Graduate School of Business
TS PROJMA R24
A PROJECT MANAGEMENT & CONTROL SYSTEM FOR CAPITAL PROJECTS
February 28, 2015
Heublein, Inc. is a consumer food and beverage company that serves products for both domestic and international markets. Beverages comprise two-thirds of the overall revenues while the balance is from Foods. Figure 1 below describes more in detail the business sub-groups and corresponding size of the businesses.
Capital allocation and spending varies among the business groups given the differences in business size. The Engineering Departments of the Groups have the responsibility on both Operational and Capital projects. Financial tracking support varies as well from full outsource to self-maintained records.
Current Capital Project process is described below with key focus on financial justification of the project. Any Capital Appropriation Request will have to go through stringent four layers of reviews for approval prior to implementation. Furthermore, the current process is reactive in nature vs proactive. A management review during implementation will only happen when there’s already a significant cost variance during execution. As a result, some major projects went over spent. Additionally, inflation is getting higher than depreciation rates making the asset value depreciates faster than expected. These opportunities compelled Heublein, Inc. to respond via Project Management & Control System (PM&C).
The PM&C Team
The Director of Facilities and Manufacturing Planning decided to use an external consultant and a program manger which was chosen from the corporate staff (internal). Ground rules were established such as, the program should be tailor fitted to the specific needs of the group. Another rule is that the directors of the engineering departments of each group will be directly involved in both the design and implementation.
The program design was divided into fourphases:
Phase 1 – Educational Overview of Engineering Department Managers: This will cover project management principles and corporate objectives and recommended approach for any PM&C system.
Phase 2 – PM&C system design: The consultant will lead sessions after three weeks to define the system. The consultant was chosen to lead this so that, as an outsider, he could criticize and comment in ways that can’t be done by engineering project managers.
Phase 3 – Project Plan Development: The program manager will prepare the project plan based on the system design considerations.
Phase 4 – Implementation: This phase will be done according to the Project Plan developed by the program manager. This will include evaluation of the results after implementation.
Developed by the engineering managers during Phase 2 was the “Menu” by which any project should contain appropriate parts of the elements. The menu includes:
The minimum set of choices from the menu is specified by the Corporate Staff for Critical or Major projects. For routine projects, the project manager can decide on the menu selection.
1. Which of the project planning aids described in the chapter was used in the case?
Project Introduction and Objectives
Work Breakdown Structure (WBS)
Hierarchical Numbering System
Project Planning Menu
Program Cost or Cost Estimate
Accountability matrix – decision authority
Milestone checklist (as part of the control system)
2. For each of the aids used in the case, describe how they were constructed and if there were any modifications in form.
Among the aids used in the case, the project plan menu was a subject for modification depending on the type of project to be taken. Given that each of the groups of businesses have its own specific needs, utilizing all of the Menu is a soft