Module 4

Preparation of project and ERP

 CONTENTS
• Meaning of project
• Project Identification & Selection
• Project Report Need and Significance
• Project Report contents and Formulation
• Guidelines by Planning Commission for Project Report,
• Enterprise Resource Planning: Meaning & Importance
• Functional areas of Management
– Marketing / Sales
– Supply Chain Management
– Finance & Accounting
Human Resources
• Types of Reports
• Methods of Report Generation
 Meaning of Project
 The project is a ‘scientifically evolved work plan’
intended to achieve a specific objective within
specified period of time.
 It is a scheme, design, a proposal of something
intended or devised to be achieved
 “Project is an approval for a capital investment
to develop facilities to provide goods and
services”--- The World Bank
 Every project has starting point, an end point
with specific objectives.
 Each Project may differ in size, nature, time,
objectives and complexity, but they have three
common basic attributes.
They are:
 A course of action
 Specific objective
 Definite time duration
 The basic necessity of an Entrepreneur is to decide
upon a project, success of any enterprise depends on
the selection of right project
 It is also referred as foundation for any venture
 Innovation & vision form an integral aspect of a
project
 Classification of Project
 Quantifiable and non-quantifiable projects
 Sectoral projects
 Techno-economic projects
a. Factor intensity-oriented classification
 Capital intensive
 Labor intensive
b. Cause-oriented classification
 Demand based
 Raw material
c. Magnitude oriented classification
 Large scale
 Medium scale
 Small scale
Quantifiable and non-quantifiable
projects
 Quantifiable Projects: projects for which right
quantitative assessment of benefit can be made
i.e. which can be measured are termed as
quantifiable projects
Eg: Projects related to power generation,
industrial development etc.
 Non-Quantifiable Projects: Projects for which
quantitative assessment cannot be made and
which is not measurable are termed as non-
quantifiable projects
Eg: projects involving health, education etc.
 Sectoral projects

 Sectoral Projects: projects are classified

based on different sectors or area such as
Automobile sector, Agriculture sector, Health
sector, Power sector, Transportation sector,
Manufacturing sector, Food-processing sector
etc.
 Techno-economic Projects
 Techno-economic Projects: this classification has 3
groups
 1) Factor Intensity-oriented classification: - classified as
capital intensive or labour intensive. If large investment
is made then such projects are called capital intensive, if
the projects involve large number of human resources
then such projects are called labour intensive.
 2) Cause-oriented classification: - classified as demand
based or raw material based. If there is demand for
certain goods/services then it can be called as demand
based, the availability of the raw materials & other
resources makes it material based.
 3) Magnitude oriented classification: - magnitude of
investment (large scale/medium scale/small scale) is
depending upon investment in project.
 Project Identification
 A project having good market is generally selected as a
project by any entrepreneur.
 It is concerned with collection of economic data,
compiling and analyzing it to identify the possibility of
investment to produce the goods or service for making
profit.
 Project identification May come from one or the
other of the following ways:
a. Observation: observation is very important source of
project idea. Observation of existing project/processes
may lead to the development of a new idea.
b. Trade & professional magazines: trade &
professional literatures helps in getting knowledge
about new trends & latest technology which helps in
getting new ideas.
c. Bulletins of research institutions: R&D bulletins of
some institutions also provide some new ideas
which are published in the bulletins
d. Government sources: departmental publications of
various government departments also provide
useful information which helps in identifying new
ideas.
 Project Ideas can be discovered from various
internal & external sources. These may include :
 Knowledge of potential customer needs.
 Personal observation of emerging trends in
demand for certain products.
 Scope for producing substitute product.
 Success stories of known entrepreneurs or
friends or relatives.
 A new product introduced by the competitor.
 Project Selection
 It starts from where project identification ends.
 Identified projects are analyzed in the existence economic
conditions, govt policies, target ,markets, profits etc..
 Tool for analysis is SWOT or SCOT analysis.
 The intending entrepreneur analyses his strengths and
weaknesses as well as opportunities/competitive
and threats/challenges offered by each of
the project ideas.
 Other points to be considered are:
 Technology
 Equipment
 Investment size
 Location
 Marketing.
 Project Report
 It’s a written document pertaining to any
investment proposal.
 It’s a course of action what the entrepreneur
wants to do in his business and the means to
do it.
 It serves as a road map describing the
direction of the enterprises, its goals and how
to achieve them.
 It also serves to attract investors and lenders.
Contents of Project Report
 General information
 Promoter
 Location
 Land and building
 Plant and machinery
 Capital requirement & cost
 Production process
 Raw material
 Man power
 Market
 Project Formulation
 It’s a systematic development of a project idea
for the eventual purpose of arriving at an
investment decision.
 It’s a step by step investigation and
development of a project.
 It’s a process involving the joint efforts of a
team of experts. Each member of the team
must be fully familiar with the broad
strategies, objectives and other aspects of the
project.
 A general set of Information given in Project
Formulation is as follows:
 General information
 Project description
 Market potential
 Capital costs and sources of finance
 Assessment of working capital requirement
 Other financial aspects
 Economic and social variables
 Project implementation
 Guidelines by Planning
Commission for project report
 General information.
 Preliminary analysis of alternatives.
 Project description.
 Marketing plan.
 Capital requirements and costs.
 Operating requirements and costs.
 Financial analysis.
 Economic analysis.
 Miscellaneous aspects
 Guidelines by Planning
Commission for project report
 General Information : it must include
 The analysis of the industry to which it
belongs.
 Description of type of industry, its priority,
past performance,
 increase in production, role of public sector,
technology,
 allocation of funds and information about the
enterprise.
 Preliminary analysis of alternatives : it should
include Technically feasible like
 Gap between demand and supply of
proposed products,
 Availability of capacity,
 List of all existing plants in industry, present
projects and proposed projects.
 Location of plant
 Requirement of any foreign exchange, etc.
 Project Description: It should provide
description of
 Technology
 Process selected for the project
 Information pertaining to the selection of
optimal location, population, water, land,
environment, pollution etc.
 details of operational requirements of the
plant, construction details for plant and
offices etc.
 Marketing plan : Demand, target, price of
product, distribution methods etc.

