CRANEFIELD COLLEGE OF PROJECT AND PROGRAMME MANAGEMENT

GROUP ASSIGNMENT
FOR

MODULE M1:

Project Management: Leading, Creating, Implementing and Improving

Please include the following declaration:
“We hereby declare that this assignment is entirely our own work, and that it has not previously been submitted to any other Higher Education Institution. We also declare that all published and unpublished sources have been fully acknowledged and properly referenced. This includes figures, tables and exhibits. Where modified by us, this has also been indicated.”

Print Name | Signature | ID Number | | | | | | | | | | | | | | | |

Table of Contents 1. Executive Summary 2 1.1. Introduction 2 1.2. Anticipated Outcomes 2 1.3. Recommendation 3 2. PROBLEMS AND CAUSES 3 2.1 Problem Statement 3 2.2 Project Overview 4 2.3 Project Selection 4 2.4 Project Justification 6 2.5 Project Prioritization 12 2.6 Balanced scorecard 13 2.7 Programme Proposal 14

3. CONCLUSIONS AND RECOMMENDATIONS 15 3.1 Conclusions 15 3.2 Recommendations 16

1.
Executive Summary

2.1. Introduction

As a result of an expected increase of $ 2,000,000 in profit, the Chief Executive Officer, Jennifer Childs, informed her general managers that she wants to reinvest the additional profit, with the aim to increase sales and reduce cost.

She requested three general managers to prepare and submit a prioritized list of potential projects that can be considered for this purpose, and then to meet with her to "sell" her on the ideas. The general managers appointed this team to develop a business cases with programme proposals, outlining how the anticipated additional profit of $ 2,000,000 can be invested to increase sales and to reduce cost. 2.2. Anticipated Outcomes

(a) The manufacturing of a new drug and bringing it to market is a very long and very expensive process. The risks are high, with only two out of ten new drugs ever making it to the market, being profitable. Considering that the development of the new drug for the company is already not producing the desired results, and the fact that the competitors may be on the verge of a breakthrough, an injection of an additional $2,000,000 will not make any significant difference.

(b) The re-organisation of the production line at the oldest and largest manufacturing plant, will not require any additional funding, but coupled with a BPR, this will increase the efficiency and productivity at the plant, reducing cost and bringing more products to the market. This together with a well motivated and trained sales department will increase sales and reduce costs.

(c) The introduction of a new computer system with the necessary development, testing and implementation, will increase cost for the company. This part of the business is not its core business and can be outsourced to India, at a cost far less than what the current operational costs are. Together with the retrenchment of staff or alternatively retraining them for the sales department, it can contribute tremendously towards reducing cost and increasing sales.

(d) The most basic driver for sales remain the individual sales representative. Nothing beats a well motivated, trained and dedicated sales person. To increase sales in all eight countries , one will need to bring the product to each country and market it. To do that will require additional sales staff. This will increase sales and profits. The majority of the $2,000,000 should be directed at this option.

2.3. Recommendation

(1) That the $2,000,000 not be invested in the development of the new drug.

(2) That the re-organisation of the production pant be approved and prioritised as the first intervention.

(3) That the computers systems and accompanying services be outsourced to a Call Centre in India.

(4) That sales staff be increased in all countries where the company has no sales offices.

(5) That the projects be undertaken parallel to each other starting with the production plant.

2. Problems and Causes

3.4. Problem Statement

As a result of an expected increase of $ 2,000,000 in profit, the Chief Executive Officer, Jennifer Childs, informed her general managers that she wants to reinvest the additional profit in the company, with the aim to increase sales and reduce cost.

She requested three general managers to prepare and submit a prioritized list of potential projects that can be considered for this purpose, and then to meet with her to "sell" her on the ideas. (Clements and Gido Successful Project Management 20...... p58)

The general managers then tasked this team to develop a detailed business case with programme proposals, outlining how the anticipated additional profit of $ 2,000,000 can be invested to increase sales and to reduce cost.

