UNIT-2
ANALYZING PROJECT FEASIBILITY
Feasibility means how a work is either easy or difficult to perform. When we set a target, always think about the long-term feasibility of achieving what we want. A feasibility study is an analysis that takes all of a project's relevant factors into account including economic, technical, legal and scheduling considerations to ascertain the likelihood of completing the project successfully.
DEFINITION OF PROJECT FEASIBILITY
The project feasibility study is a document includes a detailed description of the project, followed by a set of different feasibility areas. These are a particular feature of the project that will ultimately give the result of the project. This study will give the important information in order we can come to a point whether or not our project will start or whether it has a hit during success period.
The project feasibility study gives a review of the widespread matters related to a proposed business objective. The purpose of the study is to pick out and analyze the critical factors that can assist or prohibit the victory of a possible business objective.
IMPORTANCE OF PROJECT FEASIBILITY
A feasibility study involves taking actions and asking questions to establish whether a project idea, plan or thought is likely to succeed. An effective project feasibility study tell us whether it's feasible to go with the data, refine it or even scrap it altogether.
An exact feasibility study will help us look at the bigger picture first and work from a top-down perspective. A feasibility study helps us 'get it right' the first time before we invest a large sums of money, time and resources towards a building project.
The importance of project feasibility study cannot be overstated. Generally, if we don’t have the idea about feasibility, we can end up starting to developing a product we cannot finish developing. Finally the worst part is that we can end up by having a product manufactured that no one needs. When the need for conducting a feasibility study arises, the question then becomes, How do we go about it?
Feasibility studies are important to business development. They can allow a business to address where and how it will operate. They can also detect potential hurdles that may hamper its operations and recognize the amount of funding it will need to get the business up and running. Feasibility studies aim for marketing strategies that could help convince investors or banks that investing in a particular project or business.
The importance of feasibility study is based on organizational desire to "get it right" before committing resources, time, or budget. A feasibility study might uncover new ideas that could completely change a project's scope. It is best to make these resolutions in advance rather than to jump in and to learn that the project won't work. Conducting a feasibility study is always profitable to the project as it gives us and other shareholders a vivid image of the proposed project.
Below are some key benefits of conducting a feasibility study :-
a) Improves project team's focus
b) Identifies new opportunities
c) Provides valuable information for a "go/no-go" decision
d) Narrows the business alternatives
e) Identifies a valid reason to undertake the project
f) Enhances the success rate by evaluating multiple parameters
g) Helps decision making on the project
h) Identifies reasons not to proceed
Apart from the approaches to feasibility study listed above, some projects also require other constraints to be analyzed -
a) Internal project constraints :- Technical, Technology, Budget, Resource, etc.
b)Internal corporate constraints :- Financial, Marketing, Export, etc
c) External constraints :- Logistics, Environment, Laws and Regulations etc.
SCOPE OF PROJECT FEASIBILITY
A well defined project scope can confirm an exact feasibility study. Following key factors should be covered generally by the elements of the feasibility analysis for project.
a) Need Analysis :- The need for a project is realized under this Need Analysis. This identified need may influence the company itself , another company, the government or public. The need is confirmed and evaluated by conducting preliminary study. A proposal is then developed that specify that how the need may be satisfied.
b) Process work :- The preliminary analysis performed to ascertain what will be needed to fulfill the need is included in the process work. The consultant who is an expert in the project area may perform the work. The general attributes of the process can be illustrated by using artist's conception and scaled down models for technology oriented projects.
c) Engineering and Design :- A detailed technical study of the proposed project is involved in this stage. Written quotations are got from subcontractors and suppliers as needed. The capabilities of the technology are evaluated as needed. If needed, the product design must be performed at this period.
d) Cost Estimate :- The estimation of project cost to an acceptable level of accuracy is included in this category. At this level of a project plan, levels of around -5% to +15% are common. Cost estimation includes both the initial and operating costs.
e) Financial Analysis :- The analysis of the cash flow profile of the project is included in financial analysis. This analysis should contain sources of capital, rates of return, payback periods, inflation, breakeven points, sensitivity and residual values. The economic and financial feasibility of the project is supported with the help of the project cash flow profile.
f) Project Impacts :- The assessment of the impact of the proposed project is provided by this portion of feasibility study. Social, environmental, cultural, economic and political impacts may be some of the factors that how public views the project.
g) Conclusions and Recommendations :- The whole result of the project feasibility analysis should be included in the final portion of the project feasibility analysis. This may give the rejection or approval of the project. This portion of feasibility report must contain the recommendations on what should be done.
