Module 4

Performing Projects: Project supply chain management: - Plan purchasing and acquisitions,
plan contracting, contact types, project partnering and collaborations, project supply chain
management.

Project Progress and Results: Project Balanced Scorecard Approach, Internal project,
customer, financial issues, Finishing the project: Terminate project early, finish projects on time,
secure customer feedback and approval, knowledge management, perform administrative and
contract closure

Measuring Project Success

In project management, success can mean different things to different people. Some project
managers see success as finishing a project on time, staying within budget, or making sure the
project supports the company’s goals. Others may focus more on good communication,
teamwork, or involving stakeholders. No matter what the focus is, it’s important to measure how
well a project is doing.

Why measure project performance?

The saying ―what gets measured gets managed‖ is very true in project management. If you
measure a project’s success, you can learn how to improve. Regularly tracking performance
helps teams set realistic goals and make improvements during the project.

However, before you can measure success, you need to define what it looks like. This should be
done at the start of the project. Different people care about different things:

 Your team might care about time, cost, and quality.

 Company leaders may focus on whether the project helps the company’s big-picture
goals.
 Clients may care most about meeting promises made to their own customers.

So, how do you balance these different views? The answer is to come together early and agree on
what success looks like for everyone. This is called the success criteria.

What are success criteria?

Success criteria are the specific standards or goals used to judge whether a project has been
successful once it’s completed. Project management expert Elizabeth Harrin says these criteria
should be discussed and agreed upon by all key people involved—such as the team, stakeholders,
and clients. Once decided, they should be clearly documented in the project scope or charter.
This ensures everyone is on the same page from the beginning and helps avoid
misunderstandings later on.

Measure Project Success

To measure the success of a project, you need to set clear success criteria from the start. These
criteria are usually based on a few key factors—often called ―hard metrics.‖ Some common
examples include:

 Finishing the project on time

 Staying within budget
 Completing the agreed project scope
 Hitting important milestone dates
 Meeting quality standards
 Managing project risks
 Complying with safety, health, environmental, and security requirements

You don’t need to include all of these. In most cases, picking just three or four of the most
relevant criteria is enough.

For example:

 A small private company might focus on time, budget, and scope.

 An industrial company in sectors like mining or energy might also include safety,
security, and risk management.
 A company in the environmental sector would likely add health and environmental
compliance as key success measures.

Customer Satisfaction Matters

One of the most important signs of success is whether your customer is happy. No matter how
well you manage time or budget, if your customer isn’t satisfied, the project may still be seen as
a failure.

To measure this, send out a feedback questionnaire at the end of the project. This should go to
all key people involved—senior management, customers, end users, the project team, and even
subcontractors. Their input helps you understand what went well and what could be improved.

Project Supply Chains

When we talk about supply chains, we often forget about project-based supply chains. These
are used in large, complex, one-off projects like building a power plant, an airplane, or a telecom
network. These supply chains:

 Serve a single, unique customer

  Involve custom-designed products
 Operate across multiple global locations
 Have long lead times (sometimes months)
 Require close coordination between engineering and commercial teams

These supply chains are a big part of global business. In fact, companies like General Electric
and Boeing—which rely heavily on project-based supply chains—made up around 12% of the
Fortune 500’s revenue in 2015.

Given their complexity and importance, it’s crucial to understand how to plan and manage these
supply chains effectively in a project environment.

Project Supply Chains — A Different Set of Challenges

Project supply chains are very different from traditional "make-to-stock" supply chains. Let’s
look at the key challenges:

1. Customer Orders

 Project supply chains deal with a few large customers, not thousands of retailers or
consumers.
 Orders often come after months or years of negotiations and bids.
 Because of the small number of projects, statistical forecasting doesn’t work well.
 Historical data is limited and not always useful.
 The only effective way to identify upcoming opportunities is through close collaboration
with commercial teams.

2. Demand Planning and S&OP (Sales & Operations Planning)

 Every project is unique, so evaluating cost and risk requires input from the entire
supply chain, including vendors.
 These supply chains are global and complex, making coordination more difficult.
 Demand planning in project supply chains is different:
o It doesn’t focus on setting target inventory levels.
o It’s not about solving short-term service issues.
o Instead, it uses real orders to guide production and priorities.
 Factories rely on CRM systems (Customer Relationship Management) to see what’s due
and when, rather than on demand forecasts.
 There’s a need for accurate, reliable data, even though data quality is often a challenge
in this space.
 The focus of S&OP is on:
o Allocating limited global resources
o Managing common parts and factory capacity
o Prioritizing current orders and long-term business opportunities, not just
forecasts
3. Lead Time

 In project environments, lead times vary depending on current workloads across the
factory network.
 This is unlike make-to-stock, where standard lead times are more predictable.
 During the bidding process, it’s hard to commit to a fixed lead time without knowing
factory capacity.
 One major issue: since customers expect long waits, some companies don’t prioritize
reducing lead time.
 A supply chain leader put it simply:

“We don’t see lead time clarity or reduction as a competitive advantage. It’s just not a priority
for decision-makers.”

