Before starting any project, great care has to be taken in its planning. The success of any project depends first upon careful and proper planning and then on the efficient execution of such a plan. It is necessary for an engineer to know how to prepare project reports. The study of project planning is unavoidable for an engineer.

Project planning involves following steps

  • Market survey.
  • Project Capacity.
  • Location of industry and Selection of site.
  • Plant Layout.
  • Design and Drawing.
  • Material Requirement
  • Operation Planning.
  • Time Study.
  • Method Study.
  • Machine Loading.
  • Sub-Contracting Considerations.
  • Equipment Requirement.
  • Organisation Layout and Staff Requirement.
  • Material handling.
  • Budgeting.
  • Material Budget.
  • Cost Calculations.
  • Procurement of Capital for small scale, Large scale and Medium scale Industries.
  • Critical Report on Feasibility.



Market Survey

  • A market survey helps in forecasting demand for the proposed product.
  • It provides statistical information essential for accurate planning and execution of the project.
  • It gives clear information about the future demand for the product which helps whom (concerned consumers)
  • It gives a clear idea about the profit-earning potential of the project.
  • In the initial stage, a preliminary survey is essential.
  • If the result of the preliminary survey appears to be encouraging, a detailed survey is undertaken.


The following details in particular are taken into account in a market survey.

  • Location of the market.
  • Scope for sale of the product.
  • Purchasing habits of the consumers.
  • Purchasing capacity of the consumers.
  • Availability of raw material and other facilities.
  • Other details relevant to the project.
  • Remaining aspects of the project.


Project Capacity

After conducting a detailed market survey, the collected statistical data is compared (matched) with the capacity of the project.
For this purpose the following details are worked out.

  • For of organisation to be preferred; whether it should be an individual ownership concern, partnership or any other form suitable for the project.
  • Exact demand for the product in the market.
  • Nature of the product.
  • Amount of investment required.
  • Availability of power, raw material, water and other relevant facilities.


Location of Industry and Selection of Site

Once a decision to undertake a project is taken, the location of the production unit needs to be fixed.
For choosing a suitable location, the following factors are to be considered carefully.

  • Nearness to the market.
  • Transport facilities.
  • Existence of similar factories which have already started their production.
  • Suitability of climatic and atmospheric conditions.
  • Availability of water, power and drainage facilities.
  • Availability of Business and Banking facilities.
  • Availability of labour.
  • Easy access to the site.
  • Availability of sufficient area for future expansion.
  • Cost of construction of the factory and housing facilities for workers.
  • Availability of other facilities like medical aid, post office and other communication media.


Plant Layout

The following factors are to be considered in finalising the Plant Layout.

  • The type of building i.e. single storied building or multi storied building.
  • Provision for expansion.
  • Facility for easy supervision.
  • Proper lighting and ventilation.
  • Design to ensure easy flow of material and minimum production delays.


Design and Drawing

Once the product is decided upon, no time should be wasted in designing it. The design work should be assigned to an expert and qualified person in the field.
The following factors should be considered while drawing up a design.

  • Design of the product should be according to the desired need.
  • Drawing should be according to specifications.
  • Machinery required.


Material Requirement

Once the drawings of the product are prepared. It is easy to decide what material will be required to be purchased. This depends upon:

  • The number of items required.
  • Detailed specifications of each of the items of material required for manufacturing the product.
  • Quantity of each specific material needed in processing the product.


Operation Planning

Planning department will have to find the best manufacturing process. The manufacturing process should be such as to avoid all kind of wastages. For this purposes, a time and motion study has to be carried out.

Times Study

The exact time calculations are necessary for correct pricing of the proposed product. It is necessary to work out the time required for different processes involved in converting raw material into a finished product. This is necessary for cost control, budgeting, production schedule, machine loading etc. The time study used for method finalisation, based on the method study results is performed on average works and average machine.

Method Study

A method study is conducted to eliminate wastage of all kinds, including inefficient movements, motions. Firstly, the work is divided into suitable stages. Each stage is studied separately and then, their inter-relationships are studied.
First of all, it is necessary to break all the operations of the jobs, including material handling, machine work, manual work etc. into small elements. It is the task of an engineer to study each operation and find out the process best suited to that operation. At every stage, he should see whether a particular operations is essential or not and try to eliminate all unnecessary operations. Finally, he should lay down the exact set of operations that are essentially required to be performed. He should state which type of machine and tool has to be used. Once the best method is developed by an engineer, the procedure should be standardised so that it can be easily followed by the workers.

Machine Loading

The number of machines to be installed in the plant needs to be carefully decided. Excess machinery necessarily increases the cost of investment and production. While planning, it is necessary to ascertain the exact machine time requirement for each operation. The maximum utilisation of all machines loading programme should be prepared.

