EDPM Notes 2021

EDPM
Notes
2021
12/4/2020
EDPM Concept Notes
arunvelayudhan.v@gmail.com
Meaning and Definition of Entrepreneur
An entrepreneur is ordinarily called a businessman. He is a person who combines capital
and
labour for the purpose of production. He organizes and manages a business unit assuming
the risk for profit. He is the artist of the business world.
In the words of J.B. Say, “An entrepreneur is one who brings together the factors of
production
and combines them into a product”. He made a clear distinction between a capitalist and an
entrepreneur. Capitalist is only a financier. Entrepreneur is the coordinator and organizer of
a business enterprise. Joseph A Schumpeter defines an entrepreneur as “one who innovates,
raises money, assembles inputs and sets the organization going with the ability to identify
them and opportunities, which others are not able to fulfil such economic opportunities”. He
further said, “An entrepreneur is an innovator playing the role of a dynamic businessman
adding material growth to economic development”.
Characteristics of an Entrepreneur
An entrepreneur is a highly achievement oriented, enthusiastic and energetic individual. He
is a business leader. He has the following characteristics:
l) An entrepreneur brings about change in the society. He is a catalyst of change.
2) Entrepreneur is action-oriented, highly motivated individual who takes risk to achieve
goals.
3) Entrepreneur accepts responsibilities with enthusiasm and endurance.
4) Entrepreneur is thinker and doer, planner and worker.
5) Entrepreneur can foresee the future, seize market with a salesman’s persuasiveness,
manipulate funds with financial talent and smell error, frauds and deficiencies with an
auditor’s precisions.
6) Entrepreneur undertakes venture not for his personal gain alone but for the benefit of
consumers, government and the society as well.
7) Entrepreneur builds new enterprises. He possesses intense level of determination and a
desire to overcome hurdles and solves the problem and completes the job.
8) Entrepreneur finds the resources required to exploit opportunities.
9) Entrepreneur does extraordinary things as a function of vision, hard work, and passion.
He
challenges assumptions and breaks rules.
10) Entrepreneurs act on their ideas.
Definition of Entrepreneurship
In the words of Stevenson and others, “Entrepreneurship is the process of creating value by
bringing together a unique package of resources to exploit an opportunity.” According to
A.H.
Cole, “Entrepreneurship is the purposeful activities of an individual or a group of associated
individuals undertaken to initiate, maintain or organize a profit oriented business unit for
the
production or distribution of economic goods and services”.
All activities undertaken by an entrepreneur to bring a business unit into existence are
collectively known as entrepreneurship. It is the process of changing ideas into commercial
opportunities and creating values. In short, entrepreneurship is the process of creating a
business enterprise.
12/4/2020
EDPM Concept Notes
Nature and Characteristics of Entrepreneurship
Features of entrepreneurship are summarized as follows:
l) It is a function of innovation.
2) It is a function of leadership.
3) It is an organization building function.
4) It is a function of high achievement.
5) It involves creation and operation of an enterprise.
6) It is concerned with unique combinations of resources that make existing methods or
products obsolete.
7) It is concerned with employing, managing, and developing the factors of production.
8) It is a process of creating value for customers by exploiting untapped opportunities.
9) It is a strong and positive orientation towards growth in sales, income, assets, and
employment.
Enterprise
The organisation or system that comes out as a result of entrepreneurship. Once established
enterprise ensures that entrepreneurship is going on.
Generation and Screening of a project idea

Generation and Screening of a project idea begins when someone with specialized knowledge
or expertise or some other competence feels that he can offer a product or service
> Which can cater to a presently unmet need and demand

> To serve a market where demand exceeds supply
> Which can effectively compete with similar products or services due to its better
quality/price etc.
Idea Generation-Sources of Ideas

Product or opportunity identification and selection process starts with the generation of ideas,
or say, ideas about some opportunities or products are generated in the first instance.
The ideas about opportunities or products that the entrepreneur can consider for selecting the
most promising one to be pursued by him/her as an enterprise, can be generated or
discovered from various sources- both internal and external.
These may include:
(i) Knowledge of potential customer needs,

(ii) Watching emerging trends in demands for certain products,
(iii) Scope for producing substitute product,
(iv) Going through certain professional magazines catering to specific interests like
electronics, computers, etc.,
(v) Success stories of known entrepreneurs or friends or relatives,
(vi) Making visits to trade fairs and exhibitions displaying new products and services,
(vii) Meeting with the Government agencies,
(viii) Ideas given by the knowledgeable persons,
(ix) Knowledge about the Government policy, concessions and incentives, list of items
reserved for exclusive manufacture in small-scale sector,
(x) A new product introduced by the competitor, and
12/4/2020
EDPM Concept Notes
(xi) One’s market insights through observation.
In nutshell, a prospective entrepreneur can get ideas for establishing his/ her enterprise from
various sources. These may include consumers, existing products and services presently on
offer, distribution channels, the government officials, and research and development.
The most commonly used methods of generating ideas are: focus groups, brainstorming,
and problem inventory analysis.
These are discussed as follows:
Focus Groups:
A group called ‘focus group’ consisting of 6-12 members belonging to various socio-economic
backgrounds are formed to focus on some particular matter like new product idea. The focus
group is facilitated by a moderator to have an open in-depth discussion. The mode of the
discussion of the group can be in either a directive or a non-directive manner.
The comment from other members is supplied with an objective to stimulate group discussion
and conceptualize and develop new product idea to meet the market requirement. While
focusing on particular matter, the focus group not only generates new ideas, but screens the
ideas also to come up with the most excellent idea to be pursued as a venture.
Brainstorming:
Brainstorming technique was originally adopted by Alex Osborn in 1938 in an American

Company for encouraging creative thinking in groups of six to eight people. According to
Osborn, brainstorming means using the brain to storm the issue/problem. Brainstorming
ultimately boils down to generate a number of ideas to be considered for the dealing with the
issue/problem.
Problem Inventory Analysis:
Problem Inventory analysis though seems similar to focus group method, yet it is somewhat
different from the latter in the sense that it not only generates the ideas, but also identifies the
problems the product faces. The procedure involves two steps: One, providing consumers a
list of specific problems in a general product category.
Two identifying and discussing the products in the category that, suffer from the specific
problems. This method is found relatively more effective for the reason that it is easier to relate
known products to a set of suggested problems and then arrive at a new product idea.
However, experiences available suggest that problem inventory analysis method should
better be used for generating and identifying new ideas for screening and evaluation. The
results derived from product inventory analysis need to be carefully screened and evaluated
as they may not actually reflect a genuine business opportunity.
Entrepreneurs select their products or projects based on:

1 Their own or partners’ past experience in that business line;
2 The Government’s promotional schemes and facilities offered to run some specific
business enterprises;
3 The high profitability of products;
4 Which indicate increasing demand for them in the market?
12/4/2020
EDPM Concept Notes
5 The availability of inputs like raw materials, labour, etc. at cheaper rates;
6 The expansion or diversification plans of their own or any other ongoing business
known to them;
7 The products reserved for small-scale units or certain locations.
Innovation
Innovation is the specific instrument of effective entrepreneurship. It is the act that endows
resources with a new capacity to create wealth. Whatever changes the wealth-producing
potential of already existing resources constitutes innovation.
Innovation does not have to be technical, it is also an economic or social term
Innovation can be defined as changing the yield of resources, or defined in demand terms
rather than in supply terms, that is as changing the value and satisfaction obtained from
resources by the consumer
Systematic innovation
Systematic innovation consists in the purposeful and organized search for changes, and in
the systematic analysis of the opportunities such changes might offer for economic or social
innovation
The discipline of innovation (and it is the knowledge base of entrepreneurship) is a diagnostic

discipline: a systematic examination of areas of change that typically offer entrepreneurial
opportunities
Systematic innovation means monitoring seven sources for innovative opportunities
The Unexpected - An unexpected success, an unexpected failure or an unexpected outside

event can create opportunity. An example is the Post It Note. The Post It Note arose because
glue didn’t work. It was invented by Spencer Silver who was trying to develop a super strong
adhesive but instead created a low tack one. Although it was Silver’s invention, he could not
find a way to use it and so 3 M commercialized it.
The Incongruity - A discrepancy between reality and what everyone assumes it to be or

between what is and what ought to be, can create an innovative opportunity. Think Digital
music. Before the Ipod was created digital music was illegally downloaded. Apple realized
an opportunity for fairly priced music and innovated itunes and Ipod.
Innovation based on process need – Innovation based on a process need starts out with the
job to be done. According to Drucker, there is always a need to “perfect a process that already
exists, replace a link that is weak, (or) redesign an existing old process by supplying the
‘missing link’. An example for this is Amazon introduction of fleets of robots to handle
inventory in their warehouses.
Industry or market structure- This refers to an opportunity for an innovation when the
underlying foundation of the industry or market shifts. Internet have enabled many
entrepreneurs to do businesses in new ways. Swiggy and Uber kind of business models got
enabled by internet since it changed the way financial transactions are done (one of the major
structural change that got happened through internet)
12/4/2020
EDPM Concept Notes
Changes in perception, mood and meaning - Innovative opportunities can develop when a
society's general assumptions, attitudes and beliefs change. The drinking water business is an
example for this and now it is followed by air purifiers.
Demographics - Changes in the population's size, age structure, composition, employment,

level of education and income are opportunities too. Aging population and reduced family
support have created robots for the elderly. Robots now assist in many elements of life, from
helping in everyday tasks to being a companion.
New Knowledge - Advances in scientific and non-scientific knowledge can create new
products and new markets. Think biotechnology. The identification of the human genome has
reshaped medical research and indeed life. It is now possible to have a personal genome
sequence mapped to obtain insights into your life: From ancestry through to genetic disorders.
Sustaining Innovation: Continuous and/or evolutionary innovation, defined as the most

common type of innovation. Since it is based on the iterative improvement of what you
already have, it tends to apply the same innovation model throughout the entire process.
Improvements in mobile phones are examples for this.
Breakthrough Innovation: Groundbreaking innovation. Innovation that is based on solving

a clearly defined problem with a complex solution, by using knowledge that is apparently
unrelated to the field in question, and that would initially seem to have little correlation with
it. Low-cost operation of airlines or prepaid mobile sim-cards are examples for this.
Disruptive innovation: This is the innovation that understands and anticipates a change of
cycle in the market and completely varies its business model to adapt to new times (for
12/4/2020
EDPM Concept Notes
example, Netflix went to distributing physical films via internet streaming). This type of
innovation is clearly differential, and capable of creating leading companies in their market
niche… or in that of others.
Basic and continuous research: This is executed in the background, but normally largely
responsible for big innovations. Most large companies have a team behind them dedicated to
researching every day, or have agreements with universities and research centers who help
in this task. All the new vaccines are a result of this kind of innovation.
What is idea validation?

Idea validation is the process of gathering evidence around ideas through experimentation to
make fast, informed and de-risked decisions.
It's a process that starts from an idea and typically ends with a paying customer. The purpose
of idea validation is to expose the idea to the practicality of the real world before you build
and release the final product or offering.
Steps to validate your idea
In an early stage you want to focus on validating your assumptions to make sure the most
critical ones for your business are true. For example, you might want to validate your target
market and its potential to see if your idea is valuable and appeals to the market you’ve
defined.
If, however, your assumptions regarding your market and idea are valid, you can start testing
your product to learn how all of the elements work in reality.
Here’s the steps for idea validation process:
12/4/2020
EDPM Concept Notes
Market Demand Analysis
The total purchase value, or revenue earned by a product or service within a specified
demographic at a given point in time (across a range or a time period), in a specific location,
is known as market demand. To accurately ascertain demand, a strong focus on the
demographic needs to be maintained.
Market Demand Analysis is conducted to know about the aggregate demand for the product
or service and the market share that the proposed project will enjoy.
Market and demand Analysis involve the following activities:
(A) Situational analysis and specification of objectives →
A situational analysis must be done to know about –
(a) The preferences and purchasing power of customer
(b) Action and strategies of the competitors
(c) Practices of middle man
(B) Collection of secondary information →

