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Project Management - Project Selection Methods, A Case Study Of Bayer Group

  • 4th Sep, 2020
  • 16:44 PM

Selection of the right project comes before the examination of an effective project management methodology for any organization as an unreasonable project with disordered deliverables and impractical objectives can lead to catastrophic outcomes for a company through drainage of cost and budget as well as critical damage on the productivity and skill. But selection of the right project based on the availability of resources and the company’s skills is a significant calculation of the overall performative objective of a company. These calculations can be obtained through a wide array of project selection methods with effective measurements. In this study, the project selection method of Bayer is going to be evaluated on the selection of the project of protective packaging design and the needed tools, based on the standards and guidelines of Project Management Body of Knowledge or PMBOK.

About The Company & The Project

Based in Australia, Bayer is known as a multinational company having expertise in multiple sectors of mechanical engineering, including pharmaceuticals, crop science, consumer health and animal health. This project was selected through a range of decisional methods and the company opted for the method of Benefit Measurement as per the suggestion of the project manager. The company has been working on the selection of this project as the result of the emerging trends of the market, following the standard of PMBOK (Heldman, 2018). The common steps and strategies as per the Benefit Measurement method adapted by Bayer are discussed below.

 

Benefit Measurement Method

The essential method obtained by the company in the process of selection of the project is the Benefit Measurement Method. The procedures are as followed -

Cost Benefit Ratio - Before starting to work on the project, the company has developed an effective comparison between the cost of the products which are planning to be manufactured and the obtained benefit from it by selling it in the current market. It is an important step towards identifying the potential value of a by identifying and measuring the overall cost against the beneficial value of its return in the market..

Economic Value Added - The next step is the economic model or the EVA (Economic Value Added) which is quite similar to the cost benefit ratio. In this process, the company describes the difference between the invested cost and the generated revenue. EVA can be defined as the net operating profit exclusive of the tax (Mligo, 2016).

Payback Period - The payback period is the requisite time period of a company to recoup its estimated expenses with the future project (Heldman, 2017). In this regard, the value of dollars with the coming of inflation and interest are taken into the calculation as well.

Net Present Value - On the usage of discounted cash flow, organizations follow the technique of NPV which puts the overall lifecycle of the project into perspectives in terms of value and earnings. (O’Leary, 2017) It calculates the future values of the coming years into present dollars by the method of DCF and then, the NPV of the project which is the combination of all these values (Veal, 2017).

Scoring Model – It is a flexible way of comparing the effectiveness and productivity of one project with the other. It provides a chance to the project managers to identify the important qualities of a project beneficial for the team and the organization at large (Hinrichsen, 2019).

Opportunity Cost - Opportunity cost is very important for a project manager while working on the selection process of a project. Typically, opportunity cost decreases to what the project manager is missing out on by selecting a particular project over another (Linfield and Posavac, 2018).

 

Peer Review Method

The scope of a project is assessed by the reviews and opinions of a peer group which consisted of a number of peers from different project management fields. This peer group reviewed the overall aspects of this project and recommended few of the best strategic measurements implemented in some of the great projects (Gu, 2016).
 

Process To Conduct Selected Method

The various strategies included in the overall project selection method of Benefit Measurement need to be conducted minutely with proper monitoring and overseeing by the management team or the project manager. Bayer implemented each method which is discussed above with efficacy. At first, the company developed a group of panels with the aim to monitor the development and progress of these methods. Their responsibilities include the submission of reports of overall executions of the procedures each week to the project manager. The project manager was the head of this whole selection method whose chief duty was to oversee and audit each and every detail of the ongoing methods (Gerhards and Kranemann, 2017). Apart from this, a technical team was assigned as well to correctly calculate the costs and the budget to predict the effectiveness of this project. The employees were trained adequately as well to execute the main methods with proficiency and adapt certain tactics to the changes and new features of the project.

 

Project Initiation Process

Bayer followed the methodologies of each step by calculating the overall costs of the project, estimating the time period of its completion and taking the feedback of the peer group into consideration. An effective team was recruited under the supervision of the project manager for this cost and review analysis and the overall process is evaluated below -

Cost Benefit Ratio The cost of resources for producing packaging is $250,000 and the expected return  is $450.000 (Guevara et al. 2017). So, the cost benefit ratio is 5:9. (Saunders et al., 2019).
Economic Value Added The quantifiable benefit from the project is $200,000 (Bradley and Muller, 2016).
Payback Period The revenue is $20,000 a year, so the payback period is 15 years.
Net Present Value The  loss is $600 in the first year, $450 in the second and $800, $950 and $1100 in the third, fourth and fifth years,. So the estimated NPV is $1800. (Felter and Flatt, 2018)
Scoring Model The assessment of profitability, overall risks management, backup and support of the employees and the stakeholders and identification of the demands of the consumers in the ongoing market (Larson, 2017) helping in ranking the project on a consistent scale of comparison.
Opportunity Cost The project is worth $250.000 having opportunity cost $310,000 by missing out on $60.000. (Piotrowski, 2016)
Peer Review Method Bayer evaluated the scope of this project by assessing the reviews and opinions of a peer group which consisted of a number of peers from different project management fields.

 

Initiation Process Group & Initiation Documents

The development of an initiation process group is significantly important before the beginning of the implementation of the selection methods. Bayer adhered to the standards of PMBOK and developed an effective initiation process group through following these steps -

Business Case - The development of a business case by Bayer explains the usage of financial and other resources, risk assessment and management plan and an analysis of the cost and benefit.

Project Charter - By developing a project charter at the ‘Define’ phase, the project manager of Bayer has been able to define the limitations and scopes of this project. The project charter helped in starting the approved project, allowing the manager to use the available resources, estimating the business value of the project and its alignment with organizational strategies.

The initiation documents developed by Bayer include the definition of project scope and the overall success criteria. It consists of the basic yet important data and information like context, scope, management team and collaborations of the project (Voegelin, 2017. It also defines the project parameters and the descriptions of the roles of the stakeholders and the shareholders involved in the project.

 

Conclusion

The competency and leverage of following and implementing an effective project selection method is apparently visible in regards with the organization of Bayer. By choosing a project which will be a right fit for the advancement of overall organization growth, the project team’s skills and competencies and success of the desired target, Bayer has been successful in the implementation of an efficient project selection method by adhering to the standards and guidelines of PMBOK which has been proved beneficial for the company. This study has the purpose of evaluation of the project selection methods obtained by the Australian company Bayer in selecting the project of designing and manufacturing quality packaging of goods and supplies and been structured accordingly.

 

Reference List

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