Sub-Contracting Considerations

Methods of production have been considerably changed these days due to the development of technology and specialisation. It is not possible for a single concern to produce all the components of a given product in the same factory. So, it becomes one of the important functions of the planning department to decide whether all the parts of the final product can be produced within the factory or some of them can be purchased from other concerns. This would also give an opportunity for the growth of ancillary industries. After carefully studying the details, the planning department should decide whether and to whom a sub-contract for manufacturing of particular components is to be given. Before finalising a sub-contract, the planning department has to take into consideration the available technological know-how competitive prices, delivery schedules and factory resources.

Equipment Requirement

After careful examination of the time and motion study and machine loading it becomes possible to decide the exact number of equipments and tools that will be required. Drawings also help in deciding the requirement of tools and accessories.

Organisational layout and staff requirement

After the studying the details of the project, it is possible to decide the organisational layout. Layout of the organisation is decided after considering the nature of the work and the type and size of the industry. An organisation should be efficient and there should be proper co-ordination between men and materials, so that the firm can get maximum output with minimum cost. Duties and responsibilities of each of the officers should be clearly defined. The number of employees, their qualifications, their salaries as well as their status should be decided upon. This helps to calculate the cost of production and formulate an efficient hierarchical set-up.

Material Handling

Before and during the construction of buildings, it is necessary to consider the manner in which the material shall be handled so as to reduce the cost of production. The plant layout has a definite impact on the cost of production. By proper layout, the material handling cost can be reduced to a great extent. It also reduces the idle machine hours and the idle man hours.
Before deciding on the material handling device the following points need a careful study.

  • Type, size and shape of the product.
  • Method of manufacturing and the rate of production.
  • Availability of space and the distance to be covered.
  • Availability of power.


Budgeting

Budgeting can be defined as a forecast of the programme of operations based on the expected operating efficiency. It must be based on a definite period of time. It can be prepared by studying statistical data. It can also be stated as forecasting and planning for the future period, using past experience, market trends and the present position.
Budgeting is a major tool in the hands of the management or planning further activities of the concern. This includes estimation of sales and expenditure on production. Budgeting is also done to forecast the expected results. It can be projected either in financial terms or in numerical terms.

Master Budget : The summarised budget of the entire concern is known as the Master Budget.

Sales Budget : The Sales Budget gives an idea about the probable income from the sale of the product and the expenditure involved in organising the sales operations. A sales forecast can be made on the basis of the reports received from the salesman, who can give an estimate of the quantity of the product that is likely to be sold in their sales areas.

Month
Zone I
Zone II
Zone III
Total Sales
January
February
March
April
May
June
July
August
September
October
November
December




Total
Annual
Sales
(Zone-wise)





Production budget : The production budget is prepared to ensure that the demand of the sales department is met during the given period. It gives information about the time  needed to product and dispatch the product. It is prepared after considering the sales demand and the capacity of the production plant. The cost of production plays an important role in the production budgeting.

Production Budget for the Year 20…

Number of units to be produced
January
………
December
Total units
Product ‘A’




Product ‘B’




Product ‘C’





Financial Budget : The financial budget gives a summary of the income to be received and the amount required to be spent during a given period. It forecasts the profits, losses and the financial position of the concern. It helps the top management in estimating the profitability of their concern.

Financial Budget for the Year 20…

Particulars
January
…………….
December
1. Cash Balance in the beginning



Sales Budget for Product ‘A’ for the year 20….
2. Expected Receipts from sale.



3. Expected Expenses.



4. Loss of Profit.



5. Cash Balance in the end.




Material Budget

This budget is prepared by the production department. It shows the quantity of material required for manufacturing the product. In accordance with this budget, order are placed to procure the required quantity of material within the prescribed period.

Material Budget for the year 20…

Material
January
…………
December
Total Required
1)     X
2)   Y
3)    Z





Cost Calculations

Generally, the cost of production of a product comprises of the expenditure incurred on the various items, right from purchasing of raw material till the production and sale of the finished product. This is referred to as the cost of production. It can be calculated by adding the following expenses during a particular period.

  • Material expenses.
  • Labour expenses.
  • Factory expenses.
  • Administrative expenses.
  • Selling expenses.


After calculating the total cost of the product, it is easy to find out exactly how much profit has to be charged on each unit of the product. The amount of profit being variable, it affects the selling price of the product.

The following factors influence the determination of the profit margin:

  • Position of the production unit in the market (Monopoly or Imperfect Competition)
  • Purchasing power of the consumers.
  • The amount that a consumer is ready to pay for purchasing the product.
  • Availability of substitutes in the market.
  • The selling price of the substitute.


Procurement of Capital

Generally, large scale industries procure their capital by selling shares or by taking in partners. Working is collected through debentures, bank loans etc.

Critical Report on Feasibility


On the basis of the cost information, a critical report showing the returns of the invested capital is prepared. It is called the feasibility report of the project. If the returns on the investment are too little, some other alternative project is considered. If the returns on the investment are good, the first step in the formation of the business organisation is taken.