Project supply chains are complex, with limited demand visibility, changing lead times, and a
strong reliance on real-time coordination. Success in this space depends on flexible planning,
good data, and strong communication between engineering, commercial, and supply chain teams.

Plan Purchases and Acquisitions

Planning purchases and acquisitions is a critical part of project management. It helps the project
team identify what needs to be bought, when it’s needed, and how it should be acquired. This
step supports the development of a realistic project budget and schedule. It’s the process of:

 Listing what items or services are needed for the project.

 Deciding when to purchase them.
 Determining how they will be acquired (internally or externally).
 Choosing whether to make or buy each item or service.

Why Is It Important?

 It ensures accurate budgeting and scheduling.

 It helps determine if external vendors are needed.
 It ensures the organization chooses the most effective procurement approach.

Inputs to the Process

1. Enterprise Environmental Factors

o Market conditions: What’s available and from whom?
o Legal or procurement policies: Does your organization have a purchasing
department?
2. Organizational Process Assets
o Internal rules: Who must approve purchases?
o Vendor requirements: E.g., vendors must have a 3-year track record.
3. Project Scope Statement
o Defines project boundaries, constraints, and assumptions.
 4. Work Breakdown Structure (WBS) & WBS Dictionary
o Breaks down the project into smaller tasks and provides detailed descriptions.
o Helps identify procurement needs for each work package.
5. Project Management Plan
o Includes:
 Risk Register
 Cost Baseline
 Activity Cost Estimates
 Resource Needs
 Schedule
 Contractual Risk Info

Tools & Techniques

1. Make-or-Buy Analysis
o Should the team do the work or hire an outside vendor?
o Factors: In-house skills, cost, quality, time.
2. Expert Judgment
o Input from legal, technical, or market experts helps inform buying decisions.
3. Types of Contracts
o Fixed-Price (Lump Sum): A set price for a well-defined product/service.
o Cost-Reimbursable:
 Cost-Plus-Fee (CPF/CPPC): Vendor reimbursed for costs + a % fee.
 Cost-Plus-Fixed-Fee (CPFF): Vendor reimbursed + fixed fee.
 Cost-Plus-Incentive-Fee (CPIF): Reimbursed costs + bonus for
performance.
o Time and Materials (T&M): Flexible contract when scope is unclear.

Outcome

1. Procurement Management Plan

o Details how procurement will be handled.
o Includes contract types, who manages what, decision criteria, lead times, and
required formats.
2. Contract Statement of Work (SOW)
o Clearly describes what is being bought (products/services).
o Must be clear, detailed, and agreed upon by all parties.
3. Make-or-Buy Document
o Lists decisions made, with justifications and responsibilities.
4. Requested Changes
o Any updates to the plan should go through the Change Control Process.

Planning purchases and acquisitions is about making informed decisions to ensure the project
gets what it needs, when it needs it, in the best way possible. This process improves clarity,
control, and efficiency in how external resources are used.
Plan Contracting

Plan Contracting is the process of preparing the documents and information needed to request
bids from potential sellers and select the most suitable one. It sets the stage for requesting and
evaluating proposals during procurement.

Purpose of Plan Contracting

 To clearly define what will be purchased and under what conditions.

 To develop the documents needed for getting seller responses.
 To ensure sellers understand exactly what’s needed, so the project gets what it requires
on time and within budget.

Inputs

1. Procurement Management Plan

o Outlines how procurement will be managed.
o Identifies approved sellers, contract types, and contract management procedures.
2. Contract Statement of Work (SOW)
o Describes the product or service in detail.
o Includes deadlines, specs, service levels, quality, and performance expectations.
o Should be reviewed by the team to ensure completeness.
3. Make-or-Buy Decisions
o A documented list showing what will be produced in-house and what will be
outsourced.
4. Project Management Plan
o Important parts include:
 Delivery schedules (to align procurement timelines)
 Risk Register (to check for contractual risk mitigation needs)
 Contract-related responsibilities and agreements

Tools & Techniques

1. Standard Forms
o Organizations often use standard templates and forms to maintain consistency.
o Examples:
 Master contracts and service agreements
 Item description templates
 Non-disclosure agreements (NDAs)
 Bid evaluation checklists
 Procurement document templates
2. Expert Judgment
o Involves specialists (technical, legal, procurement) reviewing documents.
o Ensures accuracy, clarity, and alignment with best practices and legal standards.

