Proposed Portfolio Process and Selection Criteria - Case Study Example

Project Portfolio Management of the of the Part Proposed Portfolio Process and Selection Criteria: The proposed portfolio management process would include a careful evaluation of all the pros and cons of allocating different resources and funds to the multiple Strategic Business Units (SBUs) of the company. The company would choose a centralized strategic management process for delivering a suitable project portfolio management system for improving the efficiency of the business while controlling the costs appropriately. The current projects and the proposed projects that are suggested for the company would be analyzed and managed through the use of an efficient project management technology by considering the key characteristics of each of the projects under consideration. The constraints of external environmental factors, changes in customer requirements and demographics and the financial and operational constraints would also be considered for the same. The project selection criteria would mainly be based on the continuously shifting needs of the customer groups in this industry in Florida, where the company is mainly located. Also, the strategic objectives of the company like the expansion of the business into new markets like Europe and Alaska, the increase in revenues by 10%, the expansion of customer services and the improvement of the customer satisfaction levels by 15% every year, would also be considered as the main project selection criteria. Apart from these, the cost control objectives of the company including the reduction of operating costs by at least 10% per year and the reduction of warehouse and overhead costs by at least 5% per year would be taken up as key selection criteria for the project portfolio management process. Thus, to ensure that all these goals are met with, the Enterprise Project Portfolio Management (EPPM) method is selected. The Enterprise Project Portfolio Management (EPPM) method of portfolio management is selected for the company because this technique involves taking up a top down approach that helps to manage all the project intensive resources and activities across the company. This would help to streamline the different business decision units of the company by ensuring better integration of the operational, financial, human resources and corporate strategies of the company. Since, this method is an automated system and does not require manual work; therefore, it would be time and cost effective as well. The reasons for selection The EPPM takes up a centralized top down approach of managing the project portfolios which ensures that all levels of employees are actively engaged in the project management processes. Since, this business requires the management of multiple high value capital investment projects, therefore, a combined enterprise wide management system should be employed to ensure that the investments are done and managed in a benefit reaping manner. The EPPM would help to provide adequate levels of transparency in the performance systems for the projects and would also provide sufficient information to the senior management to enable them to compare the progress of each of the projects with the desirable goals and objectives of the projects. Description of the selected process The EPPM method is a combination of two significant project selection and management processes which are the benefit measurement methods and the constrained optimization methods. Figure 1: Project selection methods (Source: Sanwal, 2007, p.144). Thus, the EPPM method of project portfolio management process can be selected as the best solution for monitoring the progress and results of the projects as compared to the strategic plans of the business. The EPPM would be employed to prioritize the programs and projects of the company so that the decision makers can decide the priority level of each of the project activities and control the enterprise project portfolios accordingly. This method would help the organization to enhance the productivity and efficiency levels by adding value to the operations and strengthening the performances of the projects. The formal portfolio management process would instill flexibility in the projects and integrate suitable contingency plans which will prevent losses from the malfunctioning of any of the projects. The flexibilities related to the allocation of resources and funds can also be deiced and an in depth view of the needs of resource allocation, emergency issue escalation and crisis management can be done. The visibility of the project portfolio would provide the managers with the ability to detect potential problems in the earlier phases of the project lifecycle and thus, the can take immediate remedial actions to treat the problems before they affect the financial position of the firm. The EPPM is also expected to cut out inefficiencies and redundancies in the operational processes of the company by automating the workflows and establishing consistent approaches for the projects and portfolios while at the same time managing costs in the business so as to generate maximum profits. Apart from these, the EPPM would also be used to identify the future resource requirements that may arise in the company by establishing the project capacities in the early stages. Method for applying the selection criteria The projects would be scored on the basis of the cost versus benefit analysis while considering the different internal and external constraints that are being faced and may be faced by the company in the future during the employment of the upcoming projects. The profits that can be made from the various proposed projects would be evaluated and compared. Also, the costs related to each of the projects, the resources required for these projects and the factors in the external environment of the company that may support or hinder the functioning of these projects would be considered. The most important consideration for the selection of projects would be the availability of resources in the company, the strategic goals of the company for the coming year and the cost versus benefit analysis of these projects. The evaluation of the profits, Net Present Values of the projects, capital expediters etc. would be considered for scoring the projects and determining their feasibility. Part 2 Selection of this year’s projects The fund allocation for this Strategic Business Unit (SBU) for this annual budget period would be USD 24 million which is uniformly spread over the year. This means that the project should be selected by keeping in mind the financial constraint that this particular SBU cannot exceed spending more than USD 6 million dollars for the projects in each quarter of the year. Since, profit optimization is the ultimate objective of undertaking any new project in the company, therefore, the analysis of the benefits should essentially be done. Project Call Center This project is considered to be necessary for the company because it matches the strategic objective of the business to enhance the customer service levels by 15% in the next year. The establishment of this project would help to reduce the number of consumer complaints and ensure better communication with the customer groups by the use of the online customer service systems. This would also enable quicker response for customer queries and issues. The cost involved in this project include an investment of USD 8.5 million dollars which can be paid over two quarters in the next annual cycle. Seven employees have to be recruited for this project, the cost of which would be USD 40000. However, the work of this project can be outsourced and thus, have almost no impact on the daily operations of the main business. The initial capital investment is acceptable according to the annual budget of the company. However, the additional labor charges seem to be on the higher side. Project Ordering Upgrade This project would need an investment of USD 2.5 million dollars and USD 24, 5000 labor costs per year. However, the ordering process would be upgraded thereby initiating better integration and communication in the order management systems. The processing time for orders would be reduced by 50%. Project Rocky This project would require an initial, investment of USD 13 million but the NPV is high at USD 19 million over five years. The project would also need USD 40,000 a year for its functioning. The initial investment would be recovered within 2-3 years after the project. Thus, it seems to be within budget as well as a profitable project. Project Europa This project is most difficult as per the selection criterion of the external business environment because of issues like austerity and governmental overspending in recent years. The initial investment is USD 11 million and the NPV is USD 15 million. But, the management of this project would be complex and time consuming. Project Robot This project would cost USD 17 million dollars and the average labor cost would be USD 45000 per year. This system would establish automation and help to reduce staffs in the distribution center. But the initial establishment of this project would cause a disruption of the factory work for a period of 3 months. Project Tableware This project is aimed at expanding the business in ancillary areas and would require an initial expenditure of USD 5.5 million dollars, the NPV is USD 1 million dollars in five years. The resource requirements as well as investments for this project are high and thus it is the least preferred project for the company. Time based plan in quarters References Sanwal, A. (2007). Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy. New Jersey: Wiley. Read More