From the onset, it should be made clear that the request is not a formal request for proposal (RFP), but a request to develop a business case and programme proposal. The reason that this request is not being dealt with as a request for proposal (RFP), is that the request does not comply with the guidelines for request of a proposal as outlined in Clements and Gido ( 20....., p48 - 50). If one also looks at the text in Clements and Gido (20...., p58) regarding the request from Jennifer Childs, it reads as follows "She asks her three key managers to get together to develop a prioritized list of potential projects and then to meet with her to "sell" her on the ideas". (Clements and Gideo, 20....58).

Clearly, this is a management request or directive from a Chief Executive Officer to her managers, and is completely acceptable.

2.2 Project Overview

In this section we provide a high level overview of how this business case will address the question of how to best invest the expected $ 2,000,000 in additional profit.

The proposals from the various general managers, will be subjected to a number of business specific project selection criteria divided into different stages. Each proposal will then be tested against the specific criteria, to determine if the proposal will benefit the firm and assist in achieving the objectives as set by the Chief Executive Officer.

Proposals will need to pass each stage of the selection criteria, before moving onto the next stage of selection. If a proposal fails to meet a specific criteria, the proposal will not be allowed to continue to the next stage, and will be terminated.

The main stages of the selection will be as follows:-

1. Basic selection 2. Justification 3. Prioritisation

2.3 Project Selection

General managers, Julie Chen, Tyler Ripken, Jeff Matthews and Joe Sanchez, provided this team with four possible projects that can be considered.

Julie Chen is of the opinion that the development of a new prescription drug will increase sales and reduce cost.

Tyler Ripken is of the opinion the reorganising the production floor in the firms largest and oldest manufacturing plant will increase sales and reduce cost.

Jeff Matthews believes that the introduction of new information and technology software will increase sales and reduce cost.

Joe Sanchez is of the view that you only need to increase the sales team to increase sales and reduce cost. (Clements and Gido Successful Project Management 2012 p58-59).

In order to determine which of these possible projects will yield the best results, they need to be subjected to a specific selection criteria. (Clements and Gido Successful Project Management 2012 p39-41).

2.3.1 The following project selection criteria (Clements and Gido Successful Project Management 2012 p39-41) will form the basis of the selection process.

Criteria | Development of a new prescription drug | Reorganisation of the production floor/line | New ICT System | Increased sales staff | Aligned with company goals | Yes | Yes | Yes | Yes | Anticipated sales volume | Average | Increased production | Increased sales | Increased sales | Increase in market share | Yes | Yes | Yes | Yes | Establishment of new markets | Yes | Yes | Yes | Yes | Anticipated retail price | Not known | | | | Investment required | Yes | No | Yes | Yes | Estimated manufacturing cost per unit | Increase in cost | None | Expensive | Expensive | Technology development required | Yes | No | Yes | No | Return on investment | Long term | Yes | Yes | Yes | Human resources impact | Hire new people | No new people | Hire experts | Hire new people | Public reaction | Not known | None | None | None | Competitors reaction | Not known | None | None | None | Expected time frame | Long term | Fast | Medium | Short | Regulatory approval | Takes long to get approval | None | None | None | Risks | High | Low | High | Medium | | | | | |