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Feasibility Analysis is an analytical program through which project manager estimate the success of a project ratio and through feasibility study project manager is able to see either project will useful for us or not and how much time it will take to get completed. There are some important types of a feasibility study which are given below :-
a) Technical Feasibility Study : Technical feasibility study viewed the engineering feasibility of the project. Some important engineering aspects are included which are necessary for the designing of the project like civil, structural and other relevant aspects. The technical capability of the projected technologies and the capabilities of the personnel to be employed in the project are considered. For example, when projects are in third world countries, technology transfer between cultures and geographical areas should be analyzed. As a result productivity profit or loss and other implications are understood due to the differences in fuel availability, geography, topography, infrastructure support and other problems.
b) Market Feasibility Study :- A Market feasibility study determines whether or not a real estate market has the ability to support a particular development. Market feasibility must not be mixed up with economic feasibility. The potential influence of market demand, competitive activities and available market share should be included in the market feasibility analysis. During the start-up , ramp-up and commercial start-up phases of the project, possible competitive activities ( local, regional, national and international) should be analyzed for early contingency funding and impacts on the operating costs.
c) Economic Feasibility Study :- Economic feasibility refers to the feasibility of the considered project to produce economic benefits. A benefit cost analysis is needed. Furthermore, the economic feasibility of a project can also be evaluated by breakeven analysis. In order to facilitate the consistent basis for the evaluation, the tangible and intangible facet of a project must be translated into the economic terms. Economic feasibility is critical even when the project is non profit in nature. Given the financial resources of the company, is the project something that can be completed? The economic feasibility study is more commonly called the cost/benefit analysis. Economic feasibility determines whether the required software is capable of generating financial gains for an organization. It involves the cost incurred on the software development team, estimated cost of hardware and software, cost of performing feasibility study and so on. For this, it is essential to consider expenses made on purchases such as hardware purchase and activities needed to carry out software development. In addition, it is necessary to consider the benefits that can be achieved by developing the software.
d) Operational Feasibility :- In operational feasibility, degree of providing service to requirements is analyzed along with how much easy product will be to operate and maintenance after deployment. Along with this other operational scopes are determining usability of product, determining suggested solution by software development team is acceptable or not. This assessment involves undertaking a study to analyze and determine whether a proposed business has sufficient management expertise, organizational competence and resources to successfully launch its business. Two key aspects to consider include management ability and resource sufficiency.
It is a measure of how well the solution of problems or a specific alternative solution will work in the organization. It is also a measure of how people feel about the system. If the system is not easy to operate than the operational process would be difficult. The operator of the system should be given proper training. The system should be made such that the user can interface the system without any problem.
e) Financial Feasibility :- A financial feasibility analysis projects how much start-up capital is needed, sources of capital, returns on investment and other financial considerations. The study considers how much cash is needed, where it will come from and how it will be spent. The study is an assessment of the financial aspects of the business. Financial feasibility must be differentiated from economic feasibility. The ability of the project management to raise sufficient funds needed to implement the proposed project is included in the financial feasibility. Additional investors and other sources of funds are considered by the project proponents for their projects in many cases.
In such situations feasibility, sources, soundness and applications of these project funds may be hindrance. Other aspects of financial feasibility should also be reviewed, if accurate like credit worthiness, loan availability, equity and loan schedule. The implications of land purchase, leases and other estates inland are also reviewed in the financial feasibility analysis.
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SWOT Analysis is a simple but useful framework for determining organization's strengths, weaknesses, opportunities and threats. It is a strategic planning technique used to help a person or organization. Strengths and weaknesses are internal to one's company- things that one have some control over and can change. Examples include - who is on your team, your patents and intellectual property and your location.