 Capital requirements and cost : Estimates

should be realistic based on logical information.

 Operating requirements and costs :

 Costs involved after the commencement of
the project are called as operating costs.
 Costs of raw materials, selling, rent,
maintenance, selling, fuel, salary, repair etc
 Financial Analysis : Required to access the
financial availability of the project.

 Economic Analysis :Impact of operations on

foreign trade, direct costs and benefits.

 Miscellaneous aspects : Depending on the

nature and size of the operation of a project
other relevant description can be included in
the project report.
ENTERPRISE RESOURCE
PLANNING
(ERP)
 Enterprise Resource Planning
 Enterprise resource planning(ERP) system
is a fully integrated business management
system covering Functional areas of an
enterprise like Logistics, Production, Finance,
Accounting and Human Resources.
 It organizes and integrates operation
processes and information flows to make
optimum use of resources such as men,
material, money and machine.
 Enterprise resource planning promises one
database, one application & one user interface
 IMPORTANCE OF ERP
 ERP delivers a single database that contains all
data for the software modules, which would include:
 Manufacturing: Engineering, bills of material,
scheduling, capacity, workflow management, quality
control, cost management, manufacturing process,
manufacturing projects, manufacturing flow.
 Supply chain management: Order to cash,
inventory, order entry, purchasing, product
configuration, supply chain planning, supplier
scheduling, and inspection of goods, claim
processing, and commission calculation.
 Financials: General ledger, cash management,
accounts payable, accounts receivable, fixed assets
 Project management: Costing, billing, time and
expense, performance units, activity management.
 Human resources: Human resources, payroll,
training, time and attendance, benefits.
 Customer relationship management: Sales and
marketing, commissions, service, customer contact
and call center support, Data warehouse and
various self-service interfaces for customers,
suppliers, and employees.
 Access control: user privilege as per authority levels
for process execution. Customization -to meet the
extension, addition, change in process flow.
Functional Areas of Management
 1.Marketing and Sales (M/S)
 2. Supply Chain Management (SCM)
 3. Accounting and Finance (A/F)
 4. Human Resources (HR)
 Functional areas
 Marketing/Sales – Sales and marketing departments
can track the customer experience from presale
activities, which begin with contacting the customer,
through the actual dispatch of the customer’s order.
 Tasks related to customer visits, expenses, shipping,
invoicing, forecasting and competitor analysis can be
automated and/or enhanced through an ERP system.
Employees can contact customers, follow up on
invoices and track orders.
 Additionally, sales and marketing personnel can
monitor their individual goals, which also can be
collated and analyzed by managers and business
partners.
 Supply Chain Management – ERP modules
supporting supply chain management may
feature functions for purchasing, product
configuration, supplier scheduling, goods
inspections, claims processing, warehousing and
more. There are also related modules to manage
order processing and distribution tasks
 Accounting/Finance – By automating and
streamlining tasks related to budgeting, cost and
cash management, activity-based costing and
other accounting/finance functions, ERP systems
can provide businesses with real-time data and
insights on performance while also ensuring
compliance with relevant financial regulations.
 Human Resources – Human resources modules
within an enterprise resource planning system
may include tools and dashboards to gather and
interpret data on training, recruiting, payroll,
benefits, retirement and diversity management.
HR managers also can monitor and measure key
performance indicators (KPIs) for individual
employees, job roles and departments
 Functional Areas and Business
Processes of a Very Small Business
 Example: A fictitious coffee shop
 Examine business processes of the coffee shop
 See why coordination of functional areas helps achieve efficient
and effective business processes
 Look at how integration of the information system improves the
business