Outputs
 1. Procurement Documents
o Used to request bids, proposals, or quotes.
o Should include:
 The SOW
 Instructions on how sellers should respond
 Contract terms and conditions
 Enough detail for sellers to prepare competitive, relevant proposals
2. Evaluation Criteria
o Developed before receiving proposals to ensure fairness.
o Helps objectively and subjectively score proposals.
o Examples:
 Understanding of the SOW
 Total cost of ownership
 Technical skills and capacity
 Business type, references, and IP rights
3. Updated Contract SOW
o Based on expert input, the SOW may be revised for clarity or completeness.
o Final SOW must help sellers determine whether they can meet the requirements.

Plan Contracting ensures you're ready to invite the right vendors with the right information. By
preparing clear documents, using expert input, and defining fair evaluation criteria, you give
your project the best chance of securing high-quality vendors who meet your needs.

Plan Contracting in Project Management

1. Inputs
a) Procurement Management Plan
b) Contract Statement of Work (SOW)
c) Make-or-Buy Decisions
d) Project Management Plan
2. Tools & Techniques
a) Standard Forms (e.g., contract templates, NDAs, checklists)
b) Expert Judgment (legal, technical, industry specialists)
3. Outputs
a) Procurement Documents (RFPs, RFQs, etc.)
b) Evaluation Criteria (cost, technical capability, experience)
c) Updated SOW (after expert review)

Contract Types

1. Lump Sum (Fixed Price) Contract

 What it means: One fixed price for the entire project, no matter the actual cost.
 Use it when: The project scope and design are clear and final.
 Example: A contractor agrees to build a school for Rs 2 crore. Even if it costs more or
less, the contractor gets Rs 2 crore.
2. Unit Price Contract

 What it means: You pay based on actual quantities used, at agreed unit prices.
 Use it when: You know the work types, but not the exact quantity.
 Example: A road contractor charges Rs 5,000 per meter of road. If 1,200 meters are
laid, the total cost is Rs 60 lakh (1,200 × Rs 5,000).

3. Cost plus Contract

 What it means: Client pays actual costs + an agreed fee for the contractor.
 Use it when: The full scope isn't clear and changes are expected.
 Example: A contractor is hired to restore a heritage building. Actual cost is Rs 80 lakh,
and the contractor charges 10% extra as profit. So total payment is Rs 88 lakh.

Common Variations:

 Cost + Fixed Fee: Rs 80 lakh + Rs 10 lakh (fixed)

 Cost + Fee with Bonus: Bonus if completed early or under budget
 Cost + Fee with GMP: Not more than Rs 90 lakh even if costs rise

4. Incentive Contract

 What it means: Contractor earns rewards for meeting or exceeding targets (time, quality,
and cost).
 Use it when: You want high performance.
 Example: If a metro station is completed 1 month early, the builder gets an Rs 25 lakh
bonus. Total payment could be Rs 5 crore + Rs 25 lakh bonus.

5. Percentage of Construction Cost Contract

 What it means: Contractor or consultant is paid a percentage of the total project cost.
 Use it when: Hiring architects, engineers, or consultants.
 Example: An architect charges 6% of the construction cost. If the project costs Rs 10
crore, the architect earns Rs 60 lakh.

Project Supply Chain Management:

Supply Chain Management (SCM) involves handling the flow of materials, products, and
information from suppliers to end customers. In project-based industries, SCM ensures that all
necessary resources—raw materials, components, equipment, and services—are delivered on
time and efficiently, even if many tasks are outsourced. The goal is to improve trust and
teamwork among partners, speed up deliveries, and make inventory more visible.
Supply Chain Processes includes:

1. Customer Relationship Management – Building strong relationships with clients.

2. Customer Service Management – Solving problems and ensuring satisfaction.
3. Demand Management – Predicting and managing customer needs.
4. Order Fulfillment – Delivering the right product on time.
5. Manufacturing Flow Management – Managing production efficiently.
6. Supplier Relationship Management – Collaborating closely with suppliers.
7. Product Development & Commercialization – Creating and launching products
quickly.
8. Returns Management – Handling product returns smoothly.

Project Progress and Results Reporting:

A project status report is a tool used by project managers to share updates on a project’s
progress. It covers what's been completed, what's pending, any issues or risks, and how the
project is tracking against goals like budget and timelines. These reports help team members stay
accountable and keep clients informed. Reports are typically shared weekly or monthly, during
the Monitoring & Controlling phase of the project.