In India, Environmental Impact Assessment (EIA) has been formally introduced in 1994. It relied on the institutional framework that has a strong supporting legislative, administrative and procedural set-up. Both central and state authorities together are sharing the responsibility of its development and management. A Strength, Weakness, Opportunity and Threat (SWOT) analysis has taken up in order to suggest that there are several issues that need to be readdressed. It highlights several constraints, ranging from improper screening and scoping guidelines to ineffective monitoring and post project evaluation. The opportunities are realized as increasing public awareness, initiatives of environmental groups and business community and forward thinking to integrate environmental consideration into plans and policies. Poor governance, rapid economic reforms, and favors to small-scale units are some of the foreseen threats to the system. Thus conclude with some suggestions to improve Environment Impact Assessment process in India.
In the old EIA procedure, environmental vulnerability is only considered to a major extent in the early stages when project alternatives are worked out. In Norway, an alternative approach to EIA, an integrated vulnerability model, emphasizing environmental vulnerability and alternatives development in the early stage of EIA, has been tried out in a few pilot cases. This paper examines the content and use of the vulnerability concept in the IVM approach and discusses the concept in an EIA context.
The vulnerability concept is best suited to overview analyses and large scale considerations. The concept is particularly useful in the early stages of EIA when alternatives are designed and screened. By introducing analyses of environmental vulnerability at the start of EIA process, the environment can be a more decisive issue for the creation of project alternatives as well as improving the basis for scoping.
Vulnerability and value aspects should be examined as separate dimensions. There is a need to operate with a specification between general and specific vulnerability. The concept of environmental vulnerability has proven useful in a wide range of disciplines. Different disciplines have different lengths of experience regarding vulnerability. In disciplines such as landscape planning and hydrogeology we find elements suitable as cornerstones in the further development of an interdisciplinary methodology. Further development of vulnerability criteria in different disciplines and increased public involvement in the early stages of EIA are recommended.
In the written works, there is a great variation in the cost-benefits due to the different methodologies used in the estimation. This study aims at presenting a literature review of cost-benefit prediction methods combined with a SWOT analysis , particularly emphasizing data collection and analytical approach . Findings show that the methods used in green building cost-benefit studies can be grouped into different categories in terms of data collection and analytical approach. Each method has its advantages and disadvantages with multi capabilities. This literature review revealed that much of the current cost-benefit research lacks validity and reliability and has different degrees of bias.
As part of the Integrated Carbon Metrics project, which comprehensively quantifies embodied GHG emissions related to the built environment in Australia, this contribution evaluates construction material replacement scenarios at the economy wide-scale. We investigate the potential use of Engineered Wood Products (EWPs) in new building stock to assess the carbon results of a potentially important shift in the use of construction materials. This becomes increasingly relevant as Australia moves forward with augmenting the National Construction Code to allow the construction of mid -rise buildings utilizing timber.
The selection of low-carbon and sustainable building materials is crucial in reducing the built environment's carbon footprint. The main objective of the replacement scenario analysis is to assess the potential reduction in future GHG emissions by replacing the use of reinforced concrete with EWPs. The scenarios include the comparison of mid-rise buildings with standard reference buildings at the national scale. The analysis considers the full cradle -to-gate carbon footprint of construction materials embedded in buildings. Since the scenarios are implemented in an input output model of the Australian economy, changes in the use of construction materials can also be evaluated with respect to indirect effects on industries involved in the production chain of these materials as well as their respective GHG emissions.
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b) MARKET ANALYSIS :-
A market analysis is a quantitative and qualitative assessment of a market. It examines the market size, both in volume and in value, the various customer segments and buying patterns , the competition and the economic environment in terms of barriers to entry and regulation. It is a thorough assessment of the current market.
Market analysis is a large part of market research and an important component of a business plan. In this plan, business founders document their business idea in writing. During the course of the market analysis, a specific market is taken into account. With the help of the results displayed, companies can identify the opportunities and risk of that particular market. The target group forms the basis of the market analysis.
Market Analysis Examples:- Unfortunately, market analysis reports are extremely difficult to find, since they are often created by businesses for internal use only. Even on the internet, it is extremely difficult to find examples of market analysis. That is why we created this handy market analysis example for the smart phone industry. In the example, we will find a ton of great information including
1) The research factors for a market analysis of the smart phone industry.
2) How to summarize market analysis in a single sentence.
3) How to correctly interpret and use market analysis.
Market analysis is nothing too difficult. It is simply a tool for finding out the different characteristics of a chosen market or industry.