Secondary data is gathered in some other context and is already available in market. It is not
conducted by researcher himself. A researcher may use the following sources: -
1. Census survey
2. National sample survey reports
3. 5 years plans
4. Year books
5. Economic survey reports
6. Political survey reports
7. Annual survey of industries
8. Annual bulletin of export and import
9. Stock exchange directory
10. Monthly bulletins of RBI
11. Publications of advertising agencies
12. Industry potential surveys
Once collected, this information is evaluated to judge its reliability, accuracy and relevance to
the project.
(C) Conduct of Market Survey →
Secondary data does not provide comprehensive information. It has to be supplemented with
collection of primary data. Primary information is gathered through market surveys specially
for a particular project. Market surveys may be census survey or sample survey. In a census
survey the whole population is considered while in a sample survey a sample of population
is observed to gather relevant information. They are conducted to gather information
regarding –
1. Total demand
2. Growth of demand
3. Income
4. Buying motive
5. Purchase plans
6. Unsatisfied needs and attitude of people towards products and services
7. Characteristics of buyer
Steps in Sample Survey →
(i) Defining the target population – The researcher must carefully choose the target
population that is to be surveyed.
(ii) Selecting the sample scheme and size – It may be a census survey or a sample survey.
Probability sampling (Every sample has an equal chance to be selected) OR Non-probability
sampling (No equal chance, some are preferred some are not) method may be used.
12/4/2020
EDPM Concept Notes
(iii) Developing the Questionnaire – A questionnaire may be Structured or Unstructured with
Open end questions (give a statement or view) or close end questions (yes/no, multiple
choice). After developing the questionnaire, a pilot survey is done to look for any
mistakes/difficulties.
(iv) Recruiting and training the field investigators – Investigators with good knowledge of the
product and good technical knowledge must be recruited and proper training must be
provided to them.
(v) Obtaining the information according to questionnaire – The Investigators take personal
interviews, telephonic interviews and mail the questionnaires to the sample population to
collect responses.
(vi) Scrutinizing the information gathered – The Information gathered may be inconsistent
and the responses may be biased. Therefore, the information gathered is analysed and
scrutinized to eliminate irrelevant and unwanted data.
(vii) Analysing and interpreting the information – A statistical analysis using Parametric and
Non parametric methods is done to analyse and interpret the information.
(D) Characterization of Market
The market for the product or service is described in terms of the following factors based on
the information collected through market surveys and secondary sources. These factors are:-
i. Effective demand in the past/present and future
ii. Breakdown of demand
iii. Methods of distribution and sales promotion
iv. Types of consumer
v. Listing of supply and competition
vi. Government policies
vii. Price
Demand forecasting
It refers to estimation of future demand for a product or service. Forecasting methods may be
broadly divided into three categories i.e. Qualitative methods, Time series projection methods
and causal methods:-
Qualitative Methods →
(i) Jury of executive opinion method → It involves soliciting the opinions of a group of
Managers on expected future sales and combining them into a sales estimate.
Advantages
i. It considers a variety of factors
ii. Cheap method for developing demand forecasting
Disadvantages
i. The managers may be bias
ii. The reliability of the technique is always in question
(ii) Delphi Method → It is used for eliciting the opinions of a group of experts with the help
of mail survey.
Steps →
(a) A Group of experts are sent questionnaire and asked to express their views.
(b) The responses received are summarized and another questionnaire based on this response
is sent back, not revealing the identity of the experts.
(c) The process is continued till a reasonable agreement emerges.
Quantitative Methods
12/4/2020
EDPM Concept Notes
Time series Projection Method → Time-series methods make forecasts based solely on
historical patterns in the data. Time-series methods use time as independent variable to
produce demand. In a time, series, measurements are taken at successive points or over
successive periods. The measurements may be taken every hour, day, week, month, or year,
or at any other regular (or irregular) interval. A first step in using time-series approach is to
gather historical data. The historical data is representative of the conditions expected in the
future. Time-series models are adequate forecasting tools if demand has shown a consistent
pattern in the past that is expected to recur in the future.
(i) Trend Projection Method → It works on a linear relationship
Yt = a + bt
Where Yt = demand for a year
t = time variable
a = intercept of relationship
b = slope of relationship
(ii) Exponential smoothing method → In this method forecasts are modified in the light of
observed errors using relationship –
Ft = aFt-1 + (1-a) Ft-1
Where F= forecast for the year t
a = smoothing parameter
Ft-1= forecast for the year t-1
(iii) Moving Average Method → In this method forecast for next period is equal to the
average of sales in several preceding years.
Causal Methods
It uses the phenomenon of change in one parameter due to the change in another parameter
to develop a cause effect relationship which can be converted into quantitative method.
(i) Chain Ratio Method – Under this method the potential sales of a product may be
estimated by applying a series of factors to a measure of aggregate demand. It uses a simple
analytical approach for estimating demand. Its reliability depends upon the ratio and rates
used in the process; one ratio leads to another.
(ii) Consumption level Method – It is used for products which are directly
consumed. Consumption level is estimated on the basis of elasticity co-efficient for a product.
(iii) End user Method – It is suitable to estimate demand of intermediate products and it
involves following steps –
• Identifying the possible uses of product
• Identifying the consumption co-efficient of the product for various uses.
• Projecting the output level for consuming industries
• Deriving the demand for the product.
(iv) Leading indicator method – There are Leading variables which change ahead of other
variables called lagging variables. For e.g., Change in level of urbanization used to predict
change in demand for cars.
(v) Econometric method – It involves estimating quantitative relationships derived from
economic theory.
Feasibility Analysis
A feasibility analysis is used to determine the viability of an idea, such as ensuring a project
is legally and technically feasible as well as economically justifiable. It tells us whether a
project is worth the investment—in some cases, a project may not be doable.
12/4/2020
EDPM Concept Notes
A feasibility analysis evaluates the project’s potential for success. There are different types of
feasibility study—separate areas that a feasibility study examines, described below.
Technical Feasibility
This assessment focuses on the technical resources available to the organization. It helps
organizations determine whether the technical resources meet capacity and whether the
technical team is capable of converting the ideas into working systems. Technical feasibility
also involves evaluation of the machinery, hardware, software, and other technical
requirements of the proposed system.
Financial Feasibility
This assessment typically involves a cost/ benefits analysis of the project, helping
organizations determine the viability, cost, and benefits associated with a project before
financial resources are allocated. It also serves as an independent project assessment and
enhances project credibility—helping decision-makers determine the positive economic
benefits to the organization that the proposed project will provide.
Environmental & Legal Feasibility
This assessment investigates whether any aspect of the proposed project conflicts with legal
and environment protection requirements like zoning laws, data protection acts or social
media laws. The environmental impact of a project is a significant measure to consider in
today’s radically changing climatic conditions.
Market Feasibility
This assessment involves undertaking a study to analyze and determine whether—and how
well—the organization’s needs can be met by completing the project. All the stake holders of
the project need to be identified and their requirements need to be analyzed for understanding
the market reality with respect to the project.
Social Feasibility
To reflect the real value of the project to the society, one has to consider the impact of the
project on the society. So when we evaluate the project from the view point of the society or
the economy as a whole, it is known as Social Cost Benefit Analysis. Social cost-benefit
analysis is a systematic and cohesive method to survey all the impacts caused by an urban
development project. It comprises not just the financial effects (investment costs, direct
benefits like tax and fees, et cetera), but all the social effects, like: pollution, safety, indirect
(labour) market, legal aspects, et cetera.
Below are some key benefits of conducting a feasibility study:
1. Improves project teams’ focus
2. Identifies new opportunities
3. Provides valuable information for a “go/no-go” decision
4. Narrows the business alternatives
5. Identifies a valid reason to undertake the project
6. Enhances the success rate by evaluating multiple parameters
7. Aids decision-making on the project
8. Identifies reasons not to proceed
Technical analysis
Technical analysis of a project is concerned primarily with:
1. Material Inputs and Utilities
2. Manufacturing Process/Technology
3. Product Mix
12/4/2020
EDPM Concept Notes
4. Plant Capacity
5. Location and Site Development
6. Machineries and equipment
7. Structures and Civil works
8. Projects Charts and Layouts
(1) Material input & utilities – It involves defining the requirements for materials and utilities,
specifying their properties and setting up a supply channel. Material input & utilities may be
classified into the following:
1. Raw materials – Agricultural products, Mineral Products, Livestock, Forest Products,
Marine Products
2. Processed Industrial Materials/Components – Base metals, semi-processed materials,
manufactured parts, small component
3. Auxiliary materials and factory supplies – chemicals, additives, packaging material,
paint, oil, grease, cleaning materials
4. Utilities – power, water, steam, fuel
The following must be kept in mind while taking decisions regarding material, inputs and
utilities:
1. Physical properties of the material
2. Transportation, Handling and Storage costs
3. Quantity available from Domestic/Foreign sources
4. 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.
The choice of technology is influenced by the following considerations:
1. Plant Capacity
2. Material Inputs
3. Production cost
4. Product mix
5. Technological Obsolescence
6. Ease of adoption
(3) Product Mix – An important aspect in technical analysis of a project is product mix
decision. It is essential to choose an effective product mix as different customers have different
taste, preferences and needs. The choice of product mix is usually guided by market
requirements. A project manager must keep in mind the quality of products and flexibility in
production while taking product mix decisions.
(4) Plant capacity – It refers to the volume or no. of units that can be manufactured during
given time period. It is also known as production capacity. It is the task of the project manager
to determine the feasible normal capacity and nominal maximum capacity for the project.
Feasible Normal Capacity – It refers to the capacity attainable under normal working
condition. It is computed keeping in mind the following factors:
1. Installed capacity (machinery and equipment)
2. Technical conditions of the plan
3. Normal stoppages
12/4/2020
EDPM Concept Notes
4. Holidays, shift patterns
5. Downtime for maintenance etc.
The feasible normal capacity is the actual production capacity of a plant and usually depends
upon the following factors:
1. Technical Requirements
2. Input Constraints
3. Cost of Investment
4. Market Conditions
5. Resources of the company
6. Government policy
Nominal Maximum Capacity – It refers to capacity that is technically obtainable through use
of machines. It is usually the capacity guaranteed by the supplier of machinery.
(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
examining the following factors:
1. Proximity of Land to Markets
2. Availability of raw materials
3. Availability of Labour
4. Existing Infrastructure i.e. roads, electricity, power, water supply
5. Cost of land
6. Government Policies
7. Miscellaneous other factors like
8. Climatic conditions
9. General living conditions
10. Proximity to auxiliary inputs / units
11. Ease of Waste disposal and dumping
(6) Machinery & Equipment – Machinery and Equipment requirement depends upon the
production technology and plant capacity of the proposed project. While conducting a
technical analysis of a project the following steps must be used to select machinery and
equipment:
Steps to select machinery and equipment for a project-
1. Estimate levels of production over time
2. Define various machining and operations
3. Calculate machine hours required for each type of operations
4. Select equipment and machinery for each function
5. Types of Machinery and equipment –
6. Plant equipment (process)
7. Mechanical equipment
8. Electrical equipment
9. Instruments
10. Controls and Internal Transportation System
11. Spare parts and Tools – required with the original equipment and for operational wear
and tear.
12. Things to be considered while selecting machinery and equipment:
13. Availability of power to run machines
14. Transporting heavy equipment
12/4/2020
EDPM Concept Notes
15. Ease of use
16. Import Policies of Government if the machines are to be imported from a foreign
country
Machinery may be procured in two ways either by placing different orders to different
suppliers or through a turn-key contract
Factors affecting procurement of Machinery→
1. Quality of machinery
2. Level of technical sophistication
3. Reputation of supplier
4. Expected delivery schedule
5. Payment terms
6. Performance guarantees
(7) Structure and Civil Works – Technical analysis of a project for buildings, structures and
civil works involves preparation and development of site which includes:
1. Grading and leveling of land
2. Demolition of existing structures
3. Relocation of pipeline, cables, roads
4. Reclamation of sewers and drainage
5. Connections for utilities
6. Arranging for electricity, water etc.
7. Buildings & structures – It involves construction of
8. Factory buildings
9. Ancillary buildings
10. Administrative area
11. Residential quarters
12. Non factory buildings – cafe, medical center
13. Outdoor works – It involves
14. Supply & distribution of utilities
15. Handling and treatment of emission, wastes, effluents
16. Outdoor lighting
17. Transportation
18. Landscaping
19. Enclosure and supervision – boundary, fence, barriers, gates, doors, security posts
Environment Aspect –
The project must comply with all environmental rules and regulations
All affluent must be disposed-off properly
Eco-friendly standards must be adopted in the production process
(8) Projects Charts & 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. Project charts and layouts help to:
1. Define the scope of the project
2. Provide basis for detailed project engineering
3. Help is estimating investment and production cost
4. Types of Layout:
5. General Function Layout
6. Materials Flow Diagram
7. Production Line Diagram
12/4/2020
EDPM Concept Notes
8. Transport Layout
9. Utility consumption layout
10. Organizational Layout
Plant Layout – It is concerned with the physical layout of the factory. Plant layout depends
upon the production process adopted for the project, it involves the following considerations:
1. Consistency of layout with production process and technology
2. Smooth flow of goods from 1 stage to another
3. Proper utilization of space
4. Scope for further expansion
5. Minimization of production cost
6. Safety of personnel
After conducting a technical analysis, a project implementation schedule is prepared which
reflects the plan of action regarding installation of machinery and operation of plant.
Cost–benefit analysis (CBA)

Cost–benefit analysis (CBA), is a systematic approach to estimating the strengths and
weaknesses of alternatives of projects investments. it is used to determine options that provide
the best approach to achieve benefits while preserving savings.
The CBA is also defined as a systematic process for calculating and comparing benefits and
costs of a project.
Broadly, CBA has two main purposes:
To determine if an investment/decision is sound (justification/feasibility) – verifying whether
its benefits outweigh the costs, and by how much;
To provide a basis for comparing projects – which involves comparing the total expected cost
of each option against its total expected benefits.
In CBA, benefits and costs are expressed in monetary terms, and are adjusted for the time
value of money, so that all flows of benefits and flows of project costs over time (which tend
to occur at different points in time) are expressed on a common basis in terms of their net
present value
Process
The following is a list of steps that comprise a generic cost–benefit analysis.
1. Define the goals and objectives of the project/activities
2. List alternative projects/programs.
3. List stakeholders.
4. Select measurement(s) and measure all cost/benefit elements.
5. Predict outcome of cost and benefits over relevant time period.
6. Convert all costs and benefits into a common currency.
7. Apply discount rate.
8. Calculate net present value of project options.
9. Perform sensitivity analysis.
10. Adopt recommended choice.
A formal CBA lists all of the project expenses and tangible benefits then calculates the return
on investment (ROI), internal rate of return (IRR), net present value (NPV), and payback
period. Then, the difference between the costs and the benefits from taking action are
calculated.
A general rule of thumb is the costs should be less than 50% of the benefits and the payback
period shouldn’t exceed past a year. Some people also refer to cost benefit analysis as benefit
cost analysis (BCA).
12/4/2020
EDPM Concept Notes
It is used to evaluate projects mainly from the public sector, and provides a guidance for
solving problems that are associated with these projects.
Financial Analysis
The goals of this phase are to determine whether or not to take on the project, to calculate its
profits and to ensure stable finances during the project. In other words, financial analysis
evaluates project liquidity and profitability.
Liquidity is assured by
1. Cash flow analysis
Profitability is evaluated by the following techniques:
1. Payback period analysis
2. Accounting rate of return
3. Net present value
4. Internal rate of return
Cash flow analysis

It represents a listing of the project cash inflows and outflows divided into time periods. The
time periods may be months, quarters or years, depending on the project needs. A cash flow
can be created for either the past accounting period (it is called the cash flow statement) or the
future accounting period (the cash flow budget). Apart from the cash flow projections, the
cash flow budget may contain the actual cash inflows and outflows, allowing you to monitor
the accuracy of your projections.
The main benefit of cash flow budgeting is that it quickly points out any liquidity problems
in the future. It shows when the company would experience cash deficits and allows you to
take corrective actions in advance by reducing the outflows, changing the time of certain
transactions or borrowing the money. The cash flow budget can also identify the time periods
when the company will have excess amounts of cash, allowing you to use this cash in order
to create additional revenue.
Payback Period Analysis

Payback period analysis is a method that will tell you in how much time you can earn the
same amount of money that you would spend on the project. Its formula is:
The projects with shorter payback period rank
higher — they are more liquid and less risky
than the projects with longer payback periods.
A payback period of three years or less is
considered good, while the projects with payback period of one year of less should be
considered very important and should be prioritized.
Accounting Rate of Return (ARR)

Accounting rate of return is a simple method used to quickly estimate a project's net profits.
It represents yearly profits as a percentage of the initial investment:
Another advantage of the accounting rate of return is that the project's entire useful life is
considered, not just the payback period. On the other hand, this method does not use cash
flow data and does not consider the time value of money.
12/4/2020
EDPM Concept Notes
Net Present Value
Unlike the previous two methods, net present value (NPV) considers the time value of money.
Basically, due to its earning capacity, the same amount of money is worth more right now
than at some point in the future.
So, the net present value allows you to find the today's value of the future net cash flow of a
project. If the value is greater than the cost, the project will be profitable. You could also
compare multiple projects, where those with greater difference between the net present value
and the cost are ranked higher. The net present value is calculated by using the following
formula: Where:
• Ct- net cash inflow during the period
• Co- initial investment
• r - discount rate
• t - number of time periods
The discount rate represents the cost of borrowing
the money. If you are taking a loan in order to finance
your project, you can use the loan interest rate as the discount rate. Note that if the rate is
variable, you may have to estimate an average interest rate over the loan period. Also, you
should take tax laws into account, as business loans may be tax-deductible. If you finance the
project with your own funds, the discount rate could be the interest rate you would earn by
depositing the money in a savings account.
Internal Rate of Return (IRR)

The internal rate of return is another financial analysis method that allows you to calculate
the time value of money. The IRR of an investment represents the discount rate at which the
net present value of costs (negative cash flows) of the investment equals the net present value
of the benefits (positive cash flows) of the investment. In other words, it represents the interest
rate which is equivalent to the amount of money you expect to earn on the project.
Theoretically, all projects in which the internal rate of return is higher than the cost of capital
are profitable. However, it is advised to only accept projects where the internal rate of return
is several percentage points higher than the cost of borrowing, in order to compensate the risk
and time associated with the project.
Tips and Tricks
1. Create a cash flow budget
2. Use realistic cash flow predictions and monitor their accuracy by including the
actual cash flow as the time passes
3. Identify potential liquidity problems and solve them on time
4. Use at least two techniques for evaluating project profitability
Environmental appraisal of projects