 Need: Track progress, highlight risks, and keep stakeholders aligned.

 Frequency: Weekly, monthly, or as needed.
 Formats: Emails, dashboards, presentations, PDFs, or even verbal summaries.
 Value to Clients: Builds trust, shows results, supports future funding.
 Responsibility: Not just routine—reports should be meaningful and actionable.

Project Balanced Scorecard Approach:

The Balanced Scorecard (BSC) is a strategic management tool designed to provide a

comprehensive view of an organization’s performance. By integrating multiple perspectives into
one framework, it goes beyond traditional financial metrics to also consider customer, internal
process, and organizational capacity factors. Here's a detailed explanation of the key aspects of
the BSC, its use, and how it benefits organizations:
The Balanced Scorecard (BSC) is a strategic planning and management system used by
organizations to:

 Clarify what they aim to achieve: It ensures that everyone in the organization
understands the strategic goals.
 Align daily work with strategy: The BSC helps connect the work everyone is doing
with the broader strategy of the organization.
 Prioritize initiatives: It helps in determining what projects, products, and services are the
most important for achieving the organization’s goals.
 Monitor progress: The BSC allows organizations to measure and track progress towards
their strategic targets.

The term ―balanced‖ refers to looking at performance from multiple perspectives, not just the
traditional financial metrics. The BSC provides a more holistic approach by including factors
such as customer satisfaction, internal processes, and learning and growth.

Purpose of Balanced Scorecard

The Balanced Scorecard provides several benefits to organizations, helping them:

 Integrate Strategy and Execution: By connecting strategic planning with day-to-day

operations, BSC helps organizations ensure that the activities align with strategic goals.
 Focus on Key Performance Indicators (KPIs): It helps in setting clear, measurable
goals to track success.
 Ensure Transparency: The BSC helps communicate strategy across the organization,
ensuring alignment at all levels.
 Link Performance to Strategy: It enables tracking of specific metrics that drive the
organization’s long-term success.

Uses the Balanced Scorecard (BSC)

The Balanced Scorecard is used globally by organizations across industries, including:

  Businesses: Over half of major companies in the US, Europe, and Asia have adopted the
BSC.
 Government: Governments use the BSC to track and improve public service
performance and operational efficiency.
 Nonprofits: Nonprofit organizations use the BSC to ensure they fulfill their missions and
effectively manage resources.

In fact, Bain & Co recently ranked the Balanced Scorecard as the fifth most widely used
management tool worldwide, with Harvard Business Review labeling it one of the most
influential business ideas in the past 75 years.

The Four Perspectives of the Balanced Scorecard

The Balanced Scorecard evaluates an organization from four key perspectives, each focusing on
a different area of performance:

1. Financial (Stewardship) Perspective

o Focus: This perspective assesses the financial performance of the organization.
o Key Questions: How do we look to our shareholders? Are we meeting financial
goals?
o Examples of Metrics: Profit margins, return on investment (ROI), revenue
growth, cost management, and shareholder value.
2. Customer/Stakeholder Perspective
o Focus: This perspective looks at organizational performance from the customer’s
or stakeholder’s viewpoint.
o Key Questions: How do customers view us? Are we meeting their needs and
expectations?
o Examples of Metrics: Customer satisfaction, customer retention rates, market
share, and brand reputation.
3. Internal Process Perspective
o Focus: This perspective measures the quality and efficiency of internal processes
that drive value for customers and stakeholders.
 o Key Questions: How do we improve internal processes to deliver better products
or services?
o Examples of Metrics: Process efficiency, quality control, on-time delivery, and
cost control within operations.
4. Organizational Capacity (Learning & Growth) Perspective
o Focus: This perspective assesses the organization’s ability to learn, grow, and
innovate.
o Key Questions: How do we build the capacity to improve and create long-term
value? Do we have the necessary skills, technology, and infrastructure to achieve
our strategy?
o Examples of Metrics: Employee training and development, innovation,
technology infrastructure, and organizational culture.

How the Balanced Scorecard Works

The BSC is a tool to help organizations translate their strategic goals into clear objectives and
actionable plans. Here’s how it works in practice:

1. Define Clear Objectives: Based on the organization’s vision, mission, and strategy,
specific goals and objectives are set in each of the four perspectives.
2. Set Key Performance Indicators (KPIs): For each objective, measurable indicators
(KPIs) are established to track progress and performance.
3. Determine Targets: Set measurable and achievable targets for each KPI that align with
the overall strategy.
4. Initiate Action Plans: Implement initiatives and projects that are aligned with achieving
the set objectives and meeting the targets.
5. Review and Monitor: Regularly track and assess the performance through reports,
dashboards, and meetings to ensure goals are being achieved.