DEMAND FORECASTING
Demand Forecasting is the process of making estimations about future customer demand over a defined period, using historical data and other information. To businesses, Demand Forecasting provides an estimate of the amount of goods and services that its customers will purchase in the foreseeable future. Critical business assumptions like turnover, profit margins, cash flow, capital expenditure , risk assessment and mitigation plans , capacity planning etc are dependent on Demand Forecasting. For example, Some real -world practical example of Demand forecasting are- A leading car maker, refers to the last 12 months of actual sales of its cars at model, engine type and color level and based on the expected growth, forecasts the short-term demand for the next 12 month for purchase, production and inventory planning purpose.
A leading food manufacturing company refers to the last 24 months of actual sales of its highly seasonal products like soups and mashed potatoes. An analysis is carried out at the flavor and packaging size level. Then based on the market potential, demand is forecasted for the next 12 to 24 months for sourcing of key ingredients like tomatoes, potatoes, etc. and for capacity planning and evaluating the need for external co-packing.
Demand forecasting is the pivotal business process around which strategic and operational plans of a company are devised. Based on the Demand forecast, strategic and long range plans of a business like budgeting, financial planning, sales and marketing plans, capacity planning, risk assessment and mitigation plans are formulated.
Short to medium term tactical plans like pre-building, make -to-stock, make-to-order, contract manufacturing, supply planning, network balancing etc are execution based. Demand forecasting also facilitates important management activities like decision making, performance evaluation, judicious allocation of resources in a constrained environment and business expansion planning.
Demand forecasting reduces risk related to business activities and helps it to take exact decisions. For firms having production at the mass level, the importance of forecasting had increased more. A good forecasting helps a firm in better planning related to business goals.
Following is the significance of Demand forecasting :-
1) Fulfilling objectives of the business.
2) Preparing the budget
3) Taking management decision
4) Evaluating performance etc.
Moreover, forecasting is not completely full of proof and correct. It thus helps in evaluating various factors which affect demand and enables management staff to know about various forces relevant to the study of demand behavior.
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Product mix analysis assess different go-to-market policies to recognize the optimal product mix at the customer, regional or national levels, often expanding the framework to new product introduction and SKU sun-setting decisions. Users try to create realistic plans that maximize the financial impact of their policies while meeting other business objectives such as customer service, being the category captain etc.
Product mix what-ifs include evaluations of different product mix policies including assortment and SKU portfolio optimization. A best practice analysis sequence would include:-
1) Start by defining the what-if analysis. Assortment analysis might simply include evaluating different product mix strategies for different retail channels in different in store types or regions, with the resulting volume and price expectations associated with any given combination. A more complex framework might also include new product introductions- which require deeper forecasting especially at the manufacturing and supply chain levels or SKU sunsets at the national level that force adjustments to lower level assortment framework. Framework are generally defined by editing a demand plan or through a scenario wizard which accept users only to enter the required variables.
2) Once the framework is entered, users re-create the plan considering all the limitations in the system. Since the framework involves changing the product ix at the regional or national levels, it is essential to re-optimize the supply plan to properly account for supply chain and business limitations and for users to observe and compare multiple frameworks under the best possible outcome.
3) The re-optimized plan establishes the impact on overall financial performance. Users should be able to see P&Ls by business unit, product and major customer store type and compare the impact of the framework vs. the base plan.
4) Typically, there will be deeper questions as users will want to know why frameworks report a given outcome- remember that our system as a whole behaves in a non-linear way and this will often result in counter-intuitive findings. Root cause analysis help determine the key driver of performance.
For example, here the root cause analysis may reveal different cost-to-serve a given customer if the logistics requirement are sufficiently different such as under a rapid replenishment situation.
5) Under complex framework and limited time, users may allow the system to select the optimal product mix based on total profit impact. This type of analysis is often very revealing and lead to the definition and analysis of multiple additional frameworks.
6)Finally, users should have access to opportunity values(i.e., the net system wide impact of selling an additional unit of product or adding a unit of capacity) by product and perhaps even by product/by customer. Opportunity values provide unique insights to help users identify further opportunity while significantly reducing the workload.
CUSTOMER REQUIREMENT ANALYSIS
Accurate acquisition and effective translation of customer requirements are two key links in product configuration design. Two concepts are introduced for customer requirement decomposition. One is the requirement element, and the other is the granularity of requirement element. Moreover, the controlling principle for granularity of requirement element is given and the method of requirement decomposition is proposed from the point of semantic meaning. This method means semantic segmentation, semantic translation, supplement or subdivision of human machine environment and semantic combination. Customer's customized requirements could be decomposed effectively according to the proposed method of requirement decomposition as well as by controlling the granularity of requirement element reasonably.