An environmental impact analysis is typically conducted to assess the potential impact a
proposed development project will have on the natural and social environment. This may
include an assessment of both the short- and long-term effects on the physical environment,
such as air, water and/or noise pollution; as well as effects on local services, living and health
standards, and aesthetics.
Environmental appraisal of project consists of two key components:
1. Environmental report for approval or clearance
2. Sustainable growth of the firm
Any project requires environmental clearance for approval or licensing. The approach
accounting for the consideration beyond mere legal clearance is also appreciated in the
present scenario.
The environmental appraisal of projects are carried out by following approaches, namely,:-
12/4/2020
EDPM Concept Notes
Feasibility approach: In this approach, minimum environmental standards prescribed in the
county are to be met. For international companies, beyond environmental standards,
company aims at achieving environmental certification such as ISO 14000 (general industries)
or LEED certification (building or construction industries) There are two feasibility
approaches, namely, reactive approach and proactive approach.
Reactive approach Environmental impact assessment is carried out for the sole purpose of
getting environmental clearance.
Proactive approach Environmental impact assessment is used as a tool to improve planning
process, cost effective, carbon credits, safety of work-place etc.
Legal Requirements
Government of India permits to carry out a project if and only if it satisfies or confirms to
‘Environmental Protection Act (1986).’ The clearance from Government is mandatory for new
projects as well as expansion or modernization of existing projects.
Environmental Impact assessment (EIA) notification published in 2006 declares the partial
decentralization by implementing EIA agency and environmental expert committee at central
and state level. The expert committee evaluates the appraisal report by personal visit and
public notification. The regulatory authority gives the clearance within 105 days of receipt of
final EIA. The biannual compliance report of EIA of project is expected to submit to the
authority for post clearance monitoring.
Environmental Impact Assessment (EIA) stages
i. Screening: Screening determines the requirement of the project to be assessed for EIA.
ii. Scoping: Scoping identifies the key issues and its impacts.
iii. Impact Analysis: Impact analysis identifies likely environmental and social impact.
iv. Mitigation: Mitigation recommends the actions to be taken to reduce the potential
adverse environmental consequences.
v. Reporting: Reporting presents the results of EIA.
vi. Review: Review examines the adequacy and effectiveness of EIA.
12/4/2020
EDPM Concept Notes
Social Cost Benefit Analysis
Evaluating a project from the view point of the society (or economy) as a whole, is called Social
Cost Benefit Analysis (SCBA) / Economic Analysis
SCBA can be applied to both public and private investments
Public Investment: SCBA is important especially for the developing countries where govt.
plays a significant role in the Economic development
Private investment: Here, SCBA is important as the private investments are to be approved
by various governmental and Quasi-governmental agencies.
The main focus of SCBA is to determine
1. Economic benefits of the project in terms of shadow prices

2. The impact of the project on the level of savings and investments in the society
3. The impact of the project on the distribution of income in the society;
4. The contribution of the project towards the fulfillment of certain merit wants (self-
sufficiency, employment etc)
Two approaches for SCBA
UNIDO Approach:- This approach is mainly based on publication of UNIDO ( United Nation
Industrial Development Organisations) named Guide to Practical Project Appraisal in 1978.
L-M Approach :- IMD Little and J.A. Mireless approach for analysis of Social Cost Benefit in
Manual of Industrial Project “ Analysis in Developing countries and project Appraisal and
planning for Developing Countries.
UNIDO Approach Stage - 1
Calculation of financial profitability of the project
a) A good technical and financial analysis must be done before a meaningful economic
(social) evaluation can be made so as to determine financial profitability.
b) Financial profitability is indicated by the Net Present Value (NPV) of the project, which
is measured by taking into Account inputs (costs) and outputs (benefits) at market
price.
UNIDO Approach Stage - 2
Obtaining the net benefit of the project at economic (shadow) prices
a) The commercial profitability analysis (calculated in stage 1) would be sufficient only

if the Project is operated in Perfect market. Because, only in a perfect market, market
prices can reflect the social value
b) If the market is imperfect (most of the cases in reality), net benefit of the Project is
determined by assigning shadow Prices to inputs and outputs.
c) Therefore, developing shadow pries is very much vital.
12/4/2020
EDPM Concept Notes
Shadow prices reflect the real value of a resource (input or output) to society
Shadow Prices are also referred as economic prices, economic / accounting efficiency prices
etc
Shadow prices can be defined as the value of the contribution to the country's basic socio-
economic objectives made by any Marginal change in the availability of commodities (Output)
or factor of production (input).
Example: A project of power station may increase the production of electricity which
contributes to one of the socio-economic Objectives of the country.
UNIDO Approach - Stage 3
Adjustment for the impact of the project on Savings and investment:
The purpose of this stage is to
Determine the amount of income gained or lost because of the project by different income
groups (such as business, government, workers, customers etc)
➢ Evaluate the net impact of these gains and losses on savings

➢ Measure the adjustment factor for savings and thus the adjusted values for savings
impact
➢ Adjust the impact on savings to the net present value calculated in stage two.
UNIDO Approach- Stage 4
Adjustment for the impact of the project on Income distribution
▪ Govt. considers a project as an investment for the redistribution of income in favour

of economically weaker sections or economically backward regions
▪ This stage provides a value on the effects of a project on income distribution between
rich and poor and among regions
▪ Distribution Adjustment Factor (Weight) is calculated and the impacts of the project
on income distribution have been valued by multiplying the adjustment factor with
the particular income of a group. This value will then be added to the net present value
re-calculated in stage three to produce the social net present value of the project.
UNIDO Approach- Stage 5
Adjustment for Merit and Demerit Goods :
If there is no difference between the economic value of inputs and outputs and the social value
of those, the UNIDO approach for project evaluation ends at stage four.
In practical, there are some goods (merit goods), social value of which exceed the economic
value (e.g oil, creation of employment etc) and also there are some goods (demerit goods),
social value of which is less than their economic value (e.g., cigarette, alcohol, high -grade
cosmetics etc)
12/4/2020
EDPM Concept Notes
Adjustment to the NPV of stage 4 is required if there is any difference between the social and
economic value
The steps of adjustment procedure are:
i. Estimating the present economic value

ii. Calculating the adjustment factor
iii. Multiplying the economic value by the adjustment factor to obtain the adjusted value
iv. Adding or subtracting the adjusted value to or from the NPV of the project as
calculated in stage four.
L-M Approach
I.M.D. Little and James A. Mirrless have developed an approach to SCBA which is famously
known as L-M approach.
The core of this approach is that the social cost of using a resource in developing countries
differs widely from the price paid for it
Hence, it requires Shadow Prices to denote the real value of a resource to society.
Features of L-M Approach:
This approach measures the cost and benefits in terms of international or border prices.
It is because that the border prices represent the correct social opportunity costs or benefits of
using or producing traded goods.
Micro, Small and Medium Enterprises
Small businesses are playing an important role in the industrial economy of the world. These
are particularly important in the developing economies. Small business is predominant even
in developed countries such as USA, Japan etc.
Classification of Enterprises (New Definitions)
Revised Classification applicable w.e.f 1st July 2020
Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover
Classification Micro Small Medium
Investment in Investment in Plant Investment in Plant

Manufacturing Plant and and Machinery or and Machinery or
Enterprises and Machinery or Equipment: Equipment:
Enterprises Equipment: Not more than Not more than
rendering Services Not more than Rs.10 crore and Rs.50 crore and
12/4/2020
EDPM Concept Notes
Rs.1 crore and Annual Turnover ; Annual Turnover ;
Annual Turnover ; not more than Rs. not more than Rs.
not more than Rs. 50 crore 250 crore
5 crore
Ancillary Units
These units provide inputs to other industries. These are engaged in the manufacture of parts,
components, light engineering products like cycles, sewing machines diesels engines,
machine tools, electrical application. The investment in plant and machinery should not
exceed Rs. 5 crores.
Export Oriented Unit
Export oriented units are those SSI units which export at least 30% of its annual production
by the end of the 3th year of commencement of production.
Characteristics of MSMES
• The important characteristics of MSMEs are summarized as follows:

• They are generally organized and run by individual entrepreneurs.
• They require less capital.
• They are fundamentally labour-intensive units facilitating greater utilization of
manpower.
• They involve the use of simple technology, intensive utilization of individual skill
leading to professional specialization.
• They cater the individual tastes and fashions and render personalized service to
consumers.
• They are highly localized industries. Using local resources MSMEs are decentralized
and dispersed to rural areas.
• They are eligible for govt. assistance and patronage and for concessional finance by
banks, financial institutions etc.
• They are flexible to a large extent. They are more susceptible to change and highly
reactive and receptive to socio-economic conditions.
• They are free from red-tapism and bureaucratic handicaps.
• Compared to large units, a MSME has a lesser gestation period. ie, the period after
which the on investment starts.
Objectives of MSMEs
The primary objectives of MSME are to play a complementary role in the socio-economic set
up of a country. The other objectives are as follows:
1. To provide increased employment opportunities.

2. To provide production of large variety of goods especially consumer goods through
labour- intensive methods.
3. To bring backward areas too in the mainstream of national development.
4. To improve the level of living of people in the country.
12/4/2020
EDPM Concept Notes
5. To create a climate for the development of self-employed experts, professionals and
small entrepreneurs.
6. To ensure more equitable distribution of national income.
7. To ensure balanced regional development as regards industries.
8. To encourage the adoption of modem techniques in the unorganized traditional sector
or the industry.
Advantage Of MSMEs
1) They are relatively more environmental friendly.

2) They are generally based on local resources.
3) They provide ample opportunities for creativity and experimentation.
4) They facilitate equitable distribution of income and wealth.
5) MSME enjoys the government support and patronage.
6) These helps in the balanced regional development.
7) It is possible to make necessary changes as and when required.
8) These help in reducing prices.
9) There is a close and direct personal contact with the customer and employees.
10) They create more employment opportunities. They are labour intensive. They offer
ample scope for self-employment.
11) They require only less capital. It is a boon to a country like India where capital is
deficient.
12) MSME alone can satisfy individual tastes and offer personalized service to the
customers.
Disadvantages of MSMEs
➢ MSMEs suffer from lack of funds. They are financially weak.

➢ They suffer from lack of managerial and other skills. They cannot employ highly paid
officials.
➢ MSMEs always face tough competition from large businesses.
➢ They are not Well equipped to make advantage of the latest technology and modern
methods.
➢ There is only a little scope for division of labour and specialization.
➢ MSMEs cannot afford to spend large sums of money on research and experiments
➢ They cannot survive in times of adversity.
➢ They cannot secure cheap credit.
Role/ Importance of MSMEs in Developing Countries
1) Large Employment Opportunities: MSMEs are generally labour-intensive. For every Rs. 1
lakh of fixed investment, MSME sector provides employment for 26 persons as against 4
persons in the large scale sector. Thus in a country like India where capital is scarce and labour
is abundant, MSMEs are especially important.
2) Economical Use of Capital: MSMEs need relatively small amount of capital. Hence it is
suitable to a country like India where capital is deficient.
3) Balanced Regional Development: Generally small enterprises are located in village and
small towns. Therefore it is possible to have a balanced regional growth of industries. India is
a land of villages.
12/4/2020
EDPM Concept Notes
4) Equitable Distribution of Income And Wealth: It removes the drawbacks of capitalism,
abnormal profiteering, concentration of wealth and economic power in the hands of few etc.
5) Higher Standard of Living: MSMEs bring higher national income, higher purchasing power
of people in rural and semi-urban areas.
6) Mobilization of Locals Resources: The spreading of industries even in small towns and
villages would encourage the habit of thrift and investment among the people of rural areas.
7) Simple Technology: New but simple techniques of production can be adopted more easily
by MSMEs without much investment.
8) Less Dependence on Foreign Capital: MSMEs use relatively low proportion of imported
equipment and materials. The machinery needed for these industries can be manufactured
within the country.
9) Promotion of Self Employment: MSMEs foster individual skill and initiative and promote
self-employment particularly among the educated and professional class.
10) Promotion of Exports: With the establishment of a large number of modem MSMEs in the
post-independence period, the contribution of the small scale sector in the export earnings has
increased much.
11) Protection of Environment: MSMEs help to protect the environment by reducing the
problem of pollution.
12) Shorter Gestation Period: In these enterprises the time-lag between the execution of the
investment project and the start of flow of consumable goods is relatively short.
13) Facilitate Development of Large Scale Enterprises: MSMEs support the development of
large enterprises by meeting their requirements of inputs of raw materials, intennediate
goods, spare parts etc. and by utilizing their output for further production.
Steps For Starting SSIs/MSMEs
As soon as a person decides to become an entrepreneur and to start a MSME, he is required

to take a number of steps and formalities one after the other. They are as follows:
Step 1) Scanning of Business Environment: it is essential on the part of the entrepreneur to

study and understand the prevailing business environment. Entrepreneur should scan the
business opportunities and threats in the new environment. To study the administrative
framework, procedure, rules and regulations and other formalities implemented by the
government. The potential entrepreneur must assess his own deficiencies, which he can
compensate through training.
Step 2) Selection of the Product: The very success of one’s venture will depend on the
rationality of his decision in this regard. The economic viability of the product can be
ascertained by considering certain demand aspects such as volume of demand in the domestic
market, volume of demand in the export market, volume of potential demand, a degree of
substitution of an existing product etc. The prospective entrepreneur has to identify the
product based on market research or market survey.
12/4/2020
EDPM Concept Notes
Step 3) Selection of Form of Ownership: He has to select sole proprietorship or family
ownership or partnership or private limited company as the form of the ownership.
Step 4) Selection of Location and Site: Location is selected after considering certain factors
such as nearness to market, sources of material and labour, modem infrastructure facilities
etc. The entrepreneur has to choose a suitable plot for the factory. He may purchase land
directly or choose from an industrial area developed by State Development Corporations like
SIDCO, or Directorate of Industries. In order to stimulate industrial growth, the government
of Kerala is providing infrastructural assistance by way of
(1). Developing areas.
(2). Development Plots.
(3).Industrial estates, and
(4). Mini industrial units.
Step 5) Designing Capital Structure: Apart from the own capital, he may secure finance from
friends and relatives, term loans from banks and financial institutions.
Step 6) Acquiring Manufacturing Know-How or Technology: Many institutions of

government, research laboratories, research and development divisions of big industries and
certain consultancy agencies provide the manufacturing know-how.
Step 7) Preparation of Project Report: The report usually covers important items like sources
of finance, availability of machinery and technical know-how, sources of raw material and
labour, market potential and overall profitability.
Step 8) Registration as a Small Scale Industry: Registration with Department of industries and
Commerce is only optional. There is no statutory obligation, but small scale industries can
avail various facilities, incentives and concessions offered by the state as well as central
government only if they registered as SSI. The registration would be done in two stages.
> Provisional Registration: It will be valid for one year with possible three extensions of six
months each. It helps entrepreneur to take necessary steps to bring the units into existence.
The provisional registration may enable the party to:
Udyogaadhaar
A one-page simple registration form for online filing of UAM has been introduced which
replaces the filing of Entrepreneur’s Memorandum Part I&II. The filing of UAM can be done
on http://udyogaadhaar.gov.in .The salient features of Udyog Aadhaar are:
• Registration is online and user-friendly.
• UAM can be filed on self-declaration basis.
• No documentation required.
• No Fee for filing.
• File more than one Udyog Aadhaar with same Aadhaar Number.
Step 9) Obtain Clearances, Permission and Licenses
12/4/2020
EDPM Concept Notes
An entrepreneur has to obtain several clearances or permissions depending upon the nature
of his unit and products manufactured.
1. Regulatory or Taxation Clearances
2. Product Specific Clearances
3. Environment & Pollution Related Clearances
1. Registration under Sales Tax Act - Commercial Tax officer of area concerned
2. Registration under Central Excise Act - Collector of Central Excise or his nominee for area
3. Payment of Income Tax - ITO of the area concerned
4. Registration of Partnership deed - Inspector General of area concerned
5. Calibration of weights & measures - Weights and Measures Inspector of State
6. Power Connection - Designated Officer of State Electricity Board
7. Employee strength exceeding 10 with power connection or 20 without power - Chief
Inspector of Factories
Environment & Pollution Related Clearances
The method of granting consent under water and air pollution to SSI units has been simplified.
Except for 17 critically polluting sectors given below, in all other cases SSI units will merely
have to file an application and obtain an acknowledgement which will serve the purpose of
consent:-
1. Fertilizer (Nitrogen/Phosphate)
2.Sugar
3.Cement
4.Fermentation & Distillery
5.Aluminium
6.Petrochemicals
7.Thermal Power
8.Oil refinery
9.Sulphuric Acid
10.Tanneries
11.Copper smelter
12.Zinc smelter
13.Iron & Steel
14.Pulp & Paper
15.Dye and Dye intermediates
16.Pesticides manufacturing and formulation
17.Basic Drugs and Pharmaceuticals
Product Specific Clearances
1.Establishing a Printing Press - District Magistrate