Examples of Balanced Scorecard Metrics for Each Perspective

The Balanced Scorecard is a powerful tool for translating strategy into actionable performance
metrics across various dimensions of an organization. By focusing on four key perspectives—
financial, customer, internal processes, and learning & growth—organizations can achieve
better alignment between their strategic goals and operational actions. This leads to more
informed decision-making, improved performance, and long-term success.

This figure above represents the Balanced Scorecard (BSC) framework — a strategic planning
and management tool used in business and industry to align business activities to the vision and
strategy of the organization, improve internal and external communications, and monitor
organizational performance against strategic goals.

At the center, we have:

 Vision and Strategy: The core focus of the organization. Everything revolves around
achieving the organization's vision through strategic initiatives.
Surrounding it are four key perspectives of performance, each asking a fundamental question:

1. Financial (Top - Green Box)

 Question: "To succeed financially, how should we appear to our shareholders?"

 Focus: Financial performance metrics (e.g., profit margins, return on investment).
 Examples: Revenue growth, cost reduction, asset utilization.
 Elements: Objectives, Measures, Targets, Initiatives

2. Customer (Left - Red Box)

 Question: "To achieve our vision, how should we appear to our customers?"
 Focus: Customer satisfaction and relationships.
 Examples: Customer satisfaction scores, market share, retention rate.
 Elements: Objectives, Measures, Targets, Initiatives

3. Internal Business Processes (Right - Blue Box)

 Question: "To satisfy our shareholders and customers, what business processes must we
excel at?"
 Focus: Internal operations that drive value.
 Examples: Process efficiency, quality, innovation processes.
 Elements: Objectives, Measures, Targets, Initiatives

4. Learning and Growth (Bottom - Yellow Box)

 Question: "To achieve our vision, how will we sustain our ability to change and
improve?"
 Focus: Organizational learning, employee training, culture.
 Examples: Employee skills, IT infrastructure, knowledge sharing.
 Elements: Objectives, Measures, Targets, Initiatives

Flow and Interconnection:

 The arrows show a logical cause-and-effect relationship:

o Learning & Growth enables improvement in Internal Processes
o Internal Processes enhance Customer Satisfaction
o Satisfied Customers drive Financial Success
Internal projects

Best practices for managing internal projects within a company — especially how to treat
internal initiatives with the same seriousness and structure as external, revenue-generating
projects. Here's a breakdown of the key points and strategic recommendations it makes:

Internal projects may not generate direct income, but they contribute significantly to cost
savings, efficiency, and long-term business value. Therefore, they deserve the same discipline,
planning, and recognition as external projects.

Strategies for Successful Internal Projects:

1. Plan for Quick Wins

o Avoid long-term-only goals.
o Break down large projects into phases that deliver measurable short-term
results to maintain urgency and morale.
2. Allocate Focused Time
o Employees often work on internal projects alongside regular duties, leading to
divided attention.
o Allow them dedicated time blocks (e.g., a full day/week) for project work and
provide coverage for their regular duties.
3. Implement a Simple Project Model
o Internal projects often lack formal structure.
o Create a basic, standardized project framework (including training and tools).
o Provide mentoring or guidance for internal project managers.
4. Communicate the Purpose Clearly
o Many employees don’t understand the value of internal projects.
o Use transparent and two-way communication to explain the "why" behind the
project and its benefits to both individuals and the organization.
5. Recognize and Reward Contributions
o External projects often receive recognition; internal ones don’t.
o Acknowledge and reward internal project teams through bonuses, internal
publicity, or recognition programs to keep motivation high.
6. Follow Up and Measure Results
o Without post-project evaluation, internal efforts may be seen as futile.
o Track and publicize the impact of internal projects to improve learning and
justify future initiatives.

To drive transformation and innovation from within, companies must elevate internal projects
with proper planning, communication, recognition, and follow-up. These efforts not only boost
morale but also align the internal workforce with long-term strategic goals.
Customer Issues

Two major concerns for project customers — Scope and Quality

Customers care about:

 Scope: Getting everything that was promised.

 Quality: Getting results that are functional, reliable, and satisfactory.

1. Scope Control

Definition: "The process of controlling changes to the project scope."

 Product Scope = Features and functionality of the deliverables.

 Project Scope = Work required to deliver those features.
 Scope Change: Any modification that likely affects cost or schedule.