On that basis, in customer requirement translation, improved house of quality is constructed by combining the attributes of requirement element and the demands of configuration design and using the thought of quality function development. So, a new approach of customer requirement analysis based on requirement element and improved house of quality is put forward by integrating organically the technology of requirement decomposition and the tool of requirement translation. Exact acquisition and effective translation for customer requirements could be realized by using this approach. Finally, the customized design of a money binding machine is taken as an example to validate the effectively of propose method.
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c) TECHNICAL ANALYSIS:-
Technical analysis determines the study of the project to evaluate technical and engineering aspects when a project is being examined and formulated. It is a continuous process in the project appraisal system which determines the prerequisites for a fruitful start of the project.
Technical analysis of a project is concerned primarily with:-
1) Material inputs and utilities:- It involves defining the requirements for materials and utilities, specifying their properties and setting up a supply channel. Material input and utilities may be classified as raw materials (viz., agricultural products and mineral products), processed industrial materials/components (viz., base metals, semi-processed materials), auxiliary materials and factory supplies(viz., chemicals, additives, packaging material), utilities(viz., power, water).
The following must be kept in mind while taking decisions regarding material, inputs and utilities:-
i)Physical properties of the material
ii) Transportation, Handling and Storage costs.
iii) Quantity available from Domestic/ Foreign sources
iv) Past and future trends in prices
2)Manufacturing process/ Technology:- Taking a decision on manufacturing process and technology to be used is one of the most important decisions in technical analysis of a project. There are various options and alternatives available for manufacturing a product or service. It is the task of the project manager to select that process or technology that is easy to acquire , appropriate for the project and feasible with budget and technical requirements of the proposed project.
3)Product Mix:- Product mix decision is important to choose an effective product mix as different customers have different taste, preferences and needs. The choice of product mix is generally guided by market requirements.
4)Plant capacity :- Plant capacity is also known as production capacity. It refers to the volume or number of units that can be manufactured during given time period. It is the duty of the project manager to determine the feasible normal capacity and nominal maximum capacity for the project.
5) Location & Site:- Location refers to a broad area within the city and while site means a specific piece of land where project would be set-up. For the purpose of site selection a critical assessment of the demand, size of plant and input requirements is conducted which involves:-
i) Proximity of land to markets.
ii) Availability of raw materials.
iii)Cost of Land ,etc.
6)Machinery & Equipment :- Machinery and equipment requirement depends on the production technology and plant capacity of the proposed project. Its types are:- Plant equipment, Mechanical equipment, Instruments etc
7)Structure and Civil Works :- Technical analysis of a project for buildings, structures and civil works involves preparation and development of sites which includes:-
i)grading and leveling of land
ii)demolition of existing structures
iii)relocation of pipeline, cables, roads, etc
8) Projects Charts and Layout :- Once the project manager has sufficient data related to market size, plant capacity, production technology, machinery and equipment, buildings etc. he prepares charts and layouts for the proposed project.
USE OF VARIOUS INFORMATIONAL TOOLS FOR ANALYZING:-
Anyone can learn technical analysis tools and in the mean time become an expert themselves. Some of the informational tools of technical analysis are:
* Trend lines:- Trend lines are lines drawn on a price chart of an asset, just under or over the asset's local pivot highs or lows, to indicate that price is following a particular direction. A trend line is required to have multiple touches to be considered valid, and traders are recommend to watch for a break and close above or below trend lines, before taking any action.
* Support and resistance levels:- This can either be horizontal or diagonal. Trend lines often rise and fall, represent diagonal support or resistance. Horizontal resistance or support are often prices that represent a historic level or a rounded number.
Support is a level on price charts in which price has typically rebounded from in the past and could give another bounce if the price gets there and buyers step in.
Resistance is a level on price charts in which price has been rejected from, representing an area of interest for sellers to begin taking profit.
*Moving averages:- Moving averages are an indicator layered over price charts that represents the average price of an asset across a certain period. Moving averages can be short or long term across daily, weekly or even longer timeframes.