32
 Marketing and Sales
 Functions of Marketing and
Sales
 Developing products
 Determining pricing
 Promoting products to
customers
 Taking customers’ orders
 Helping create a sales forecast

33
  Marketing and Sales tasks for the coffee shop
 Formal recordkeeping not required
 Need to keep track of customers
 Product development can be done informally
 Good repeat customers allowed to charge purchases—up to a
point
 Records must show how much each customer owes and his or her
available credit

34
  Needs information from all other functional areas
 Customers communicate orders to M/S in person or by
telephone, e-mail, fax, the Web, etc.
 M/S has a role in determining product prices
 Pricing might be determined based on a product’s unit cost,
plus some percentage markup
 Requires information from Accounting and Finance, and Supply
Chain Management data

35
36
  M/S needs to interact with Human Resources to exchange
information on hiring needs, legal requirements, etc.
 Inputs for M/S
 Customer data
 Order data
 Sales trend data
 Per-unit cost
 Company travel expense policy

37
  Outputs for M/S
 Sales strategies
 Product pricing
 Employment needs

38
 Supply Chain Management
 In commerce, supply chain management
(SCM), the management of the flow of goods
and services, involves the movement and storage
of raw materials, of work-in-process inventory,
and of finished goods from point of origin to point
of consumption.

39
  Needs information from various functional areas
 Production plans based on information about product sales
(actual and projected) that comes from Marketing and Sales
 With accurate data about required production levels:
 Raw material and packaging can be ordered as needed
 Inventory levels can be kept low, saving money

40
  Supply Chain Management data and records can:
 Provide data needed by Accounting and Finance to determine
how much of each resource was used
 Support the M/S function by providing information about what
has been produced and shipped
 Supply Chain Management interacts in some ways with
Human Resources

41
  W.r.to example
 Functions within Supply Chain Management
 Making the coffee (manufacturing/production)
 Buying raw materials (purchasing)
 Production planning requires sales forecasts from M/S
functional area
 Sales forecasts: Analyses that attempt to predict the future
sales of a product

42
  Production plans used to develop requirements for raw
materials and packaging
 Raw materials: Bottled spring water, fresh lemons, artificial
sweetener, raw sugar
 Packaging: Cups, straws

43
44
  Inputs for SCM
 Product sales data
 Production plans
 Inventory levels
 Layoff and recall company policy
 Outputs for SCM
 Raw material orders
 Packaging orders
 Resource expenditure data
 Production and inventory reports
 Hiring information

45
 Accounting and Finance
 Recordcompany’s transactions in the
books of account
 Record accounts payable when raw
materials are purchased and cash
outflows when they pay for materials
 Summarize transaction data to prepare
reports about company’s financial
position and profitability

46
  Functions within Accounting and Finance
 Recording raw data about transactions (including sales), raw
material purchases, payroll, and receipt of cash from customers
 Raw data: Numbers collected from sales, manufacturing
and other operations, without any manipulation, calculation,
or arrangement for presentation

47
  People in other functional areas provide data to A/F
 M/S provides sales data
 SCM provides production and inventory data
 HR provides payroll and benefit expense data
 M/S personnel require data from A/F to evaluate customer
credit

48
49
  Inputs for A/F
 Payments from customers
 Accounts receivable data
 Accounts payable data
 Sales data
 Production and inventory data
 Payroll and expense data

50
  Outputs for A/F
 Payments to suppliers
 Financial reports
 Customer credit data

51
 Human Resources
 Recruit
 Train
 Evaluate
 Compensate
 Dehire (retire or fire)

52
  HR uses sales forecasts developed by the
individual departments to plan personnel needs
 Systems integrated using ERP software provide
the data sharing necessary between functional
areas

53
  HR needs information from the other departments
 Tasks related to employee hiring, benefits,
training, and government compliance are all
responsibilities of HR
 HR needs accurate forecasts of personnel needs
from all functional units
 HR needs to know what skills are needed to
perform a particular job and how much the
company can afford to pay employees

54
  Observing governmental regulations in recruiting,
training, compensating, promoting, and terminating
employees
 Inputs for HR
 Personnel forecasts
 Skills data
 Outputs for HR
 Regulation compliance
 Employee training and certification
 Skills database
 Employee evaluation and compensation

55
  Significant amount of data is maintained by and
shared among the functional areas
 Timeliness and accuracy of these data critical to
each area’s success and to company’s ability to
make a profit and generate future growth
 ERP software allows all functional areas to share
a common database
 Allows accurate, real-time information to be
available

56
ASSIGNMENT QUESTIONS
 What is a project report? What are the contents of it
 Explain the guidelines by planning commission of india for
project report
 What is ERP? Explain its need and the functional areas