Proactive Scope Management:

 Identify potential causes of scope changes early.

 Avoid unnecessary changes if stakeholders are still satisfied.
 If a change is essential, process it through an integrated change control system.
 Every change must be evaluated for impact on:
o Budget �
o Schedule �
o Resources �

2. Quality Assurance (QA)

Definition: "Application of planned systematic quality activities to ensure the project meets
requirements."

QA Activities:

 Ensure correct work execution.

 Ensure stakeholder satisfaction with how work is done.
 Includes:
o Quality Audits
o Process Improvement

Quality Audits:

 Goal: Improve — not blame.

 Review:
1. Documented procedures (what should be done)
2. Actual practices (what is being done)
 3. Records (proof of completion and compliance)
 Conducted by internal/external auditors to align standards with execution.

Process Improvement

Process = "A set of interrelated actions to produce results."

 Efficiency: Output/Input ratio. Less effort for same result = more efficient.
 Effectiveness: Quality and stakeholder satisfaction.

Benchmarking: A method to improve process performance

Steps:

1. Identify a critical process needing improvement.

2. Find a leading organization in that area.
3. Arrange to observe and learn from them.
4. Plan what to observe and ask.
5. Visit and conduct the study.
6. Customize their method for your context.
7. Pilot test new methods.
8. Evaluate success.
9. Fully adopt if results are positive.

Topic Key Insight

Scope Control Manage changes wisely; evaluate impact on cost and time.
Quality Assurance Ensure standards are met through audits and stakeholder satisfaction.
Process Improvement Improve through audits, benchmarking, and focused enhancements.

5 Phases/ Process of Supply Chain Management (SCM)

A supply chain manager's job is not only about traditional logistics and purchasing. They have
to find ways to increase efficiency and keep costs down while also avoiding shortages and
preparing for unexpected contingencies. Typically, the SCM process consists of these five
phases:

1. Planning

To get the best results from SCM, the process usually begins with planning to match supply
with customer and manufacturing demands. Companies must try to predict what their future
needs will be and act accordingly. That means taking into account the raw materials or
components needed during each stage of manufacturing, equipment capacity and limitations,
and staffing needs. Large businesses often rely on enterprise resource planning (ERP) software
to help coordinate the process.

2. Sourcing
Effective SCM processes rely very heavily on strong relationships with suppliers. Sourcing
entails working with vendors to supply the materials needed throughout the manufacturing
process. Different industries will have different sourcing requirements. In general, SCM
sourcing involves ensuring that:

 The raw materials or components meet the manufacturing specifications needed for the
production of the goods.
 The prices paid to the vendor are in line with market expectations.
 The vendor has the flexibility to deliver emergency materials due to unforeseen events.
 The vendor has a proven record of delivering goods on time and of good quality.

SCM is especially critical when manufacturers are working with perishable goods.

When sourcing goods, companies should be mindful of lead times and how well equipped a
supplier is to meet their needs.

3. Manufacturing

Using machinery and labor to transform the raw materials or components the company has
received from its suppliers into something new is the heart of the supply chain management
process. This final product is the ultimate goal of the manufacturing process, though it is not the
final stage of SCM.

The manufacturing process may be further divided into sub-tasks such as assembly, testing,
inspection, and packaging. During the manufacturing process, companies must be mindful of
waste or other factors that may cause deviations from their original plans. For example, if a
company is using more raw materials than planned and sourced for due to inadequate employee
training, it must rectify the issue or revisit the earlier stages in SCM.

4. Delivery

Once products are made and sales are finalized, a company must get those products into the
hands of its customers. A company with effective SCM will have robust logistic capabilities and
delivery channels to ensure timely, safe, and inexpensive delivery of its products.

This includes having a backup or diversified distribution methods should one method of
transportation temporarily be unusable. For example, how might a company's delivery process
be impacted by record snowfall in distribution centre areas?

5. Returns

The SCM process concludes with support for the product and customer returns.

The return process is often called reverse logistics, and the company must ensure it has the
capabilities to receive returned products and correctly assign refunds for them. Whether a
company is conducting a product recall or a customer is simply not satisfied with the product,
the transaction with the customer must be remedied.

Returns can also be a valuable form of feedback, helping the company to identify defective or
poorly designed products and to make whatever changes are necessary. Without addressing the
underlying cause of a customer return, the SCM process will have failed, and returns will likely
persist into the future.