* Trading volume:- Trading volume is another extremely important tool for traders to use to determine interest in an asset. Volume typically proceeds price action, and keen-eyed technical analysis can often spot trend changes in the price of an asset by watching trading volume. It also confirm the validity of a movement.
* Chart patterns:- One of the most helpful tools a trader can use when performing technical analysis is to watch for certain patterns to appear on price charts before taking a position. Using trend lines, technical analysis can draw triangles and other geometric shapes on price charts.
* Candlesticks:- Japanese candlesticks were introduced to assist technical analysts and traders in getting tipped off of upcoming price movements. Depending on how a candlestick opens, closes, and the price action within each candle can cause a candlestick to close in a particular shape or pattern. It can also be used to predict future price movements.
* Fractals:- Fractals are repeating patterns that play out on price charts, oftentimes on increasingly lower timeframes. It add validity and credence to the idea that markets are cyclical, and each cycle is a direct impact of the emotional state of traders.
*Indicators:- In addition to volume, other helpful indicators have been developed to add to a trader' arsenal and offer even more changes to determine future price movements before they occur. Commonly used indicators include the Stochastic Oscillator, Bollinger Bands etc.
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Ecommerce projects are one of the most challenging of all kinds of software projects, owning to the nature of the project itself. With integrated and inter-organizational nature, ecommerce projects have a faster development cycle time and a pressing need for an effective strategy at every phase of the project to deal with the problems. However, the success in implementing ecommerce projects depends a lot on the way an organization handles implementation with factors such as organizational attitudes and business contexts being recognized as key for the implementation process, it is evolutionary, rather than revolutionary and id dependent on the dynamic changes in the technology. This dynamic approach for project management is in contrast with the traditional methods that often consists of tasks in sequential order, to be finished consecutively.
With an emphasis on addressing high risk areas, stabilizing the basic architecture and refining the driving requirements, the primary challenge of every ecommerce project is to achieve all the project goals and objectives while staying well within the preconceived constraints. This is where process frameworks come into the picture. There are a variety of process frameworks, but all of them contains briefly which a project manager should be aware of.
Ecommerce projects tend to have continuous scope changes and the only way to manage the uninterrupted changes the client tries to incorporate with more and more functionalities is to build the portal in iterations.
Time-to-market is the most relevant in ecommerce project than any other type of project management. With the market brimming with more competitors each day, any extra time one take to enter the market will be a grave mistake as only disaster will finally takes place. In ecommerce projects, a component based architecture portals with dynamic content , functionality ,frequent maintenance would help quick development and decrease construction and maintenance time without compromising on the quality.
The most important aspect of an ecommerce project is to warrant that we maximize the value delivered at the end of the project. With superior features, the portal needs to deliver with minimum drawbacks and minimal maintenance cost. While estimating a cost of the project, it should be noted that rework is a fact of software development.
Every ecommerce project has to be aware of its major issues such as response time at various loads, scalability and responsiveness which are quite critical for the success rate. Since the project involves custom developed components, it is necessary that all the performance criteria are met. By doing a structural prototype at the early stages, gives quick response on performance levels.
There are lots of places to see for inspiration, popular methods that can help to start improving the internal process. Let us talk about the two popular methodologies used.
i) Agile Project Management :- Started in 2001with the Agile Manifesto, a varient of iterative methods, the agile methodology follows a principle where small portions of the final project are created in each cycle, modifying the project course based on the feedback to the smaller pieces of the project. Widely used by individuals, the Agile practices create an organizational culture that gives importance to customers.
ii) Lean Project Management :- The basic idea of Lean methodology is to get out of all the unnecessary tasks in the process, cut out useless meetings, wasteful deliverables and focus on the deliverables that move the ecommerce business forward, like a new product prototype or improved shopping experience. The methods are repetitive and involve creating a image of the final deliverable in each cycle.
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d) OPERATIONAL ANALYSIS
Operations management is the administration of business practices to create the highest level of efficiency possible within an organization. It is concerned with converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization.
Operation management is an area of management concerned with designing and controlling the process of production and redesigning business operations in the production of goods and services. It involves the responsibility of confirming that business operations are efficient in terms of using as few resources as needed and effective in terms of meeting customer requirements. Operations management is primarily concerned with planning, organizing and supervising in the contexts of production, manufacturing or the provision of services.