2.4 Project Justification

Proposal | Argument | Objective 1Increase profit | Objective 2Reduce cost | Development of a new prescription drug | Currently the cost to develop a new drug is estimated at $ 2.6 Bil with another $ 312 mil needed for post approval processes. Over the last decade, the cost for such development increased by 145% with no guarantee of approval or success.(www.scientificamerican.com. Pharmaceutical drug now exceeds $ 2.5 Bil by Rick Mullin, Chemical &Engineering News on November 14,2014) | No | No | | Another report (www.discoverymedicine.com The cost of new drug discovery and development Published June 20,2009 by Michael Dickson - College of Pharmacy, University of South Carolina and Jean Paul Gagnon, Director of Public Policy Aventis Pharmaceuticals), indicates that it takes on average $803 mil to develop one drug, and that the time for such development can be anything from eight to thirteen years. The report also highlights the huge risks involved in drug development and indicate that due to to high cost and huge risks involved with the process, the industry tents to quickly disregard a drug development process if initial indications are that it might not be a success. | | | | A report from Dr.Wayne Wineguard, Ph.D, Pacific Research Institute, dated June, 2014, www.pacificresearch.org, indicates that only two out of ten medicines that are developed and make it to the market. are actually profitable. | | | | From the information provided by Julie Chen on the development process to date, and the information obtained from other sources as mentioned, it is clear that an additional $2,000,000 injection into the development of the prescription drug is not going to make any significant contribution towards the development process. The cost to develop is just to much and the risks to high.The proposal does therefore not meet with the basic objectives as outlined by the Chief Executive Officer. | | | Reorganisation of the production floor/line | The general manager responsible for production is of the opinion that rearranging the layout of the production floor at the largest manufacturing plant, will reduce inefficiency and increase productivity.It is the opinion of the team, that this specific proposal should receive favorable consideration, and should also include business process reengineering (BPR). | Yes | Yes | | The concept of business process reengineering, is to rethink and breakdown existing business processes. This allows a company to reduce costs while improving productivity through newer, more efficient processes.If one also looks at the old and outdated information technology systems in use within the organisation, and the comments made by the Chief Executive Officer in relation to the ICT systems and processes, it further strengthens our view point that a business process reengineering will be the way to go. | | | | Dr. Abdulaziz A. Bubshait, from the King Fand University of Petroleum and Mineral, Department of Construction Engineering and Management, in his Term Paper "Business Process Reengineering: Overview of Concept and Application", gives a clear indication that business process reengineering is not only for companies that are in difficulty. Companies that are on top of the game also needs to continuously renew in order to stay competitive in the new global economy. By introducing business process reengineering, companies can greatly improve efficiency and productivity while at the same time reducing cost | | | | The benefits of a BPR will undoubtedly meet the requirements and objectives as determined by the Chief Executive Officer and will benefit the firm immensely. | | | | This proposal from Tyler Ripken meets the objectives set by the CEO and is highly recommended for implementation, especially as this is a manufacturing business and this process will increase productivity while reducing cost. | | | New ICT System | The general manager responsible for operations, would like the use the $2,000,000 to procure a new computer system as the current system is outdated and struggles to keep up with customer orders, customer complaints and takes time to issue invoices.The Chief Executive Office however already indicated that she is not willing to spend money on a new computer system and suggested outsourcing. | | | | Outsourcing can be the cheaper option, especially where a company outsources non core business functions to focus on core business. | | | | (www.flatworldsolution.com) indicate that IT outsourcing is one of the most common business processes to be outsourced. It further lists some of the advantages to outsourcing as being the following:-Swiftness and expertiseMore focus on core businessRisk sharingReduced operational cost | | | | The functions of the computer systems within the company is to deal with orders, invoicing and customer matters. The company is a manufacturing business and spending money on a new computers system with specialist help will not address the objectives as set by the Chief Executive Officer. It will actually increase cost. | | | | It would therefore be better to take the advice from the Chief Executive Officer and to outsource the functions of customer care, orders and invoices to a specialist company, especially one in India, where the cost is very cheap, and to retrench the current workforce to reduce cost. | | | | Recommendation therefore is to outsource the function and to retrench staff. | | | Increase sales staff | This proposal soughs to increase the number of sales staff and establish a presence in countries where no sales staff have been. | | | | It is the basic foundation of a manufacturing company to increase its sales, revenue and market share. Any private enterprise focused on profit will have the same objectives. | | | | (Harish Sujan, Barton A., Weitz and Mita Sujan August 1988, Increasing Sales Productivity by getting Sales People to Work Smarter), states that the individual salesperson still remain the most effective method of selling products. The salesperson going to a client, interacting with the client and establishing that personal relationship is and remains the most effective tool to sell a product. | | | | (Bob Thompson Ceo, CustomerThink Corp, April 2008, Improving Sales Productivity: An opportunity for sales and IT Leadership), also places emphasis on the individual salesperson as the most valuable asset in selling products. He also indicates that more time should be spend on increasing sales time and states that 40% of a salesperson's time is spend on non sales functions.Salespersons should be better trained, have a better understanding of the product/s and be supported with state of the art technology to ensure that sales are processed with speed. | | | | It is thus clear that in order to increase sales, the company will need to appoint salespeople to target those countries where salespeople are not yet deployed.Although this will have an increase in personnel cost, the increase will be off-set against the increased sales, the retrenchment of staff in the production department and the outsourcing of the customer ICT modules. | | | | The recommendation is thus to employ additional sales staff. | | |