1. Planning:
 Demand Planning:
Forecasting the project's needs and aligning them with the project's schedule and budget.
 Supply Planning: Identifying and securing reliable suppliers, negotiating contracts, and
establishing inventory levels.
 Inventory Management: Allocating storage space and managing inventory levels to meet
production needs.
 Logistics Management: Planning the movement of goods and materials from suppliers to
the project site and back

2. Sourcing:
 Procurement: Acquiring raw materials, components, and services from suppliers.
 Supplier Selection: Evaluating and selecting suppliers based on factors like quality, cost,
reliability, and delivery time.
 Contract Negotiation: Establishing clear terms and conditions with suppliers.
3. Manufacturing/Construction:
 Production Planning: Developing a production schedule that aligns with the project's
timeline and budget.
 Process Optimization: Identifying and implementing strategies to improve efficiency and
reduce waste.
 Quality Control: Implementing measures to ensure the quality of materials and products
throughout the production process.

4. Delivery:
 Logistics Execution: Managing the transportation, warehousing, and distribution of
materials and products.
 Order Fulfilment: Ensuring timely and accurate delivery of products to the project site.
 Tracking and Monitoring: Monitoring the movement of goods and materials throughout
the supply chain.
5. Returns:
  Reverse Logistics: Managing the return of goods and materials, including recycling and
disposal.
 Defective Material Handling: Establishing procedures for handling defective materials
and returns.
 Customer Support: Providing support to the project team and end-users regarding
returns and warranty issues.

5 Phases of Supply Chain Management (SCM) – Simplified with Examples

1. Planning
This is the first and most important step in SCM. It’s all about preparing ahead.
 Companies try to guess what products customers will want and how much.
 They plan how many raw materials are needed.
 They check if their machines and workers are enough to make the products.
 They plan how to deliver goods on time without wasting resources.
Example:
A shoe company wants to sell 10,000 pairs of shoes next month. They need to plan:
 How much leather, rubber, and laces to order.
 How many workers and machines are needed?
 How long each step (cutting, stitching, and packing) will take.
If they don’t plan well, they may run out of materials or delay deliveries.
Tool Used: Many big companies use software like ERP (Enterprise Resource Planning) to
manage all this smoothly.

2. Sourcing (Buying materials): Now that the company knows what it needs, it must buy the
right materials from the right suppliers.
It includes
 Finding suppliers who can deliver good quality raw materials on time.
 Negotiating fair prices.
 Making sure the supplier can handle urgent orders if needed.
 Building strong, long-term relationships with trusted vendors.
Example
The shoe company needs leather. They choose a supplier who:
 Delivers top-quality leather that matches their design.
 Can provide extra leather quickly in case of sudden demand.
 Has a history of on-time delivery.
If the supplier delivers late or poor-quality material, the entire production will be delayed.

3. Manufacturing (Making the Product)

This is the phase where the magic happens — raw materials are turned into finished products.
It includes
 Materials are used to make the product through processes like assembling, testing, and
packaging.
 Quality control is important to check if the products are good.
 Waste must be minimized and problems fixed quickly.
Example:
The shoe company starts production:
 Workers cut the leather, stitch the parts, attach the sole, and package the shoes.
 If a machine breaks down or workers are poorly trained, production can slow down or
create faulty shoes.
 If too much leather is wasted, the company will lose money.
4. Delivery (Distributing the Product): Once the product is ready, it needs to reach the
customers.
It includes
 Products are stored, and then transported through trucks, ships, or planes.
 Deliveries must be quick, safe, and cost-efficient.
 Backup plans are made for problems like bad weather or transport strikes.
Example:
The shoe company sends shoes to shops across the country.
 If there’s a snowstorm in one region, they use another route or warehouse to avoid delay.
 Having multiple delivery partners (like FedEx and DHL) ensures no single failure stops
deliveries.

5. Returns (Handling Product Returns): Not all products stay with customers. Some come
back — and that needs proper handling.
It includes
 Accepting returned products from customers or shops.
 Refunding or replacing products.
 Studying why returns happen (e.g., size issues, defects) and fixing the root cause.
Example:
Customers return shoes because the sole came off in a week.
 The company collects them, gives refunds or replacements.
 They check if the problem is in the glue or stitching and fix it in the next batch.
 This avoids future complaints and improves product quality.
Phase What It Does Real-Life Example
Planning Predict needs and prepare resources Estimate how many shoes to make
Sourcing Buy the right materials Get leather from reliable suppliers
Manufacturing Make the products Assemble and package shoes
Delivery Send products to customers Transport shoes to stores or homes
Returns Handle faulty or unwanted products Fix issues and improve for next time