For example, if an organization makes furniture, some of the operations management decisions involve the following: purchasing wood and fabric, hiring and training workers, purchase cutting tools and other fabrication equipment.
IMPORTANCE OF OPERATION MANAGEMENT
Operation management is the process that usually plans, controls and supervises manufacturing and production processes and service delivery. Operations management is important in a business organization because it helps effectively manage, control and supervise goods, services and people.
Operations management cuts across every sector and industry as it may concern. it finds use in every business though some might not be obvious. In health sector, operations management warrants there is a proper health delivery with the right instruments at the right time. It also helps people like nurses, doctors, surgeons and other health officers deliver timely service. When something goes missing, a technical every members knows what is at fault.
For a production or manufacturing company to be successful, operations management is major until that must first stand. For example take an oil and gas company ,product has been discharged by ship to the reservoir in order to be made available for a large amount of customers. Operations management sees to the effective delivery of the products and also plans and schedules what and how must be done. With OM, people achieve more and productivity is increased.
Operations management is widely used irrespective of the size of a company or what they do.
Operations management plays an effective role in achievement of pre-determined objectives of an organization. It confirms that all activities are going as per plans by continuously monitoring all operations of organization.
Operations management improves the productivity of an employees. It checks and measures the performance of all people working in the organization. Operation manager trains and educate their employees for better performance.
Operations management helps in improving the goodwill and presence of the organization. It confirms that quality products are delivered to all customers that could give them better satisfaction and makes them pleased.
Operations management focuses on optimum utilization of all resources of the organization. It frames proper policies and accordingly continues all operations of the organization. Operation managers keep a glance on all activities and ensure that all resources are used on only useful means and are not wasted.
Operations management helps in motivating the employees towards their roles. Operation managers guide all peoples in performing their roles and give them with better atmosphere. Employees are remunerated and rewarded according to their performance level.
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Operational level strategy refers to the means the companies use to accomplish overall objectives. Through the development of operational strategies, the firm can evaluate and implement efficient systems for the use of resources and personnel. To be effective, all parts of the company have to work together.
The management decisions are classified into three levels or categories:-
1) Strategic Production Planning :- Strategic planning involves deciding and developing strategic plans to achieve strategic objectives or goals. Top management typically develops the strategic plans. These decisions or plans are normally long term decisions, which are having implications for the next five years and above. Lot of risk and uncertainty is involved in long term or strategic level planning. Strategic planning needs a thorough scanning and analysis of external environment to seek information.
The strategic operations planning decisions include:-
i) Technology decisions:- Choice of appropriate technology, equipment's , process choice and degree of automation.
ii)Capacity decisions:- Amount, time and type.
iii) Facilities decisions :- Size, location and specializations.
iv)Vertical integration :- Direction, extent and balance.
The strategic level production planning is concerned with decisions, which are having implications for the next five to ten years. These decisions are critical to the success and better performance of the organization. These decisions influence the competitive positions of the organizations and help to position the operations strategy of the organization.
Characteristics of Strategic production/ Operational Planning:-
i) Strategic level production planning aids to get the goals in the best possible ways.
ii) It helps to achieve the competitive advantages and to develop core competence.
iii) It helps to develop strengths and eliminate the weaknesses to en-cash the available opportunities.
iv) It gives direction to growth and development of business.
v) Strategic level planning lays foundations for tactical goals and operational goals.
2) Tactical Production Plan :- Tactical planning is done at middle management level, which involves the resource acquisitions and utilizations to achieve the organizational goals. Tactical plans cover short period frames and are associated with less uncertainty and hence lower risk as compared to strategic planning.
Tactical planning decisions include:-
i) Establishing parameters for measuring operational efficiency and productivity.
ii) Making plans to improve use of existing resources.
iii) Prepare equipment and manpower planning.
iv) Planning for modernization of the facilitates and automation.
v) Specific technology and tools to enhance production efficiency or productivity.
3) Operational Level Production Planning :- The operational planning decisions are taken at the bottom level of management and these are routine decisions. These plans are prepared to establish actions necessary for achieving operational goals. These covers shorter period i.e., within a year. The lower level management develops operational plans and the planning horizon is one year. These plans establish actions that are important to achieve operational goals. These plans are deterministic in the sense that uncertainty is very low. The plans are expressed in terms of actions, which can be quantified. some characteristics of operational level production plans are:-
i) Plans are definite, and action oriented.
ii)Plans are expressed in terms of parameters, which can be quantified.
iii) Plans give the detailed instructions regarding: what to be done? who should do?