2.License for Cold Storage Construction - Designated Official in State
3.Pesticides - Central/State Agricultural Department - Ministry of Agriculture
4.Drugs and Pharmaceuticals - Drug license from State Drug Controller
5.Safety Matches/ Fireworks - License under Explosives Act from Directorate of
Explosives, Nagpur
6.Household Electrical Appliances - License from Bureau of Indian Standards
7.Wood Working Industry within 8 km from forest - District Forest Officer
12/4/2020
EDPM Concept Notes
8. Milk Processing & Milk products manufacturing units - Approval under Milk and Milk
Products Order from State Agricultural/ Food Processing Industries Department above a
designated capacity.
Other Permissions
(1) Apply to NSIC/SIDO and other institutions for procuring machines on H.P basis.
(3) Apply to local Bodies for permission to construct the shed to establish a unit.
(4) Apply for financial assistance to SFC/Banks or other financial institutions on the basis of
project report.
(5) Obtain sales tax, excise registration etc whenever required.
(6) Apply for a shed in an industrial estate/ development site in an industrial area/ material
for construction of shed as the case may be.
7) Obtaining Statutory License: Any person should obtain the following licenses and
certificates before starting the venture:
(A) License from Local Bodies For
(1) Construction of the building.
(2) Installation of plant and machinery.
(B) License from the Directorate of Factories and Boilers For:
(1) Approval of factory building.
(2) Registration under section 6, 7 and 85 of the Factory Act.
(C) No Objection Certificate from State Pollution Control Board.
Step 10) Apply for Power Connection: There are 2 categories of power, the Low Tension (LT)
and High Tension (HT). A consumer can avail LT only if the connected load is 75 HP and
below. If connected load is between 75 HP and 130 HP, the consumer has the option to avail
either LT supply or HT supply.
Step 11) Arrangement of Finance: Entrepreneur needs to acquire assists of 2 kinds namely
Fixed assets and current assets. Long term finance is needed to acquire fixed assets like land,
building, plant and machinery and for security deposits. Short term funds are required for
acquiring current assets. Current assets are essential for the day to day working of the
industry. Long term funds includes owner’s capital, subsidy from central/ state govt,
personal borrowings from friends and relatives and long term loans from financial institution
like KFC and KSIDC.
Step 13) Installation of Machinery: Machinery should preferably be installed as per the plant
layout.
Step 14) Recruitment of Manpower: The number and type of Workers is to be decided. After
this, the required workers should be recruited.
Step 15) Procurement of Raw Material: The raw materials may be procured indigenously or
may have to be imported by the entrepreneur. The next step is to start production, which is
taken up in two stages- Trial production and Commercial production having successfully test
marketed the product, commercial marketing can be undertaken.
Step 16) Application for Permanent Registration: For this, application form has to be made to
the GM of DIC through IEO/ Taluk Industries Officer. The GM should inform the
entrepreneur of the date and time of inspection of the unit. On being satisfied a registration
certificate may be issued by the Directorate of Industries within one month of the receipt of
the application. The period of the certificate whether provisional or permanent will be for a
12/4/2020
EDPM Concept Notes
period of 2 years. Renewal certificate would be affected by the GM (DIC) within a period of 3
months from the date of expiry of certificate.
Micro, Small and Medium Enterprises Development Act 2006
Under this act, the central Government shall set up, for the purpose of the act, a Board known
as the National Board for Micro, Small and Medium Enterprises.
Preamble: “An Act to provide for facilitating the promotion and development and enhancing
the competitiveness of micro, small and medium enterprises and for matters connected
therewith or incidental thereto.”
The Objective of the Act is to seek the following:
To provide for statutory definitions of “small enterprise” and “medium enterprise”;
To provide for the establishment of a National Small and Medium Enterprises Board, a high-
level forum consisting of stakeholders for participative review of and making
recommendations on the policies and programmes for the development of small and medium
enterprises;
To provide for classification of small and medium enterprises on the basis of investment in
plant and machinery or equipment and establishment of an Advisory Committee to
recommend on the related matter;
To empower the Central Government to notify programmes, guidelines or instructions for

facilitating the promotion and development and enhancing the competitiveness of small and
medium enterprises;
To empower the State Government to specify, by notification, that provisions of the labour
laws specified in clause 9(2) will not apply to small and medium enterprises employing upto
50 employees with a view to facilitating the graduation of small enterprises to medium
enterprises;
To make provisions for ensuring timely and smooth flow of credit to small and medium
enterprises so as to minimize the incidence of sickness among and enhancing the
competitiveness of such enterprises, in accordance with the guidelines or instructions of the
Reserve Bank of India;
To empower the Central and State Governments to notify Preference Policies in respect of
procurement of goods and services, produced and provided by small enterprises, by the
Ministries, Departments and public sector enterprises;
To empower the Central Government to create a Fund or Funds for facilitating promotions
and development and enhancing the competitiveness of small enterprises and medium
enterprises;
To empower, to prescribe harmonised, simpler and streamlined procedures for inspections of

small and medium enterprises under the labour laws enumerated in clause 15, having regard
to the need to promote self-regulations or self-certification by such enterprises;
To prescribe for maintenance of records and filing of returns by small and medium enterprises
with a view to reduce the multiplicity of often-overlapping types of returns to be filed;
12/4/2020
EDPM Concept Notes
To make further improvements in the Interest on Delayed Payments to Small Scale and
Ancillary Industrial Undertakings Act, 1993 and making that enactment a part of the proposed
legislation and to repeal that enactment
The schemes/programmes undertaken by the Ministry and its organizations seek to

facilitate/provide:
1 Adequate flow of credit from financial institutions/banks;

2 Support for technology upgradation and modernization;
3 Integrated infrastructural facilities;
4 Modern testing facilities and quality certification;
5 Access to modern management practices;
6 Entrepreneurship development and skill upgradation through appropriate training
facilities;
7 Support for product development, design intervention and packaging;
8 Welfare of artisans and workers;
9 Assistance for better access to domestic and export markets; and
10 Cluster-wise measures to promote capacity-building and empowerment of the units and
their collectives.
The Implementation of policies and various programmes/schemes for providing support

services to MSME’s are undertaken through the following organizations of the Ministry
1. Office of Development Commissioner (Micro, Small and Medium Enterprises)

2. Khadi & Village Industries Commission (KVIC)
3. Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)
4. Coir Board
5. National Small Industries Corporation (NSIC) Ltd
6. National Institute for Micro, Small and Medium Enterprises (ni-msme)
7. National Board for Micro, Small and Medium Enterprises (NB MSME)
Major Plan Schemes Implemented By The Ministry
Schemes for MSME Sector
1. Performance & Credit Rating Scheme
The scheme is being implemented through National Small Industries Corporation (NSIC)
Limited. The main objective of the scheme is to provide a trusted third party opinion on the
capabilities and creditworthiness of the MSEs so as to create awareness amongst them about
the strengths and weakness of their existing operations.
2. Marketing Assistance Scheme
The scheme is being implemented through National Small Industries Corporation (NSIC)
Limited. The main objectives of the scheme is to enhance the marketing competitiveness of
MSMEs; to provide them a platform for interaction with the individual/institutional buyers;
to update them with prevalent market scenario and to provide them a form for redressing
their problems. MSMEs are supported under the Scheme for capturing the new market
opportunities through organising/ participating in various domestic & international
exhibitions/ trade fairs, Buyer-Seller meets intensive campaigns and other marketing events.
12/4/2020
EDPM Concept Notes
3. International Cooperation (IC) Scheme
Technology infusion and/or upgradation of Indian micro, small and medium enterprises
(MSMEs), their modernisation and promotion of their exports are the principal objectives of
assistance under the Scheme. The Scheme would cover the following activities:(a) Deputation
of MSME business delegations to other countries for exploring new areas of technology
infusion/upgradation, facilitating joint ventures, improving market of MSMEs products,
foreign collaborations, etc; (b) Participation by Indian MSMEs in international exhibitions,
trade fairs and buyer seller meets in foreign countries as well as in India, in which there is
international participation; (c) Holding international conferences and seminars on topics and
themes of interest to the MSME. IC Scheme provides financial assistance towards the airfare
and space rent of entrepreneurs.
4. Assistance to Training Institutions Scheme
The Scheme envisages financial assistance for establishment of new institutions (EDIs-
Entrepreneurship Development Institutes), strengthening the infrastructure of the existing
EDIs and for supporting entrepreneurship and skill development activities. The assistance
shall be provided to these training institutions in the form of capital grant for
creation/strengthening of infrastructure and programme support for conducting
entrepreneurship development and skill development programmes.
5. Survey, Studies and Policy Research
The main objectives of the Scheme are (i) to regularly/periodically collect relevant and reliable
data on various aspects and features of MSMEs, (ii) to study and analyze, on the basis of
empirical data or otherwise, the constraints and challenges faced by MSMEs as well as the
opportunities available to them in the context of liberalization and globalization of the
economy, and (iii) to use the results of these surveys and analytical studies for policy research
and designing appropriate strategies and measures of intervention by the Government.
Project
A project is a temporary endeavor, having a defined beginning and end (usually constrained
by date, but can be by funding or deliverables), undertaken to meet unique goals and
objectives, usually to bring about beneficial change or added value. The temporary nature of
projects stands in contrast to business as usual (or operations), which are repetitive,
permanent or semi-permanent functional work to produce products or services. In practice,
the management of these two systems is often found to be quite different, and as such requires
the development of distinct technical skills and the adoption of separate management.
Projects are different from standard business operational activities as they are:
• Unique in nature. They do not involve repetitive processes. Every project undertaken
is different from the last, whereas operational activities often involve undertaking
repetitive (identical) processes
• Have a defined timescale. Projects have a clearly specified start and end date within
which the deliverables must be produced to meet a specified customer requirement
• Have an approved budget. Projects are allocated a level of financial expenditure
within which the deliverables must be produced to meet a specified customer
requirement
12/4/2020
EDPM Concept Notes
• Have limited resources. At the start of a project an agreed amount of labor, equipment
and materials is allocated to the project
• Involve an element of risk. Projects entail a level of uncertainty and therefore carry
business risk
• Achieve beneficial change. The purpose of a project, typically, is to improve an
organization through the implementation of business change.
Project management-Definition
Project management is the discipline of planning, organizing, securing and managing
resources to bring about the successful completion of specific project goals and objectives.
Objectives of Project Management

Project management aims to plan, coordinate and control the complex and diverse activities
of modern industrial and commercial projects. All projects are sharing one common
characteristic, i.e. the projection of ideas and activities into new endeavours. The purpose of
project management is to foresee or predict as many uncertainties and problems as possible
and to plan, organize and control activities so that the project is completed successfully in
spite of all the risks.
Project classification based on application areas.

This kind of project can be classified into the following type.
Construction type projects: The construction type of project produces artifacts, which means
a useful or decorative man-made object. The value generated by the project is embedded in
the artifact. The artifact may be a complex system with human and mechanical components.
Some examples of construction projects are IT Park, automobile industry, laying express
highway, etc.
Research project: The research projects produce knowledge. The knowledge may be formally
represented as models, patterns or patents, empirical equations, etc. The knowledge is
generally embedded in a working process or artefact. Some examples of research projects are
business modelling, economic model, hybrid variety of paddy, complex algorithm to manage
parallel computers, etc.
Reengineering projects: Reengineering projects will bring a change in an existing system or

process. Some examples of reengineering projects are issuing voter ID cards to the citizens,
computerized land records, improved production processes, etc.
Procurement projects: A procurement project produces a contractually-based business

relationship with a selected supplier for a defined product or service on a fixed specification
and/or a defined specification process. Some examples are, outsourcing a specific
construction project or a research project, outsourcing business functions, like payroll
processing, recruitment of executives, etc.
Business implementation projects: This type of project produces an operationally effective

process. The value generated by the project is embedded in the process. The value generated
by the project is embedded in the process. Some examples of this type of projects are
implementation of ERP software in an automobile company, installing e-commerce system
for a chain of stores, etc.
12/4/2020
EDPM Concept Notes
Project Scope
The main purpose of the scope definition is to clearly describe the boundaries of your project.
Clearly describing the boundaries is not enough when it comes to project. You need to get the
client's agreement as well.
Therefore, the defined scope of the project usually included into the contractual agreements
between the client and the service provider. SOW, or in other words, Statement of Work, is
one such document.
In the project scope definition, the elements within the scope and out of the scope are well
defined in order to clearly understand what will be the area under the project control.
Therefore, you should identify more elements in detailed manner and divide them among the
scope and out of scope.
How to Define the Project Scope
When the project is about to be funded, there should be a set of defined deliverables and
objectives for the project. Project objectives can be used for defining the project scope. As a
matter of fact, there should be one or more deliveries addressing each project objective in the
project. By looking at the deliverables, you can actually gauge the project scope.
Scope Creep
Scope creep is something common with every project. This refers to the incremental expansion
or modification of the project scope. Most of the time, the client may come back to the service
provider during the project execution and add more requirements.
Most of such requirements haven't been in the initial requirements. As a result, change
requests need to be raised in order to cover the increasing costs of the service provider.
Due to business scope creep, there can be technological scope creep as well. The project team
may require new technologies in order to address some of the new requirements in the scope.
In such instances, the service provider may want to work with the client closely and make
necessary logistic and financial arrangements.
Project life cycle or Project Development Cycle

Project management activities can be categorized into five main processes.
1 - Project Initiation
Project initiation is the
starting point of any project.
In this process, all the
activities related to winning
a project takes place.
Usually, the main activity of
this phase is the pre-sale or
selection of the project.
During the pre-sale period,

the service provider proves
12/4/2020
EDPM Concept Notes
the eligibility and ability of completing the project to the client and eventually wins the
business. Then, it is the detailed during requirements gathering which comes next.
During the requirements gathering activity, all the client requirements are gathered and
analyzed for implementation. In this activity, negotiations may take place to change certain
requirements or remove certain requirements altogether.
Usually, project initiation process ends with requirements sign-off.
2 - Project Planning
Project planning is one of the main project management processes. If the project management
team gets this step wrong, there could be heavy negative consequences during the next phases
of the project.
In this process, the project plan is derived in order to address the project requirements such
as, requirements scope, budget and timelines. Once the project plan is derived, then the project
schedule is developed.
Depending on the budget and the schedule, the resources are then allocated to the project.
This phase is the most important phase when it comes to project cost and effort.
3 - Project Execution
After all paperwork is done, in this phase, the project management executes the project in
order to achieve project objectives.
When it comes to execution, each member of the team carries out their own assignments
within the given deadline for each activity. The detailed project schedule will be used for
tracking the project progress.
During the project execution, there are many reporting activities to be done. The senior
management of the company will require daily or weekly status updates on the project
progress.
In addition to that, the client may also want to track the progress of the project. During the
project execution, it is a must to track the effort and cost of the project in order to determine
whether the project is progressing in the right direction or not.
In addition to reporting, there are multiple deliveries to be made during the project execution.
Usually, project deliveries are not onetime deliveries made at the end of the project. Instead,
the deliveries are scattered throughout the project execution period and delivered upon
agreed timelines.
4 - Control and Validation
During the project life cycle, the project activities should be thoroughly controlled and
validated. The controlling can be mainly done by adhering to the initial protocols such as
project plan, quality assurance test plan and communication plan for the project.
12/4/2020
EDPM Concept Notes
Validation is a supporting activity that runs from first day to the last day of a project. Each
and every activity and delivery should have its own validation criteria in order to verify the
successful outcome or the successful completion.