In summary the project justification is as follows:-

Project | Justification | Go -Ahead Yes or No | Development of a new prescription drug | Too high risk and too expensive! Does not meet CEO Objectives. | | Reorganisation of the production floor/line | Great proposal. Cost saving and increased production. No funding required. | | New ICT System | Too expensive. Not core business. Outsource to service provider. | | Increase sales staff | Great proposal. Increased sales activity will lead to increased sales and revenue. | |

2.5 Project Prioritization

| Factors | | | Weight | | | | | ProjectsKey1- Poor2- Better3- Average4- Good5- Excellent | Aligned with company goals | Anticipated sales volume | Increase in market share | Establishment of new markets | Anticipated retail price | Investment required | Estimated manufacturing cost per unit | Technology development required | Return on investment | Human resources impact | Public reaction | Competitors reaction | Expected time frame | Regulatory approval | Risks | Total | Development of a new prescription drug | 4 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 3 | 1 | 1 | 1 | 1 | 1 | 1 | 20 | Reorganisation of the production floor/line | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 75 | New ICT System | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 15 | Increase sales staff | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 60 | (asq.org.services.bodyofknowledge-asq) amended

2.6 Balanced Score Card

(Harvard Business School, Conceptual Foundations of the Balanced Scorecard, Robert S. Kaplan, Working Paper, 10-074)

The projects within this business case all resort under the financial perspective. The reason for this is that the Chief Executive Officers objectives namely to reduce cost and increase sales falls squarely within the financial perspective of the balanced scorecard.

2.7 Programme Proposal

3. Conclusions and Recommendations

3.1 The conclusions are as follows:-

1. That the company is profitable and doing well. 2. The company wants to re-invest $2,000,000. 3. In re-investing, the company wants to reduce cost and increase sales. 4. The company is considering four options for the re-investment.
(a) Development of a new drug.
(b) Redesign of the production floor/line.
(c) Introduction of a new ICT system.
(d) Increasing its sales staff.

5. In analysing the four options, the following are our conclusions:-

(a) The manufacturing of a new drug and bringing it to market is a very long and very expensive process. The risks are high, with only two out of ten new drugs ever making it to the market, being profitable. Considering that the development of the new drug for the company is already not producing the desired results, and the fact that the competitors may be on the verge of a breakthrough, an injection of an additional $2,000,000 will not make any significant difference.

(b) The re-organisation of the production line at the oldest and largest manufacturing plant, will not require any additional funding, but coupled with a BPR, this will increase the efficiency and productivity at the plant, reducing cost and bringing more products to the market. This together with a well motivated and trained sales department will increase sales and reduce costs.

(c) The introduction of a new computer system with the necessary development, testing and implementation, will increase cost for the company. This part of the business is not its core business and can be outsourced to India, at a cost far less than what the current operational costs are. Together with the retrenchment of staff or alternatively retraining them for the sales department, it can contribute tremendously towards reducing cost and increasing sales.

(d) The most basic driver for sales remain the individual sales representative. Nothing beats a well motivated, trained and dedicated sales person. To increase sales in all eight countries , one will need to bring the product to each country and market it. To do that will require additional sales staff. This will increase sales and profits. The majority of the $2,000,000 should be directed at this option. 3.2 The recommendations are as follows:-

(1) That the $2,000,000 not be invested in the development of the new drug.

(2) That the re-organisation of the production pant be approved and prioritised as the first intervention.

(3) That the computers systems and accompanying services be outsourced to a Call Centre in India.

(4) That sales staff be increased in all countries where the company has no sales offices.

(5) That the projects be undertaken parallel to each other starting with the production plant.

Bibliography