Strategic control looks at the strategy of a process, from implementation to completion and analyzes how effective the strategy is and where changes can be made to improve it. Operational control focuses on day-to-day operations.
The purpose of strategic control is to identify whether the organization should continue with its present strategy or modify it is the light of changed circumstances. Operational control should assist the organization to be both efficient and effective and in this way help the chosen strategy to work successfully.
The basic forms of control are concerned with physical systems, so that a wall thermostat may be control the central healing system of a house. If the room temperature fall below the desired temperature set on the thermostat, the boiler in started so that water in the radiators is heated and the temperature rises to desired level.
Key Takeaways
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Material Management is a complex process that includes procurement, transportation and inventory management from manufacturer to storefront. Overseeing the materials initial purchase through internal operations then to the service point and on through distribution can often be a labor intensive task. It encompasses all operations management functions from purchasing to the final delivery of the end items. The departments that are part of the production control function are the purchasing, receiving, raw materials inventory and production departments.
Material management is responsible for purchasing the highest quality equipment and products at the lowest possible cost for the organization. It is also responsible for managing, purchasing, inventory control functions, shipping and receiving and also planning and administering department budgets.
The aim of material management is to provide an unbroken chain of components for production to manufacture goods on time for customers. The materials department is charged with releasing materials to a supply base, confirming that the materials are delivered on time to the company using the correct carrier.
Work Study :- Work study is a generic term for those techniques, particularly method study and work measurement which are used in all its context and which lead systematically to the investigation of all the factors, which effect the efficiency and economy of the situation being reviewed in order to effect improvement.
The main objective of work study is to improve productivity of men, machines, and materials. The aim of work study is to determine the best method of performing each operation and to remove the wastage so that production increases with less fatigue. The work study is also used in determining the standard time that a qualified worker should take to perform the operation when working at a normal place.
Work study is a technique which deals with the following problems:-
i) As to how should a job be done, and
ii) How much time a job should take for completion.
The role of work study is to standardize the method of doing a work, to minimize the unit cost of production, to determine the standard time for doing a task, to minimize the material movement and operators movement, to eliminate unnecessary human movements.
Method Study :- Method study is the process of subjecting work to systematic, critical scrutiny to make it more effective or more efficient. It is one of the keys to achieving productivity improvement.
Method study was originally designed for the analysis and improvement of repetitive manual work but it can be used for all types of activity at all levels of an organization. It is concerned with the reduction of the work content and establishing the one best way of doing the job.
Work selected for method study probably an identified problem area or an identified opportunity. It may be identified through a systematic review of available data, normal monitoring or control processes, high levels of dissatisfaction and complaint or as part of a change in management policy, practice, technology or location and because it meets certain conditions of urgency and priority.
Lean operations:- Lean operations is a means of running an organization by focusing on delivering higher customer satisfaction while using as few resources as possible. It is a business strategy driven by the principle of doing more with less. It is a minimalist approach to running a business and improving day-to-day operations. In other words, lean operations is all about putting a little Marie Kondo-like efficiency into our workflows. For example:-Truck manufacturing, Printing industry, Automotive parts manufacturing etc.
As companies face increasing competition at home and abroad, finding better, faster, less expensive ways to operate is necessary to remain relevant and stay in business. The concept of lean operations is a method companies have been using for almost a century. The ROI of lean operations promises greater employee engagement and a bigger bottom line.
Running a business as efficiently as possible may seem like an obvious goal, but even the more prolific business leaders can easily get bogged down in the day-to-day operations. It is easy to forget to take a step back and take stock of the organization on a more holistic level.
In today's world, building a high functioning company is more important than ever. Taking a lean approach to operations management create business agility- a necessary attribute to prepare for and survive a crisis like the covid-19 pandemic. But a crisis can also be the perfect catalyst to adopt lean operations management principles. A turbulent event can reveal weak spots in our workflows and could reveal the perfect opportunity to chart a new course.
With a lean approach operations management can withstand sudden changes and limit disruptions so a business can continue to produce value for its stakeholders.
Key Takeaways
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Reference-
1.The Lazy Project Manager by Peter Taylor
2. Project Management by K. Nagaranjan