When it comes to project deliveries and requirements, a separate team called 'quality
assurance team' will assist the project team for validation and verification functions.
5 - Closeout and Evaluation
Once all the project requirements are achieved, it is time to hand over the implemented system
and closeout the project. If the project deliveries are in par with the acceptance criteria defined
by the client, the project will be duly accepted and paid by the customer.
Once the project closeout takes place, it is time to evaluate the entire project. In this evaluation,
the mistakes made by the project team will be identified and will take necessary steps to avoid
them in the future projects.
During the project evaluation process, the service provider may notice that they haven't
gained the expected margins for the project and may have exceeded the timelines planned at
the beginning.
In such cases, the project is not a 100% success to the service provider. Therefore, such
instances should be studied carefully and should take necessary actions to avoid in the future.
Stakeholder management
When working on a project, there are many people or organizations that are dependent on
and/or are affected by the final product or output. These people are the stakeholders of a
project.
Stakeholder management involves taking into consideration the different interests and values
stakeholders have and addressing them during the duration of the project to ensure that all
stakeholders are happy at the end.
12/4/2020
EDPM Concept Notes
This branch of management is important because it helps an organization to achieve its
strategic objectives by involving both the external and internal environments and by creating
a positive relationship with stakeholders through good management of their expectations.
Stakeholder management is also important because it helps identify positive existing
relationships with stakeholders. These relationships can be converted to coalitions and
partnerships, which go on to build trust and encourage collaboration among the stakeholders.
Stakeholder management, in a business project sense, works through a strategy. This strategy
is created using information gathered through the following processes:
Stakeholder Identification - It is first important to note all the stakeholders involved,
whether internal or external. An ideal way to do this is by creating a stakeholder map.
Stakeholder Analysis - Through stakeholder analysis, it is the manager's job to identify a
stakeholder's needs, interfaces, expectations, authority and common relationship.
Stakeholder Matrix - During this process, managers position stakeholders using
information gathered during the stakeholder analysis process. Stakeholders are positioned
according to their level of influence or enrichment they provide to the project.
Stakeholder Engagement - This is one of the most important processes of stakeholder
management where all stakeholders engage with the manager to get to know each other and
understand each other better, at an executive level.
This communication is important for it gives both the manager and stakeholder a chance to
discuss and concur upon expectations and most importantly agree on a common set of Values
and Principals, which all stakeholders will stand by.
Communicating Information - Here, expectations of communication are agreed upon and
the manner in which communication is managed between the stakeholders is established, that
is, how and when communication is received and who receives it.
Stakeholder Agreements - This is the Lexicon of the project or the objectives set forth. All
key stakeholders sign this stakeholder agreement, which is a collection of all the agreed
decisions.
Project Charter
Project Charter refers to a statement of objectives in a project. This statement also sets out
detailed project goals, roles and responsibilities, identifies the main stakeholders, and the level
of authority of a project manager.
It acts as a guideline for future projects as well as an important material in the organization's
knowledge management system.
The project charter is a short document that would consist of new offering request or a request
for proposal. This document is a part of the project management process, which is required
by Initiative for Policy Dialogue (IPD) and Customer Relationship Management (CRM).
The Role of Project Charter
Following are the roles of a Project Charter:
1. It documents the reasons for undertaking the project.
2. Outlines the objectives and the constraints faced by the project.
3. Provides solutions to the problem in hand.
12/4/2020
EDPM Concept Notes
4. Identifies the main stakeholders of the project.
Benefits of Project Charter
Following are the prominent benefits of Project Charter for a project:
1. It improves and paves way for good customer relationships.
2. Project Charter also works as a tool that improves project management processes.
3. Regional and headquarter communications can also be improved to a greater extent.
4. By having a project charter, project sponsorship can also be gained.
5. Project Charter recognizes senior management roles.
Allows progression, which is aimed at attaining industry best practices.
Elements in Project Charter
Since project charter is a project planning tool, which is aimed at resolving an issue or an
opportunity, the below elements are essential for a good charter project.
For an effective charter project, it needs to address these key elements:
1. Identity of the project.
2. Time: the start date and the deadline for the project.
3. People involved in the project.
4. Outlined objectives and set targets.
5. The reason for a project charter to be carried out, often referred to as 'business case'.
6. Detailed description of a problem or an opportunity.
7. The return expected from the project.
8. Results that could be expected in terms of performance.
9. The expected date that the objectives is to be achieved.
10. Clearly defined roles and responsibilities of the participants involved.
11. Requirement of resources that will be needed for the objectives to be achieved.
12. Barriers and the risks involved with the project
13. Informed and effective communication plan
Project Planning
Steps in Defining the Project

Step 1: Defining the Project Scope
Defining the project scope sets the stage for developing a project plan. Project scope is a
definition of the end result or mission of your project – a product or service for your client or
customer. The primary purpose is to define as clearly as possible the deliverable(s) for the end
user and to focus project plans. The scope document directs focus on the project purpose
throughout the life of the project for the customer and project participants.
Project scope definition is a document that will be published and used by the project owner
and project participants for planning and measuring project success. Scope describes what
you expect to deliver to your customer when the project is complete. Project scope should
define the results to be achieved in specific, tangible and measurable terms.
12/4/2020
EDPM Concept Notes
Project Scope Checklist
1. Project objectives
2. Deliverables
3. Milestones
4. Technical requirements
5. Limits and exclusions
6. Reviews with customer
Project objectives. The first step of project scope definition is to define the major objectives to
meet your customer’s need(s).
Deliverables. The next step is to define major deliverables- the expected outputs over the life
of the project, deliverables in the early design phase of a project might be a list of
specifications. Deliverables typically include time, quantity and cost estimates as well. Each
major deliverable will be indicative of a corresponding milestone.
Milestones. A milestone is a significant event in a project that occurs at a point in time. The
milestone schedule shows only major segments of work; it represents first, rough-cut
estimates of time, cost, and resources for the project.
Technical requirements. More frequently than not, a product or service will have technical
requirement to ensure proper performance.
Limits and exclusions. The limits of scope should be defined. Failure to define limits can lead
to false expectations and to expending resources and time on the wrong problem.
Reviews with customer. Completion of the scope checklist ends with a review with your
customer-internal or external. The main concern here is the understanding and agreement of
expectations. Is the customer getting what he or she desires in deliverables? Does the project
definition identify key accomplishments, budgets, timing, and performance requirements?
Are questions of limits and exclusions covered? Clear communication in all these issues is
imperative to avoid claims or misunderstanding.
The Six points above constitute a generic scope checklist. Different industries and companies
will develop unique checklists and templates to fit their needs and specific kinds of projects.
Clear scope definition ensures you will know when a change in scope occurs. A clear project
scope definition is the primary prerequisite for development of your work breakdown
structure. Scope definition provides an administrative plan that is used to develop your
operational plan. Scope definition should be as brief as possible but complete; one or two
pages are typical for small projects.
Scope creep
Scope creep in project management refers to changes, continuous or uncontrolled growth in
a project’s scope, at any point after the project begins. This can occur when the scope of a
project is not properly defined, documented, or controlled. It is generally considered harmful.
12/4/2020
EDPM Concept Notes
Step 2: Establishing Project Priorities
Quality and the ultimate success of a project are traditionally defined as meeting and/or
exceeding the expectations of the customer and/or upper management in terms of cost, time,
and performance of the project. The interrelationship among these criteria varies. Sometime
it is necessary to compromise the performance and scope of the project to get the project done
quickly or less expensively. Often, the longer a project takes, the more expensive it becomes.
However, a positive correlation between cost and schedule may not always be true.
Sometimes project costs can be reduced by using cheaper, less efficient labor or equipment
that extends the duration of the project.
One of the primary jobs of a project manager is to manage the trade-offs among time, cost,
and performance. To do so, project managers must define and understand the nature of the
priorities of the project. They need to have a candid discussion with the project customer and
upper management to establish the relative importance of each criterion. One technique that
is useful for this purpose is completing a priority matric for the project that identifies which
criterion is constrained, which should be enhanced, and which can be accepted:
Constrain: the original parameter is fixed. The project

must meet the completion date, specification and scope of
the project or budget.
Enhance: Given the scope of the project, which criterion

should be optimized? In case of time and cost, this usually
means taking advantage of opportunities either to reduce
costs or shorten the schedule. Conversely, with regard to
performance, enhancing means adding value to the
project.
Project Management Trade-off parameters:

Accept: For which criterion is it tolerable not to meet the original parameter? When trade-offs
have to be made, is it permissible for the schedule to slip, to reduce the scope and performance
of the project, or to go over budget?
Priority varies from project to project. For example, for many software projects time to market
is critical and companies like Microsoft may defer original scope requirements to later
versions in order to get to the market first. Alternatively, for special event projects
(conferences, parades, tournaments) time is constrained once the date has been announced,
and if the budget is tight, the project manager will compromise the scope of the project in
order to complete the project on time.
12/4/2020
EDPM Concept Notes
Good project managers should seek to optimize each criterion. If everything goes well on a
project and no major problems or setbacks are encountered, their argument may be valid.
However, this situation is rare and project managers are often forced to make tough decisions
that benefit one criterion while compromising the other two.
There are likely to be natural limits to the extent managers can constrain, optimize or accept
any one criterion. It may be acceptable for project to slip 1 month behind schedule but no
further or to exceed the planned cost. Likewise, it may be desirable to finish a project 1 month
early, but after that cost conservation should be the primary goal. Some project managers
document these limits as part of creating the priority matrix.
In summary, developing a decision priority matrix for a project provides a forum for clearly
establishing priorities with customers and top management so as to create shared expectations
and to avoid misunderstandings. The priority information is essential to the planning process,
where adjustments can be made in the scope, schedule, and budget allocation. Finally, the
matrix provides a basis for monitoring and evaluating progress so that appropriate corrective
action can be taken. During the course of a project, priorities may change. The customer may
suddenly need the project completed 1 month sooner, or new directives from the top
management may emphasize cost saving initiatives. The project manager needs to be vigilant
in order to anticipate and confirm changes in priorities and make appropriate adjustments.
Step 3: Creating the Work Breakdown Structure

Once the scope and deliverables have been identified, the work of the project can be
successively subdivided into smaller and smaller work elements. The outcome of this
hierarchical process is called the work breakdown structure (WBS). The WBS is a map of the
project. Use of a WBS helps to assure project managers that all products and work elements
are identified, to integrate the project with current organization, and to establish a basis for
control. Basically, the WBS is an outline of the project with different levels of detail. The figure
shows the major groupings commonly used in the field to develop a hierarchical WBS.
The WBS begins with the project as the final deliverable. Major project work
deliverables/systems are identified first; then the sub deliverables necessary to accomplish
the larger deliverables are defined. The process is repeated until the deliverable details are
small enough to be manageable and one person can be responsible. This sub deliverable is
further divided into work packages. Because the lowest sub deliverable usually includes
several work packages, the work packages are grouped by type of work – for example,
hardware, programming, and testing. These groupings within a subdeliverable are called cost
accounts, this grouping facilitates a system for monitoring project progress by work and
responsibility.
12/4/2020
EDPM Concept Notes
The Hierarchical Breakdown for WBS: Hierarchical structure later provides management
with a database for planning, executing, monitoring, and controlling the work of the project.
In addition, the hierarchical
structure provides
management with information
appropriate to each level. For
example, top management
deals primarily with major
deliverables, while first-line
supervisors deal with smaller
subdeliverables and work
packages.
How a WBS helps the project
manager?
• The WBS defines all the
elements of the project in a
hierarchical framework and
establishes their relationships
to the project end item(s).
Think of the project as a large
work package that is
successively broken down into
smaller work package; the total
project is the summation of all
the smaller work packages.
This hierarchical structure
facilitates evaluation of cost, time, and technical performance at all levels in the
organization over the life of the project.
• While WBS is developed, organizational units and individuals are assigned
responsibility for accomplishment of work packages. This integrates the work and the
organization. In practice, the process is sometimes called OBS, the organization
breakdown structure, which will be discussed later in the chapter.
• WBS makes it possible to plan, schedule, and budget. It gives a framework for tracking
cost and work performance. Use of the structure provides the opportunity to “rollup”
(sum) the budget and actual costs of the smaller work packages into larger work
elements so that performance can be measured by organizational units and work
accomplishment.
• The WBS defines communication channels and assists in understanding and
coordinating many parts of the project. The structure shows the work and
organizational units responsible and suggests where written communication should
be directed. Problems can be quickly addressed and coordinated because the structure
integrates work and responsibility.
WBS Development
Figure below shows a simplified WBS for development of a new Voice Data Recognition
project to be used by field personal to collect and analyze data. At the top of the chart (level
1) is the project end item—a deliverable product or service. Note how the levels of the
structure can represent information for different levels of management. For example, level 1
information represents the total project objectives and is useful to top management; levels 2,
3, and 4 are suitable for middle management; and level 5 is for first-line managers.
12/4/2020
EDPM Concept Notes
Level 2 shows a partial
list of deliverables
necessary to develop the
new product—Design
Specifications, Software
Development,
Integration, Hardware
Installation, and Test.
The Software
Development deliverable
(shaded) has been
extended down to level 5
work packages. Level 4
subdeliverables
represent the lowest
manageable elements of
the project. Each
subdeliverables requires
work packages that will
be completed by an assigned organizational unit. Each deliverable will be successively
divided in the manner. It is not necessary to divide all elements of the WBS to the same level.
The lowest level of the WBS is called a work package. Work project are short-duration tasks
that have a definite start and shop point, consume resources, and represent cost. Each work
project is a control point. A work project manager is responsible for seeing that the package
is completed on time, within budget, and according to technical specifications. Practice
suggests a work package should not exceed 10 work days or 1 reporting period. If a work
package has a duration exceeding 10 days, check or monitoring points should be established
within the fore too much time has passed. Each work package of the WBS should be as
independent of other packages of the project as possible. No work package is described in
more than one subdeliverable of the WBS.
There is an important difference between the last work breakdown subdeliverable and a work
package. Typically, a work breakdown subdeliverable includes the outcomes of more than
one work package from perhaps two or three departments. Therefore, the subdeliverable does
not have duration of its own and does not consume resources or cost money directly. (In a
sense, of course, duration for a particular work breakdown element can be derived from
identifying which work package must start first [earliest] and which package will be the latest
to finish; the difference becomes the duration for the subdeliverable.) The resources and costs
for the subdeliverable are simply the summation of the resources and costs for all the work
packages in the work package, costs and resources can ne “rolled up” into the higher elements.
The higher elements are used to identify the execution stage of the project life cycle. Thus, the
work package is the basic unit used for planning, scheduling, and controlling the project.
To review, each work package in the WBS
1. Defines work (what).

