DEVELOP PROJECT

Project Selection Guidelines:

1. The model

 Develop a set of seven (between 3-9) indices for comparing and ranking these projects

 Quantify the relative importance of these indices by assigning different maximum points

to each indices

 Compare and rank these projects

o Scoring Model example (Figure 2-11 from Rad and Anantatmula)

o Ranking Matrix

Project Index 1

Index 2 Index 3 Index 4 Index 5 Index 6 Index 7 Total

1 2 3 4

2. The projects

 If some assumptions need to be highlighted explicitly, go ahead and list them

 Determine the value of indices for each project

 Sum the rating for each project to determine the overall ranking

3. Pick a project for implementation in the light of the numeric rankings

Background

Many companies encourage car-pooling and van pooling for their employees in order to promote on-time arrival of employees and in order to free up the parking lot for the clients.

About four years ago, seven creative entrepreneurs formed a company to develop and market an innovative van pooling system for enlightened employers. This company is currently called Vandelay.

The basic underlying philosophy of this approach to van pooling is that the employees will be picked up for work from wherever they happen to be when it is time to go to work. Using location sensors embedded in a cell phone, the van pooling system will detect the location of the employee and dispatch a van to pick up the employee so that the employee will arrive to work on time.

The primary server of the system will continually change the route of the vans in order to accommodate the picking up of new passengers and also to accommodate current traffic congestion patterns for that time and location.

Special signals will notify the employee when and where the pickup will take place. A master display will notify the driver as to who needs to be picked up and where. Another master display will keep the employer informed of the status of all incoming employees, their pick up time and the van assignment.

This creative van pooling has been tried on a small scale for about 25 local companies. Consequently, a lot of the operational infrastructure is in place and the systems are generally functioning properly.

On the basis of this success, our startup company has acquired the financial support of a venture capital group in order to market this system at a national scale. Although there are many potential targets for this first major implementation, for the time being the venture group will sponsor only one.

The Vandelay currently manufactures the basic components of the detecting devices and for the master displays. The centralized servers, the wiring, and termination components are purchased from outside vendors.

The Vandelay manufactures these basic components in one of three plants: one in the western region, one in the central region, and one in the eastern region. The Vandelay acquired these plants recently from a typewriter manufacturer who no longer needed these plants. The Vandelay has since fully adapted these plants to the basic component assembly.

The Vandelay is a fully project-oriented company. Therefore, assigning personnel to a new project is conducted with exceptional ease.

The following functions are performed at the company headquarters:

o Engineering, hardware/software design, testing, and installation

The following support functions are also provided by headquarters’ staff:

o Marketing, sales, procurement, contracting, and training o PMO functions

The servers and installation materials are purchased from outside vendors. There are three vendors for the server. There are twelve vendors for the wiring and termination materials. Prospective Project 1: Airport

There are two different categories of airports. Major airports that serve large multinational airlines,

and regional airports that serve private and smaller airplanes. We are focusing on large airports

because, at the first glance, they look to be more attractive.

The major airports serve several different airlines. The concern here is that each of these airlines

may require a separate software application for integration into their ticketing and intercom

system.

An additional characteristic is that these airlines use telecommunications channels to communicate

between their various airport groups. We haven't tried this particular interface before, and it may

involve forming a joint venture with a company that has experience in this area. This technology for

this project is considered to be complex.

An average airport would generate revenue of $100,000. The expenses would be about $90,000.

This project has a potential annual revenue stream of $30 to $50 million. There doesn't appear to

be long-term growth in this opportunity, but it would be a stable stream for the next 5 years.

Prospective Project 2: Big Bob’s Burger Barn

This 200-site chain has requested the assistance of VANDELAY in solving their van-pooling

problem.

One attractive characteristic of this opportunity is the exposure to the industry once this system is

successfully installed.

A preliminary review of the software requirements indicates that only a moderate amount of

modifications, to our existing design, is necessary here. The design, installation, and operational

characteristics will be very similar to many of the installations currently in place. This project is

considered to be of medium complexity.

Preliminary estimates of tasks indicate that, for each site, the installation will take four to seven

days and testing will take four to six days. Testing duration used to be three days, but it has

increased recently.

This account, if successful, will generate revenues for the next ten years. However, in order to meet

the number of units necessary for all of BBBB s sites, manufacturing plants would have to add an

additional production shift.

The average price that VANDELAY would charge per site would be around $35,000. VANDELAY’s

costs would be around $20,000.

Successful delivery of this project might lead to annual industry revenue of $50 million.

Prospective Project 3: Rent A Repair Expert

RARE provides services of a variety of trades personnel to homeowners on a contract basis. Their

expertise areas are: masonry, concrete, electrical, heating, ventilation, air conditioning, plumbing,

doors, windows, and carpets.

Since each of these specialties is dispatched out of a separate depot, a separate system will have to

be designed an installed for each depot. However, an additional requirement is that the van pooling

data be passed along to the telecommunications channels that service teams use to communicate

between the site crews and the local service depot.

VANDELAY has not tried this interface before. Therefore, VANDELAY might choose to hire an

experienced sub-contractor to help in this facet of the system. In general, this project is expected to

include complex problems

One drawback of this project is that due to the sharing requirements for portions of the

communication system, the components have lower margins and higher prices.

This project could generate four million dollars for the first year, with a potential steady annual

revenue stream of $20 to $30 million.

There doesn't appear to be a long-term growth in this area. However, success in the first project

would provide a stable revenue stream for the next five years.

An average local service depot would cost about $55,000 to deliver and it would generate a revenue

of $60,000.

Prospective Project 4: Metropolitan Sports Arena

If this project is successful, VANDELAY could get contracts for many of the roughly 100 sports

arenas.

If our system is successful, this market could generate an annual revenue of $25 million roughly at

the breakeven point.

The stadiums are used only on weekends.

These establishments tend to charge royalties to anyone who provides a service to them, on the

premise that the service firms would receive publicity for being part of their events. Therefore, this

project would have to be conducted at a breakeven status.

This project could be the most challenging and potentially the least rewarding application of our

technology.

This project is considered to be highly complex.

The system design is expected to be highly sophisticated and would require a highly skilled person

to maintain its operational capability, even after the system has been put into operation.

Limitations of Exercises

o You may feel that you are not given enough useful information for your tasks o You may feel that you are given too much superfluous information. o You may feel that you are not given satisfactory answers to all your questions o You may feel that you are not given enough time to perform your tasks.

You are probably right on all counts. To that extent, these exercises mirror the real world.