Current Assets

£0

£0

£0

£0

Purchase Long-term Assets

£0

£0

£0

£0

Dividends

£35,000

£50,000

£75,000

£225,000

£350,000

Subtotal Cash Spent

£992,000

£1,913,592

£3,716,925

£5,114,180

£6,114,180

Net Cash Flow

£550,000

(£692,259)

£705,417

£922,758

£1,522,758

Cash Balance

£125,021

£157,041

£262,458

£785,216

£1, 585,216

The sales forecast for the project is as follows.

Table 2: Sales Forecast

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales

£1,951,500

£4,072,500

£5,846,125

Direct Cost of Sales

£975,750

£1,995,525

£2,747,679

Other Costs of Goods

$0

$0

$0

Total Cost of Sales

£975,750

£1,995,525

£2,747,679

Gross Margin

£975,750

£2,076,975

£3,098,446

Gross Margin %

50.00%

51.00%

53.00%

Expenses

Payroll

£215,000

£570,000

£755,000

Sales and Marketing and Other Expenses

£216,000

£200,000

£250,000

Depreciation

$0

$0

$0

Advertising & Marketing Collateral

£295,000

£350,000

£425,000

Industrial Design

£64,284

£75,000

£80,000

Rent

£22,800

£26,000

£30,000

Telephone

£7,500

£10,000

£15,000

Utilities

$14,400

$18,000

£20,000

Insurance

£6,000

£7,500

£7,500

Payroll Taxes

£50,200

£85,500

£113,250

Company Vehicles and related expenses

£16,800

£18,000

£19,000

Trade Shows & Events

£30,000

£0

£0

Total Operating Expenses

£937,984

£1,360,000

£1,714,750

Profit Before Interest and Taxes

£37,766

£716,975

£1,383,696

EBITDA

£37,766

£716,975

£1,383,696

Interest Expense

£0

£0

£0

Taxes Incurred

£11,330

£215,093

£415,109

Net Profit

£26,436

£501,883

£968,587

Net Profit/Sales

1.35%

12.32%

16.57%

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Assets

Current Assets

Cash

£157,041

£262,458

£785,216

Accounts Receivable

£230,167

£480,325

£689,512

Inventory

£130,900

£267,706

£368,610

Other Current Assets

£0

£0

£0

Total Current Assets

£518,108

£1,010,489

£1,843,338

Long-term Assets

Long-term Assets

£0

£0

£0

Accumulated Depreciation

£0

£0

£0

Total Long-term Assets

£0

£0

£0

Total Assets

£518,108

£1,010,489

£1,843,338

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities

Accounts Payable

£192,371

£257,870

£347,132

Current Borrowing

£0

£0

£0

Other Current Liabilities

£0

£0

£0

Subtotal Current Liabilities

£192,371

£257,870

£347,132

Long-term Liabilities

$0

$0

$0

Total Liabilities

£192,371

£257,870

£347,132

Paid-in Capital

£450,000

£450,000

£450,000

Retained Earnings

(£150,700)

(£199,264)

£77,619

Earnings

£26,436

£501,883

£968,587

Total Capital

£325,736

£752,619

£1,496,206

Total Liabilities and Capital

£518,108

£1,010,489

£1,843,338

Net Worth

£325,736

£752,619

£1,496,206

By calculating the payback period for the project, the proposal divide the initial investment by the annual cash flow. In the PDA Investment, the global electronic company will have a payback as follows:

Formula for Payback period: Initial Investment / Annual cash flow

Initial investment= £5,000,000

Annual cash flow = £3,716,925

Payback period is 1.35 years

Based on the calculation the payback period for the PDA project is 1.35 years. Based on the cash flow for the project, the project is likely to be acceptable by senior management on the ground that the payback period is 1.35 years.

Q3). Evaluation of the two forecasts prepared is as follows:

b. To calculate the potential value of the project using Net Present Value (NPV) and the Internal Rate of Returns. The proposal uses the project cost of capital, which is 7%. Typically, NPV calculates the present value of the project cash inflows and the project cash outflows. The basic principle of NPV is to calculate whether the present value of the project inflows is greater than the present value of project cash outflows.

Based on the previous calculation, the net cash flows for the investment is as follows

Year 0

Year 1

Year 2

Year 3

Year 4

Net Cash Flow

£550,000

£692,259

£705,417

£922,758

£1,522,758

With 7% discounted cost of capital, the NPV for the project is calculated as follows:

NPV: 550,000+(0.952 X 692,259)+ (0.890X 705,417)+(0.840 X 922.751) +(0.792XX 1,522,758).

550,000+659,021+627821+775110+1206024

NPV is 3,817,676

From the discount cash flow model, senior management would accept the investment based on the fact the NPV is positive at the cost of capital of the firm.

Thus, the Internal Rate of Return is 16%.

Q4). "Examine the benefits of inter-project learning for a global consumer electronics firm and make recommendations on how this could be implemented."

There are several benefits that a global consumer electronic firm could derive from inter-project learning.

First, inter-project learning allows firm to enhance project completeness. Prencipe, & Tell (2001) argue that inter-project learning allows firms to execute a project in a best method. In the present competitive market environment, project is the key to the dynamic competitive capabilities. Typically, accumulation of knowledge builds project competencies, which could enhances market performances of a global consumer electronic firm. Experience has revealed that project-based firm has been able to record high profit in the market environment. ( Brady, and Davies, 2004).Through inter-project learning, a global consumer electronic firm will be able to better estimate the project costs and this will enhance ability to deliver the project with success. Moreover, the inter-project learning will enable the company to estimate the project risks efficiently. By better evaluating the project risks, the project manager will be able to find the strategy to manage the risks associated with the project. More importantly, the inter-project learning will assist a global electronic firm to meet the project objectives, improve cost efficiencies and meet the project deadline. (Anbari, Carayannis, and Voetsch, 2008).

There are several methods that a global consumer electronic firm could implement inter-project learning, one of the technique is the use of on-the-job training. Through this process employee could be accumulate knowledge. Moreover, formal training is also one of the technique that could enhance inter-project learning within an organization.

Part B - Project Planning & Control

The diagram bellow is used to determine the critical path using CPA.

The Critical Path in this project is C, F, H, K, and I.

Q6). a) Construct a GANTT chart and identify scheduling flexibilities.

GANTT chart is very useful in schedule a repetitive or periodic project, and the following GANTT is used to display schedule flexibilities.

Labor

Design the Project

Implementing the project

Management

Estimate project cost

Staff training

Project Completion

For the project manager, allocation of limited resources is very critical in a project. Allocate of scare resource is very critical when the resource is too large to accommodate. With extreme demand for labor during the project lifecycle, there are fluctuations in the labor required to complete the project.

ABLE 10-15 Resources Required and Starting Times for a Nine Activity Project

Activity

Workers Required

Equipment Required

Earliest Start Time

Latest Start Time

Duration

A

B

C

D

E

F

G

H

I

2

2

2

2

2

2

2

2

4

0

1

1

1

1

0

1

1

1

0

0

4

4

12

12

21

21

24

0

9

4

15

13

12

22

25

24

4

3

8

7

9

12

2

5

6

100% Revised Early Start Schedule