2. Identifies time to complete a work package (how long).
3. Identifies a time-phased budget to complete a work package (cost).
12/4/2020
EDPM Concept Notes
4. Identifies resources needed to complete a work package (how much).
5. Identifies a single person responsible for units of work (who).
6. Identifies monitoring points for measuring progress.
Creating a WBS from scratch can be daunting task. Project managers should take advantage
of relevant examples to facilitate the process. WBS’s are products of group efforts. It the
project is small; the entire project team may be involved breaking down the project into its
components. For large, complex projects the people responsible for the major deliverables are
likely to meet to establish the first two levels of deliverables. In turn, further detail would be
delegated to the people responsible for the specific work. Collectively this information would
be gathered and integrated into a formal WBS by a project support person. The final version
would be reviewed by the inner echelon of the project team. Relevant stakeholders (most
notably customers) would be consulted to confirm agreement and revise when appropriate.
Project managers developing their first WBS frequently forget that the structure should be
end-item, output oriented. First attempts often result in a WBS that follows the organization
structure—design, marketing, production, finance. If a WBS follows the organization
structure, the focus will be on the organization function and processes rather than the project
output or deliverables. In addition, a WBS with a process focus will become an accounting
tool that records costs by function rather than a tool for “output” management. Every effort
should be made to develop a WBS that is output oriented in order to concentrate on concrete
deliverables. Organizational unit responsibility can be tied to the WBS by grouping the work
packages of a deliverable into a cost account while still maintaining the focus on completing
the deliverable. The process is discussed next.
Step 4: Integrating the WBS with the Organization
An integral part of creating the WBS is to define the organizational units responsible for
performing the work. In practices, the outcome of this process is the organization breakdown
structure (OBS). The OBS depicts how the firm has organized to discharge work
responsibility. The
purposes of the OBS are to
provide a framework to
summarize organization
unit work performance, to
identify organization units
responsible for work
packages, and to tie the
organizational unit to cost
control accounts. Recall,
cost accounts group similar
work packages (usually
under the purview of a
department). The OBS
defines the organization
subdeliverables in a
hierarchical pattern in
successively smaller and
smaller units.
12/4/2020
EDPM Concept Notes
Explain the various stages in developing a project plan
Step One: Define Activities
The goal of the activity definition step is to identify all the tasks required to accomplish the
product. This frequently results in identifying all the work products and deliverables that
comprise the project. These deliverables are found as the components of a Work Break Down
structure (WBS). The project schedule further decomposes these deliverables into the actual
activities required to complete the work.
Step Two: Sequence Activities
At this point you've entered all the task names and have further decomposed the deliverables
listed in the WBS. The next step is to sequence the activities with dependencies. During this
step, you'll identify any dependencies of related tasks and document them in the project
schedule
Step Three: Estimate Activity Resources
The next step is to identify the resources and their availability to your project. Remember that
not all team members will be 100% available to your project as some team members will be
working on multiple projects. In this step, you'll also assign resources to each of the tasks
Step Four: Estimate Activity Durations
With resources assigned, the next step is to estimate each task's duration. The activity's
duration is the number of working periods required to complete the task. In Microsoft Project,
this can be defined in days, weeks, and even months! It is also important to understand the
difference of the different duration types including Fixed Work, Fixed Duration and Fixed
Units. Selecting the correct duration type impacts the resource availability and the forecasted
task end date
Step Five: Develop Schedule
The next step is to analyze the project schedule and examine the sequences, durations,
resources and inevitable scheduling constraints. The goal of this step is to validate the project
schedule correctly models the planned work. In this step you'll not only validate the duration
estimates are accurate, but validate the resource allocations are correct.
Project Scheduling
Scheduling is an inexact process in that it tries to predict the future. While it is not possible to
know with certainty how long a project will take, there are techniques that can increase your
likelihood of being close. If you are close in your planning and estimating, you can manage
the project to achieve the schedule by accelerating some efforts or modifying approaches to
meet required deadlines.
One key ingredient in the scheduling process is experience in the project area; another is
experience with scheduling in general. In every industry area there will be a body of
knowledge that associates the accomplishment of known work efforts with a time duration.
In some industries, there are books recording industry standards for use by cost and schedule
12/4/2020
EDPM Concept Notes
estimators. Interviewing those who have had experience with similar projects is the best way
to determine how long things will really take.
When preparing a schedule estimate, consider that transition between activities often takes
time. Organizations or resources outside your direct control may not share your sense of
schedule urgency, and their work may take longer to complete. Beware of all external
dependency relationships. Uncertain resources of talent, equipment, or data will likely result
in extending the project schedule.
Experience teaches that things usually take longer than we think they will, and that giving
away schedule margin in the planning phase is a sure way to ensure a highly stressed project
effort. People tend to be optimistic in estimating schedules and, on average, estimate only 80%
of the time actually required.
Failure to meet schedule goals is most often due to unrealistic deadlines, passive project
execution, unforeseen problems, or things overlooked in the plan.
Explain different tools used in project Scheduling.

1. Gantt Chart:
Taking its name from early project management innovator Henry L. Gantt, the basic Gantt
chart is an easy way to document schedules. It is a horizontal-bar schedule showing activity
start, duration, and completion. It shows the connection between events and the calendar, and
provides a graphical analog of the activity duration.
The Gantt schedule can
illustrate the relationship
between work activities
having duration, events
without duration that
indicate a significant
completion, and milestones
that represent major
achievements or decision
points. Various annotations
can be used to communicate
the progress of the project
effort compared to the
baseline plan, as well to depict in a graphical way area where there are modified expectations
from the baseline plan.
What are the benefits of project scheduling?

Forces detailed thinking and planning
This is the biggest benefit! Brainstorming with the team on what needs to be done when and
by whom can be a very enlightening exercise.
2) Improves communication
A completed / current version of the schedule keeps all team members focused on the same
thing. When the team knows what is supposed to occur when and by whom, this makes
managing the rest of the project a little easier. Communicating with management, the
customer, and other stakeholders is also much easier with a schedule.
12/4/2020
EDPM Concept Notes
3) Provides a goal
Whether it is the short-term goals of tasks for the week, the mid-range goals of a deliverable
or milestone, or the overall project finish date, this information is all contained within the
schedule, all team members should be aware of these goals.
4) Lets you know when you are off track
Just like when you take a trip; the schedule is the roadmap that tells you how to get from point
A to point Z. Monitoring the baseline or original schedule allows you to know when you get
off track. It will tell you just how far off track your project is, and allow you to experiment
with what-if scenario's for getting back on track.
5) Reduces delivery time
Once your original schedule is complete, you now have the ability to step back and determine
what tasks could be started early or completed in parallel with other tasks (Fast Tracking).
Secondly, by tying dates and durations to tasks creates a sense of urgency that might not
otherwise be there. Without these dates, a team member may postpone working on an activity
that could cause a delay in downstream milestones.
6) Reduces costs
Here are a few situations of how a schedule reduces cost. Reduces rework - Imagine someone
starting to develop the code for a new application without all the requirements.
Eliminates duplicate work - Imagine person A and person B heading off to perform the same
task when only person A was assigned.
Return resources sooner - Whether renting a bulldozer, or contracting a team of people, the
longer those resources are on the project, the more costly it becomes. A schedule will enable
the project manager to return those resources as soon as possible.
7) Increases productivity
By examining the sequence of tasks and the resources assigned, periods can be found where
resources are under-utilized. Assigning them to additional tasks or changing the logic of
when the tasks should be performed will make the team more productive.
8) See problems early
Whether it is an issue with a milestone date slipping or resources being over-allocated a month
from now, having an up-to-date schedule can help to see these problems before they become
true issues impacting your project. You can leverage the schedule for what-if scenarios to find
a solution or raise the issue to the proper stakeholders well in advance.
9) Enables project manager to control the project instead of the project having control of
them
Resource allocation
Resource allocation is the assignment of available resources to various uses. In project
management, resource allocation or resource management is the scheduling of activities and
the resources required by those activities while taking into consideration both the resource
availability and the project time.
Establishing Dependencies
12/4/2020
EDPM Concept Notes
The main reason for a project manager to establish dependencies is to ensure that tasks get
executed properly. By identifying correct dependencies from that of incorrect dependencies
allows the project to be completed within the set timeframe.
Here are some of the constraints that a project manager will come across during the project
execution cycle. The constraints a project manager will face can be categorized into three
categories.
Mandatory - These constraints arise due to physical limitations such as experiments.
Discretionary - These are constraints based on preferences or decisions taken by teams.
External - Often based on needs or desires involving a third party.
The Process of Assigning Resources
For resource leveling to take place, resources are delegated with tasks (deliverables), which
needs execution. During the starting phase of a project, idealistically the roles are assigned to
resources (human resources) at which point the resources are not identified.
Later, these roles are assigned to specific tasks, which require specialization.
Leveling of Resources
A technique in which start and finish dates are adjusted based on resource constraints with
the goal of balancing demand for resources with the available supply.
Resource leveling helps an organization to make use of the available resources to the
maximum. The idea behind resource leveling is to reduce wastage of resources i.e., to stop
over-allocation of resources.
Project manager will identify time that is unused by a resource and will take measures to
prevent it or making an advantage out of it.
By resource conflicts, there are numerous disadvantages suffered by the organization, such
as:
1. Delay in certain tasks being completed
2. Difficulty in assigning a different resource
3. Unable to change task dependencies
4. To remove certain tasks
5. To add more tasks
6. Overall delays and budget overruns of projects
Critical path is a common type of technique used by project managers when it comes to
resource leveling. The critical path represents for both the longest and shortest time duration
paths in the network diagram to complete the project.
However, apart from the widely used critical path concept, project managers use fast tracking
and crashing if things get out of hand.
Fast tracking - This performs critical path tasks. This buys time. The prominent feature of
this technique is that although the work is completed for the moment, possibility of rework is
higher.
Crashing - This refers to assigning resources in addition to existing resources to get work
done faster, associated with additional cost such as labor, equipment, etc.
12/4/2020
EDPM Concept Notes
Project Risk
A risk is an unplanned or uncertain event that can impact a project. If an event won't affect
the project, it's not considered a risk. We usually understand risk as negative, but there are
actually two types of risks when it comes to projects. We would define a threat as negative
risk; however, there is also positive risk, or what we call opportunity.
Market Risk and Firm Risk
Market risk and specific risk (Firm Risk) are two different forms of risk. Market risk, or
systematic risk, is the risk of losing investments due to factors, such as political risk and
macroeconomic risk, that affect the performance of the overall market. Market risk is also
known as volatility.
Unsystematic risk or Firm risk, only affects an industry or particular company. These risks are
resulting from internal factors.
Project Risk management

Risk management is defined as identifying, assessing, prioritizing, and mitigating risks
associated with any undertaking. Whether that undertaking is a family reunion or a multi-
billion-dollar new construction effort, risk can derail any project if it's not addressed up front.
Failure to conduct good risk management can result in delayed completion schedules, budget
overages, frustrated team members, and ultimately, project failure.
1. The knowledge area of Project Risk Management consists of the following processes
Risk Management Processes

Process Project Phase Key Deliverables
Plan Risk Management Planning Risk Management Plan
Identify Risks Planning Risk register
Perform Qualitative Risk Analysis Planning Risk register updates
Perform Quantitative Risk Analysis Planning Risk register updates
Plan Risk Responses Planning Risk related contract

decisions
Monitor and Control Risks Monitoring and Controlling Risk register updates
2. A project risk is a potential source of deviation from the project plan. Project risks can
have a negative or positive impact on the project. Project risks that are negative are called
threats. Project risks that are positive are called opportunities.
3. Responses to threat include --
o Reducing the probability of risk
o Developing contingency plans
o Passively accepting consequences.
o Transferring risk: Insurance is an example of transferring risk.
12/4/2020
EDPM Concept Notes
4. Non-critical risks should be documented. They should be revisited and reviewed
regularly.
5. Risks are identified in all phases.
6. Work-around refers to how to handle risks that have occurred but are not part of risk
response plan. This happens in risk monitoring and control phase.
7. Delphi technique is most commonly used to obtain expert opinions on technical issues.
It can be used to get inputs on Scope, Estimates or Risks.
Why Is Risk Management Important?
First and foremost, a project manager, the person responsible for leading the project from
inception to completion, has the responsibility of anticipating and preventing project
problems. Second, it's nearly impossible to ensure a project stays on schedule and on budget
without risk management. The reality is that there is no such thing as a risk-free project, so it
benefits the project team to anticipate and mitigate risks.
Steps to Risk Management
As already noted, risk management consists of identifying, assessing, prioritizing, and

mitigating risks.
Identifying risks, the first step, is a group task; no single person can identify all risks involved
in a particular project. Using the project team and subject matter experts if needed, the team
should list the events that could impact the project. It is always a good idea to talk to
stakeholders (stakeholders are people who have an interest in or are impacted by the project)
before beginning risk identification. Many times, risk will be identified simply by talking
through the project with stakeholders.
The next step is to assess the risk; many project managers use a simple tool such as a
spreadsheet to list and assess risks. Risk assessment should always include the probability, or
likelihood, that something will occur, and the impact, or effect, on the project.
Risk Matrix
A risk matrix is a matrix that is used during risk assessment to define the level of risk by
considering the category of probability or likelihood against the category of consequence
severity. This is a simple mechanism to increase visibility of risks and assist management
decision making.
12/4/2020
EDPM Concept Notes
Combining probability and impact will give a risk exposure, or risk score, which will help
determine the highest risks. Quantifying probability and impact so that a mathematical
formula can be used to determine risk exposure eliminates some of the guesswork and
subjectivity associated with risk assessment, those risks with the highest numbers are the
priorities.
Lastly, response strategies should be developed for each risk so that if the risk does occur, the
project is not derailed and the team knows in advance how to handle it. Typical response
strategies include avoidance, mitigation, transfer, and accept.
Avoidance is done by reworking part of the project so that the risk cannot occur.
Mitigation is steps taken to reduce the risk so that the impact is lower; Mitigation is the most
common risk management strategy.
Transferring risk is done when a third party is used to manage parts of the project so that they
take on the risk.
Accepting risk is done when the risk is so low or the impact so little that the project is not
really endangered should it occur; the risk is basically ignored.
CPM - Critical Path Method

DuPont developed a Critical Path Method (CPM) designed to address the challenge of
shutting down chemical plants for maintenance and then restarting the plants once the
maintenance had been completed.
Complex project, require a series of activities, some of which must be performed sequentially
and others that can be performed in parallel with other activities. This collection of series and
parallel tasks can be modeled as a network.
CPM models the activities and events of a project as a network. Activities are shown as nodes
on the network and events that signify the beginning or ending of activities are shown as arcs
or lines between the nodes
Example for CPM based Calculations
12/4/2020
EDPM Concept Notes
Project Crashing
12/4/2020
EDPM Concept Notes
Efforts to accelerate a project schedule are commonly grouped under the term "crashing" the
schedule. There is always some price for driving a project to completion sooner than normal.
Reducing the completion time of a project by sharply increasing manpower and/or other
expenses. Crashing is a schedule compression technique used to reduce or shorten the project
schedule. Some of the common methods used are
1. Adding additional resources to the critical path tasks
This option has various constraints such as the securing of the budget to add the resources,
and the availability of the resources.
2. Reduce the project requirements or scope
This can be done only if the sponsor and major stakeholders agree to reduce the scope
After applying the crashing, the critical path might have changed and result in creating a
different critical path. Always revisit the project schedule to ensure the schedule has been
crashed.
There are a number of ways to improve the schedule when your boss says, I need it sooner!
1. Add people to the schedule. Additional staff must be added early in a project or they
will slow it down while learning the ropes. If you add people, you may also need to add staff
for supervision and coordination, so staff are fully applied.
2. Improve productivity and work longer hours. A good team atmosphere with
management support can help make this happen. Without positive nourishment of this
process, you could lose your team to attrition.
3. Review schedule dependencies and look for opportunities to overlap tasks or make
serial tasks concurrent or parallel activities. This requires greater coordination and sometimes
involves increased risks which need to be managed carefully.
4. Review the project scope and remove or delay features or functionality from the
project critical path.
5. Consider innovative approaches such as a different development methodology,
alternative technologies, or out-sourcing options.
What are the various steps in CPM Method to allocate minimum time to complete the
project?
Steps in CPM Project Planning
1. Specify the individual activities.
2. Determine the sequence of those activities.
3. Draw a network diagram.
4. Estimate the completion time for each activity.
5. Identify the critical path (longest path through the network)
6. Update the CPM diagram as the project progresses
What are the Benefits and limitations of CPM Method?
12/4/2020
EDPM Concept Notes
CPM Benefits
• Provides a graphical view of the project.

• Predicts the time required to complete the project.
• Shows which activities are critical to maintaining the schedule and which are not.
CPM Limitations
While CPM is easy to understand and use, it does not consider the time variations that can
have a great impact on the completion time of a complex project. CPM was developed for
complex but fairly routine projects with minimum uncertainty in the project completion times.
For less routine projects there is more uncertainty in the completion times, and this
uncertainty limits its usefulness.
Project Execution
Project execution is the phase in which the plan designed in the prior phases of the project life
cycle is put into action. It is the third phase in the project life cycle and follows completion of
the planning phase.
The chief purpose of project execution is to develop and produce the project's expected
deliverables that must be delivered on time and within budget and must meet the agreed
upon scope and fulfill customer quality requirements.
The project team develops project deliverables, but the project manager needs to implement
various management processes to monitor and control these activities.
There are nine activities that project managers should follow to assure success of the project
execution phase. These activities are:
1. Time management
2. Cost management
3. Quality management
4. Change management
5. Risk management
6. Issue management
7. Procurement management
8. Acceptance management, and
9. Communications management
The following are the activities that should be completed
Time management is a process for recording and controlling time spent by project team
members on the project. Time is a valuable resource that needs to be managed, so each team
member should record the time they worked project activities on a timesheet form. This will
help the project manager control the time devoted to each activity within the project.
Cost management is the process by which costs and expenses incurred by the project are
formally identified, approved, and paid. Expense forms must be completed for each set of
related project expenses such as labor, equipment, and materials' costs.
Quality is defined as the extent to which the final deliverable conforms to the customer
requirements. Quality management is a process by which quality is assured and controlled
for the project. This is accomplished by using quality assurance and quality control
12/4/2020
EDPM Concept Notes
techniques. Quality reviews should be performed frequently and the results recorded on a
project quality review form.
Change management is the process by which changes to the project scope, deliverables, due
dates, or resources must be formally requested, evaluated, and approved prior to
implementation. Managing change within the project is a core aspect of the project manager's
responsibility. This is achieved by understanding the business and system drivers requiring
the change, identifying the costs and benefits of adopting the change, and then formulating a
structured plan for implementing the change. To formally request a change to the project, a
change form must be completed by a member of the project team. It is very important that the
status of all active change forms be recorded within a project change register.
Risk management is the process by which risks to the project are formally identified,
quantified, and managed. Project risks may be identified at any stage of the project by
completing a risk form and recording the relevant risk details within the project risk register.
Once discovered, project risks should always be captured on a risk form to assure the risk is
eliminated or mitigated.
Issue management is the process by which issues that affect the ability of the project to
produce the required deliverable are formally captured and managed. After an issue form has
been completed and the details are logged in the issue register, each issue is evaluated by the
project manager and a set of response actions must be undertaken to resolve the issue.
Procurement management is the process of sourcing products from external suppliers.

Purchase orders, which include the type of contract agreed upon by the project team and the
contractor, are used to purchase products from suppliers. A procurement register must be
maintained to track all purchase requests through their completion.
Acceptance management is the process for achieving customer acceptance for deliverables
produced by the project. Acceptance forms must be used to enable the project team to request
acceptance for a deliverable when it is completed. Each acceptance form identifies the
acceptance criteria, and review methods and results of the acceptance reviews undertaken.
Communications management is the process by which formal communications messages are

identified, created, reviewed and communicated within a project. The most common method
of communicating the status of the project is via a project status report. Communications
management plays an integral role in keeping a project on task. The specifics of
communication, including the method and frequency, vary depending on your project's
needs. The hallmark of every successful project is continuous, frequent communications.
Project Control Techniques
What Is the Project Control Process?

The project control process compares actual performance versus the planned
performance of the project. A project manager compares if the work that has actually
been completed matches what was originally planned for completion at any given
time. A project manager can calculate the actual amount of work completed and
budget spent versus what was planned. If the two figures are not equal, corrective
action may be required.
12/4/2020
EDPM Concept Notes
The project control process will also identify and track new risks and issues. Tracking
risks and issues is important because either one, if not controlled, can quickly cause
the project to overspend or fall behind schedule.
Project status reports are another method used to determine if a project is under
control. A project manager will meet with the project team regularly to gather status
report information from each work group involved in the project. This can be used to
identify when the project may be experiencing issues that require corrective action.
Project Control Tools
There are several different project control tools, which include expert judgment,
analytical tools, and meetings.
Expert Judgment
The project manager will use their past experience, or expert judgment to influence
decisions on the current project. Often, the project manager will use the entire project
management team to help make decisions for the project.
Analytical Tools
There are many analytical techniques the project manager can use to identify the
potential for variations in a project's performance. Regression analysis, causal
analysis, and earned value management are just some of the analytic tools a project
manager uses to track a project's performance.
Meetings
Meetings can be face to face, virtual, formal, or informal, and can include project team
members, executives, and stakeholders. Meetings are useful to the project control
process because they create a method for project stakeholders to discuss issues and
concerns.
Results of the Project Control Process

There are many different beneficial results of the project control process:
1. Change Requests
A change request is used when a change is needed to correct deficiencies in project
quality, schedule, or budget. A change request can be initiated for any reason and may
impact the project's quality plan, schedule, or budget. It is up to the project manager
to manage the change request process so the goals of the project don't keep shifting
during project execution.
Types of changes requests include:
Corrective actions are an intentional activity that realigns performance plans.
Preventive action is an activity that prevents future issues.
Defect repair is an action to modify a nonconforming product or process.
2. Project Documentation Updates
Depending on the change required, a project manager may need to update the project
documentation, like the project plan, schedule, cost management plan, or quality plan.
If the change adds scope, budget, or extends the project schedule, then the project
manager must update his project documents. Many project managers have not
communicated or documented changes that occurred along the way and have paid
for this mistake.
3. Work Performance Reports
12/4/2020
EDPM Concept Notes
Work performance reports are the reports that represent the work of the project. The
reports will show current project status versus the project's planned performance. A
project manager will look at actual hours worked and compare to planned hours. This
comparison will help determine where the variance has occurred.
Monitoring and controlling: Key Points
1. Involves tracking, reviewing, and regulating project progress

2. Includes status reporting, progress measurement, and forecasting
3. Reports on scope, schedule, cost, resources, quality, and risks
4. Control project and project document changes
5. Includes control of scope, schedule, costs, and risks
6. Formalizes acceptance of deliverables
7. Records quality control results
8. Implements risk treatment plans and actions
9. Administers suppliers
The key outputs are:
1. Progress and status reports
2. Plan updates
3. Risks registers
4. Change requests
5. Work products/deliverables
Following are some of the valuable and essential techniques used for efficient project
control:
1 - Planning the Project Budget
You would need to ideally make a budget at the beginning of the planning session
with regard to the project at hand. It is this budget that you would have to help you
for all payments that need to be made and costs that you will incur during the project
life cycle. The making of this budget therefore entails a lot of research and critical
thinking.
Like any other budget, you would always have to leave room for adjustments as the
costs may not remain the same right through the period of the project. Adhering to
the project budget at all times is key to the profit from project.
2 - Keeping a Track of Costs
Keeping track of all actual costs is also equally important as any other technique. Here,
it is best to prepare a budget that is time-based. This will help you keep track of the
budget of a project in each of its phases. The actual costs will have to be tracked against
the periodic targets that have been set out in the budget. These targets could be on a
monthly or weekly basis or even yearly if the project will go on for long.
12/4/2020
EDPM Concept Notes
This is much easier to work with rather than having one complete budget for the entire
period of the project. If any new work is required to be carried out, you would need
to make estimations for this and see if it can be accommodated with the final amount
in the budget. If not, you may have to work on necessary arrangements for 'Change
Requests', where the client will pay for the new work or the changes.
3 - Effective Time Management
Another effective technique would be effective time management. Although this

technique does apply to various management areas, it is very important with regard
to project cost control.
The reason for this is that the cost of your project could keep rising if you are unable
to meet the project deadlines; the longer the project is dragged on for, the higher the
costs incurred which effectively means that the budget will be exceeded.
The project manager would need to constantly remind his/her team of the important
deadlines of the project in order to ensure that work is completed on time.
4 - Project Change Control
Project change control is yet another vital technique. Change control systems are
essential to take into account any potential changes that could occur during the course
of the project.
This is due to the fact that each change to the scope of the project will have an impact
on the deadlines of the deliverables, so the changes may increase project cost by
increasing the effort needed for the project.
Explain about PERT Technique in network analysis.

The Program Evaluation and Review Technique (PERT) is a network model that
allows for randomness in activity completion times. PERT was developed in the late
1950's for the U.S. Navy's Polaris project having thousands of contractors. It has the
potential to reduce both the time and cost required to complete a project.
In a project, an activity is a task that must be performed and an event is a milestone
marking the completion of one or more activities. Before an activity can begin, all of
its predecessor activities must be completed. Project network models represent
activities and milestones by arcs and nodes. PERT is typically represented as an
activity on arc network, in which the activities are represented on the lines and
milestones on the nodes.
There are three times have to be calculated:
3) Most likely times
4) Optimistic times
5) Pessimistic time
12/4/2020
EDPM Concept Notes
Explain various steps in PERT Technique.
Steps in the PERT Planning Process
PERT planning involves the following steps:
1. Identify the specific activities and milestones.
2. Determine the proper sequence of the activities.
3. Construct a network diagram.
4. Estimate the time required for each activity.
5. Determine the critical path.
6. Update the PERT chart as the project progresses.
A distinguishing feature of PERT is its ability to deal with uncertainty in activity

completion times. For each activity, the model usually includes three time estimates:
• Optimistic time (OT) - generally the shortest time in which the activity can be
completed.
• Most likely time (MT) - the completion time having the highest probability.
This is different from expected time. Seasoned managers have an amazing way of
estimating very close to actual data from prior estimation errors.
• Pessimistic time (PT) - the longest time that an activity might require.
The expected time for each activity can be approximated using the following weighted
average:
Expected time = (OT + 4 x MT+ PT) / 6
This expected time might be displayed on the network diagram.
Variance for each activity is given by: [(PT - OT) / 6] 2
What are the benefits and limitations of PERT Technique?
Benefits of PERT
PERT is useful because it provides the following information:
1. Expected project completion time.
2. Probability of completion before a specified date.
3. The critical path activities that directly impact the completion time.
4. The activities that have slack time and that can lend resources to critical path
activities.
5. Activities start and end dates.
Limitations of PERT
The following are some of PERT's limitations:
1. The activity time estimates are somewhat subjective and depend on judgment.
In cases where there is little experience in performing an activity, the numbers may be
12/4/2020
EDPM Concept Notes
only a guess. In other cases, if the person or group performing the activity estimates
the time there may be bias in the estimate.
2. The underestimation of the project completion time due to alternate paths
becoming critical is perhaps the most serious
Example 1:
A small project consisting of eight activities has the following characteristics:
(i) Draw the PERT network for the project.
(ii) Prepare the activity schedule for the project.
(iii) Determine the critical path.
(iv) If a 30- week deadline is imposed, what is the probability that the project will be
finished within the time limit?
ADVERTISEMENTS:
If the project manager wants to 99% sure that the project is completed on the
schedule date, how many weeks before that date should he start the project work?
Solution:
The network diagram for the given data is shown in fig. below. The earliest time and
variance of each activity is computed by using the formula.
12/4/2020
EDPM Concept Notes
(ii) Calculation activity duration and scheduling times.
(iii) The critical path of the project is 1-2-4-5 -6, critical activities being A, D, G and H.
The expected project length is the sum of duration of each critical activity. Expected
project length = 5 + 15 + 4 + 5 = 29 weeks.
Variance project length is obtained by summing variance of each critical activity.
(Iv) The required probability can be determined by finding the area under the
normal curve to the left of X = 30
12/4/2020
EDPM Concept Notes
Now, the probability of completing the project within the 30 week deadline is
(v) If the project start T weeks before the due date, the X will represent the ordinate
under normal curve to the left of which 99% of area lies.
The area between n and X- being 99-50 or 49% and Z – value corresponding to this is
2033 (From table)
Example 2:
A small project consisting of ten activities has the following characteristics:
Determine the critical path
Solution:
12/4/2020
EDPM Concept Notes
Network for the given project is drawn below:
Value of expected time for each activity is shown in following Table:
Time [Earliest & latest] are calculated as follows:
12/4/2020
EDPM Concept Notes
As we can see there are two critical paths along which E-values and L-values are
similar, but the longest network of critical activities is known as critical path.
Critical path is 1-2-3-6-7-8
Expected length of critical path is = 6 + 3 + 4 + 2 + 2 = 17 weeks
Example 3:
Product manager has planned a list of activities culminating in the inaugurate

launch of the new products.
These are given in the table below:
12/4/2020
EDPM Concept Notes
What is the probability that product manager will be able to complete the language
launch within 80 days-time?
Solution:
Network diagram for given problem is shown in following fig:
Expected time value for each activity of given network is listed in table below along
with three variance.
12/4/2020
EDPM Concept Notes
Value of earliest & latest time is calculated on the basis of expected time te as
follows:
Value of earliest & latest time is calculated on the basis of expected time te as
follows:
Hence critical path along with E-value and L- value are same i.e., 1- 2-4-5-6-7- 8-9
Expected project duration is 172.83 days
Variance of project length = Sum of variance of each critical activity = 6.25 + 0.44 +
32.11 +100+1.36+.44+0= 140.6
For Z = -2.77 Probability of completing the project with 80 days-time i.e., 0.3%.
Example 4:
A Project is composed of seven activities whose time estimates are listed in the
following table. Activities are simplified by this beginning (1) ones ending (j) Node
member.
12/4/2020
EDPM Concept Notes
Calculate expected project length.
Solution:
Calculation of expected time for each activity is shown in following table:
E- Values and L- values are calculated on the basis of expected time are as follows:
12/4/2020
EDPM Concept Notes
Network diagram for given project along with E-values and L-values is shown by
following Fig:
Critical path for the above network 1-3-5-6 shown by double lines; along with E-
values and L-values are same.
Expect project length will be = 4 + 6+ 7 = 17 weeks.
Project Management Organization

What Is an Organization?
An organization is a group or groups of individuals who share the purpose of accomplishing
a goal. Each organization is defined by the culture and style, called norms that they create.
Cultural norms are shaped by the experiences of the organization and will develop over time.
The experiences can be items such as risk management, diversity, values, leadership, or
accountability.
12/4/2020
EDPM Concept Notes
What is project organization Structure?
Project organization is a temporary thing. It will only exist from the projects start until its end.
All the project team members are coming from different organizations of part of the
organization. They will all have a temporary assignment to the project. An organizational
structure consists of activities such as task allocation, coordination and supervision, which are
directed towards the achievement of organizational aims. It can also be considered as the
viewing glass or perspective through which individuals see their organization and its
environment
The project organization should be a result from the project strategy, it should be constructed
in such a way that the strategy can be implemented within the environment of the project. The
project team that does the work should be as small as possible. Small is beautiful, and effective.
The project organization can be used to satisfy some wishes of stakeholders to create the
much-needed win-win situations.
Project Organizational Structure Types

There are three main types of structures to consider when organizing a project: functional,
matrix, and projectized. Each type is characterized by the project manager's authority and
role, resource availability, budget responsibility, and whether or not a project management
staff is available. Let's discuss each type of project organization.
Functional Organizations
A functional organization is one in which the project manager works on a part-time basis and
has minimal authority. There are few resources, and a functional manager bears the budget,
decision making, and
overall responsibility. A
project management
administrative staff is
available, but like the
project manager, works
part time. This type of
organization is grouped by
functionality, for instance,
marketing, human
resources, finance, may be
subdivided further into
departments. The
department level will
complete projects
separately from other
departments. A defining
characteristic of the functional organization is that it is a hierarchy with one clear manager or
boss.
A functional organization is suited for small companies with different departments that can
work independently of each other and can provide limited services or goods. Advantages of
functional organizations include clear direct authority, direct career development and
experience, strong technical ability, and resource flexibility. There are a few disadvantages of
the functional organization. For example, no one is solely accountable for the project, projects
are not emphasized, and there can be plenty of politicking in the organization.
12/4/2020
EDPM Concept Notes
Projectized Organizations
A projectized organization is characterized by total project manager authority and dedicated
resources. The project manager is full-time and has budget responsibility, and the
administrative staff is on the project full-time.
Projectized organizations are designed solely to run projects, which means that when the
project is complete, personnel have to find another project or not have a job. This is both an
advantage and disadvantage of the projectized organization. An example of this type of
organizational structure would be used in a government project management office (PMO).
In this organization, if personnel complete a project, they need to find another project to
continue to work.
Matrix Organizations
A matrix organization is a blend of the functional and projectized organizations, and has three
subtypes. Each subtype is characterized by the changing authority and responsibilities of the
characteristics. Let's go over each one.
A weak matrix is
characterized by low project
manager authority and low
resource availability. Like a
functional organization, the
functional manager maintains
budget control and manages
the part-time project manager
and staff.
A balanced matrix is
characterized by increasing
project manager authority,
and low to moderate resource availability. The budget responsibility is shared between the
functional manager and the project manager, who works full-time and has a part-time
administrative staff.
A strong matrix is characterized by moderate to high project manager authority and resources
that are more readily available. The full-time project manager manages the budget and the
administrative staff is on the project full-time.
Advantages of the matrix organization include personnel, who are chosen based on needs of
the project and skill set of the individuals. The project manager selects the team and has the
ability to make the team diverse. Resources can be assigned either full- or part-time, which in
turn can lessen the project costs.
Disadvantages of the matrix organization include high complexity of the different groups
involved, which can be a nightmare for the project manager. Also, loyalty between groups can
influence outcomes and decisions, and costs can be higher due to more groups and oversight
involved.
Explain the Advantages and Disadvantages of different project organizational structures?
Three primary structures have become the foundation for how an organization is run:
functional; projectized; and matrix
1) Functional Structure
12/4/2020
EDPM Concept Notes
A functional organization is the most common type of the three. It works best in small
organizations in which the different sections are geographically close together and which
provide only a small number of goods and/or services. In a functional structure, the
organization is broken into different sections based upon specialty. For example, there may
be one area for sales, one for customer service and one for the supervisors who deal with
escalated problems. The project manager's role is to ensure smooth execution of processes and
projects; however, the functional manager has the most power and makes the final decisions
Advantages and Disadvantages of a Functional Structure
An advantage to the functional structure is the role of the functional manager, which means
there's only one boss. This reduces or prevents conflicts of interest and makes it easier to
manage specialists. A disadvantage of this type of structure is that the project manager has
limited authority and a limited career path.
2) Projectized Structure
In a projectized structure, all the work is looked at as a project. The project manager has
complete control, unlike in the functional structure, and all team members report directly to
the project manager. Sometimes these team members are permanent, and sometimes they are
hired as temporary workers to help with the project until its completion. If the organization
takes on a large project, it will have all the necessary resources available to sustain the project
and will act as a small, self-contained company.
Advantages and Disadvantages of a Projectized Structure
Advantages to the projectized structure include the project manager's opportunity for career
progression. In addition, because good communication exists within the project work, the
team members tend to be more committed to, and excel in, their responsibilities. The
disadvantage of a projectized structure is that, because the team breaks up and disperses after
the completion of the project, there are no long-term goals or sense of job security for the rest
of the workers. Another disadvantage is that the organization has to essentially clone the same
resources for each project (project manager, work area, administrator).
3) Matrix Structure
The matrix structure combines both the functional and projectized structures. Each team
member has two bosses; they report both to the functional manager and the project manager.
If the matrix is strong, the power resides more with the project manager. If the matrix is weak,
the power resides more with the functional manager. The key is to find a balance in which the
power is shared equally. Because of its complexity, this type of structure can lead to problems
if it is not used carefully and properly. Good communication is essential for success.
Advantages and Disadvantages of Matrix Structure
An advantage to the matrix structure lies in the efficient use of resources because of ease of
access. This structure also demonstrates efficient communication both vertically and
horizontally. Because of this, once the projects have ended, the team members are likely to
receive a job elsewhere in the organization. A disadvantage of the matrix structure is
complexity, which can be difficult to manage. For example, if the functional manager and the
project manager do not communicate well, the team members can be caught in the middle,
causing confusion.
12/4/2020
EDPM Concept Notes
Computers in Project Management
Projects usually deal with large amounts of data and information. The need for data and
information is driven by project complexity and size; at times it is also driven by unknown
and unique concerns associated with a project. The project manager must focus on the
relevance and applicability of such data and information and, more importantly, on the ways
of capturing tacit knowledge of all the stakeholders. Here is where computer applications
come into play, as IT can efficiently convert data into information but cannot suitably convert
information into knowledge.
In addition to capturing and storing information with easy access, technology can be used for
developing and deploying project management processes and performance monitoring
systems.
Several project management software tools are available to manage project management
processes, such as developing detailed schedules, estimating cost, allocating resources,
assessing and managing risk, monitoring progress, and measuring project performance.
Computer technology can efficiently and effectively help project stakeholders accomplish five
project management functions:
1. Document the defined project roles and implement related processes;
2. Establish formal and consistent processes;
3. Communicate expectations of processes and roles;
4. Communicate openly among all the project team members, including virtual
teams; and
5. Monitor and manage project outcomes.
Specifically, technology plays a major role in helping the project manager develop and
formalize project processes and establish channels of open communication. By using
technological tools, the project team can access organizational and tacit knowledge of past
projects and historical data; this information can help project teams improve their project
performance.
Project managers can achieve a level of continuous improvement in project performance by
applying numerous technology tools throughout the project management life cycle:
1. Selecting projects by using knowledge-based decision systems consisting of quantitative
and qualitative criteria;
2. Developing a resource breakdown structure (RBS) for the project environment and
keeping it current by using resource cost information from historical project data and
resource database systems;
3. Developing project plans and scope with the help of historical data from knowledge
repositories related to project plans and scope definitions;
4. Estimating—accurately and realistically—project costs by using historical cost and effort
estimation and earned value data of past projects;
5. Developing a work breakdown structure (WBS) by using standardized WBS packages
maintained in database systems;
6. Developing a project schedule by using historical schedule data and “after action review”
information from knowledge repositories;
7. Managing resources by using actual resource usage data from similar projects; and
reducing risk.
8. In essence, technology can help project managers improve the project processes they use
to manage project complexity, project integration, and resource utilization. Going beyond
these processes, technology can help project managers promote open communication,
12/4/2020
EDPM Concept Notes
learning, knowledge transfer, and productivity. Project managers may also choose to
develop electronic yellow pages listing project experts in specific interest groups, such as
scope definition, scheduling, cost estimating, and risk management. Specifically,
technology, such as electronic yellow pages, video conferences, the Internet, and intranet
can help project managers lead projects implemented by virtual project teams. These
technologies help project managers communicate effectively with their virtual project
teams and integrate project tasks effectively.
Microsoft Project
Microsoft Project is a project management software product, developed and sold by Microsoft.
It is designed to assist a project manager in developing a plan, assigning resources to tasks,
tracking progress, managing the budget, and analyzing workloads.
MS Project creates budgets based on assignment work and resource rates. As resources are
assigned to tasks and assignment work estimated, the program calculates the cost, equal to
the work times the rate, which rolls up to the task level and then to any summary tasks and
finally to the project level.
Resource definitions (people, equipment and materials) can be shared between projects using
a shared resource pool. Each resource can have its own calendar, which defines what days
and shifts a resource is available. Resource rates are used to calculate resource assignment
costs which are rolled up and summarized at the resource level. Each resource can be assigned
to multiple tasks in multiple plans and each task can be assigned multiple resources, and the
application schedules task work based on the resource availability as defined in the resource
calendars.
The application creates critical path schedules, and critical chain and event chain
methodology third-party add-ons also are available.
Schedules can be resource leveled, and chains are visualized in a Gantt chart.
Additionally, Microsoft Project can recognize different classes of users. These different classes
of users can have differing access levels to projects, views, and other data.
Custom objects such as calendars, views, tables, filters, and fields are stored in an enterprise
global which is shared by all users.
MS Project Features, Benefits and Advantages
1. Create project schedules.
2. Create and manage project resources.
3. Project timeline view.
4. MS Project Reports - both built-in and custom.
5. Different views which can be customized - task view, resource view etc.
6. Ability to manage multiple projects with a master project plan.
7. Share resources with a common resource pool.
8. Create custom fields to capture specific details.
9. Implement traffic light indicators with custom fields.
10. Filters, groups and highlights to help with task management.
11. Earned Value Management.
12. Supports project baseline which allows creating snapshots of project schedules.
13. It is an industry standard tool with huge social presence.
14. Integrates well with other tools.
12/4/2020
EDPM Concept Notes
15. User Friendly and has right basic.
12/4/2020
EDPM Concept Notes

EDPM Notes 2021

Uploaded by

Copyright:

Available Formats

EDPM Notes 2021

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

EDPM Notes 2021

Uploaded by

Copyright:

Available Formats

What are the characteristics of an entrepreneur?

What are the characteristics of an entrepreneur?

What is entrepreneurship defined as?

What is entrepreneurship defined as?

EDPM

Generation and Screening of a project idea

> Which can cater to a presently unmet need and demand

Idea Generation-Sources of Ideas

These may include:

(i) Knowledge of potential customer needs,

These are discussed as follows:

Brainstorming technique was originally adopted by Alex Osborn in 1938 in an American

Problem Inventory Analysis:

Entrepreneurs select their products or projects based on:

Innovation does not have to be technical, it is also an economic or social term

The discipline of innovation (and it is the knowledge base of entrepreneurship) is a diagnostic

Systematic innovation means monitoring seven sources for innovative opportunities

The Unexpected - An unexpected success, an unexpected failure or an unexpected outside

The Incongruity - A discrepancy between reality and what everyone assumes it to be or

Demographics - Changes in the population's size, age structure, composition, employment,

Sustaining Innovation: Continuous and/or evolutionary innovation, defined as the most

Breakthrough Innovation: Groundbreaking innovation. Innovation that is based on solving

What is idea validation?

Steps to validate your idea

Here’s the steps for idea validation process:

(B) Collection of secondary information →

Cost–benefit analysis (CBA)

Cash flow analysis

Payback Period Analysis

Accounting Rate of Return (ARR)

Internal Rate of Return (IRR)

Environmental appraisal of projects

SCBA can be applied to both public and private investments

The main focus of SCBA is to determine

1. Economic benefits of the project in terms of shadow prices

Two approaches for SCBA

UNIDO Approach Stage - 1

Calculation of financial profitability of the project

UNIDO Approach Stage - 2

Obtaining the net benefit of the project at economic (shadow) prices

a) The commercial profitability analysis (calculated in stage 1) would be sufficient only

UNIDO Approach - Stage 3

Adjustment for the impact of the project on Savings and investment:

The purpose of this stage is to

➢ Evaluate the net impact of these gains and losses on savings

UNIDO Approach- Stage 4

Adjustment for the impact of the project on Income distribution

▪ Govt. considers a project as an investment for the redistribution of income in favour

UNIDO Approach- Stage 5

Adjustment for Merit and Demerit Goods :

The steps of adjustment procedure are:

i. Estimating the present economic value

Features of L-M Approach:

Micro, Small and Medium Enterprises

Classification of Enterprises (New Definitions)

Revised Classification applicable w.e.f 1st July 2020

Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover

Classification Micro Small Medium

Investment in Investment in Plant Investment in Plant