Methods involved in Project Supply Chain Management

In the dynamic landscape of SCM, several methods contribute to its successful implementation.
These methodologies are designed to enhance efficiency, reduce costs, and create a responsive
and agile supply chain.
1. Lean Manufacturing: Minimizing Waste
 Lean manufacturing is a cornerstone of SCM, aiming to minimize waste while
maximizing efficiency. This method emphasizes the elimination of non-value-added
activities, reducing excess inventory, and optimizing production processes. By
streamlining operations, companies can respond swiftly to changes in demand and
maintain a cost-effective supply chain.
2. Just-in-Time (JIT): Precision in Production
JIT is a method where products are manufactured or delivered just in time to be sold or
used. This approach reduces the need for large inventories, lowering carrying costs and
minimizing the risk of obsolete stock. JIT relies on accurate demand forecasting, efficient
communication within the supply chain, and robust relationships with suppliers to ensure
a seamless and responsive production process.
3. Six Sigma: Quality Assurance
Six Sigma is a data-driven methodology that focuses on minimizing defects and
improving the quality of processes. In the context of SCM, Six Sigma principles can be
applied to enhance the reliability of the entire supply chain, ensuring that products meet
or exceed customer expectations. By reducing variability and defects, companies can
achieve a higher level of customer satisfaction and operational efficiency.
4. Agile Supply Chain: Adapting to Change
The agile supply chain methodology prioritizes adaptability and responsiveness. In
today's dynamic business environment, where market conditions can change rapidly, an
agile supply chain can quickly adjust to fluctuations in demand, supply chain disruptions,
or changes in customer preferences. This approach often involves collaboration, real-time
data sharing, and flexible manufacturing processes.
 Risk Management: Identifying and mitigating potential risks to the supply chain, such as
supplier delays, material shortages, or quality issues.
 Sales and Operations Planning (S&OP): Integrating sales and operations planning to
align demand and supply.
 Supplier Relationship Management (SRM): Building and maintaining strong
relationships with suppliers.
 Technology Integration: Utilizing technology to improve visibility, communication, and
efficiency throughout the supply chain.
  Collaboration and Communication: Fostering strong communication and collaboration
between all parties involved in the project supply chain.
 Continuous Improvement: Regularly reviewing and improving the supply chain process
to ensure on-going efficiency and effectiveness.

Planning, Purchasing, and Acquisitions in Supply Chain Management

1. Planning in the Supply Chain

Planning is the first and most critical step in the supply chain. It involves deciding what products
are needed, how much is needed, when they are needed, and how to produce and deliver them
efficiently.

It includes

 Forecasting customer demand.

 Planning production schedules.
 Estimating material and labor requirements.
 Managing inventory levels.
 Coordinating with suppliers and distributors.

Without good planning, companies may produce too much or too little, resulting in losses,
customer dissatisfaction, or extra inventory costs.

Example
A company planning to produce 5,000 smartphones in the next quarter needs to plan for:

 Raw materials (chips, screens, batteries).

 Labor and machine time.
 Delivery schedules.
 Budget and supplier availability.

2. Purchasing in the Supply Chain: Purchasing refers to the process of buying the materials,
components, and services needed for production.

Includes

 Selecting reliable suppliers.

 Requesting and evaluating quotes or bids.
 Negotiating prices, terms, and delivery schedules.
 Placing purchase orders (POs).
 Ensuring timely delivery and quality of goods.
Purchasing affects product quality, cost, and availability. Poor purchasing decisions can delay
production or increase expenses.

Example: A car manufacturer needs steel, glass, and tires. The purchasing team:

 Chooses suppliers with the best balance of quality and price.

 Orders the right quantity at the right time.
 Ensures deliveries align with production schedules.

3. Acquisition in the Supply Chain: Acquisition is a broader term than purchasing. It refers to
acquiring all necessary inputs — goods, services, equipment, or even entire facilities — needed
for operations. It often involves long-term investment decisions.

Includes

 Identifying needs for strategic or capital items (e.g., machines, land, IT systems).
 Budgeting and financial evaluation.
 Legal contracts and supplier evaluation.
 Installation or integration of assets into the business.

Acquisitions support long-term supply chain capabilities and capacity expansion. They are
critical for business growth, innovation, or entering new markets. Example: A food processing
company decides to acquire a packaging machine. The acquisition process includes:

 Researching suppliers.
 Comparing costs and warranties.
 Purchasing and installing the equipment.
 Training staff to operate it.

Phase Purpose Example

Planning Decide what is needed and when Plan to produce 10,000 units in 3 months
Purchasing Buy the materials/services Order raw materials like plastic, metal, etc.
Acquisition Secure major or long-term resources Buy new machinery for faster production

 Planning ensures the right products are made at the right time using the right resources.
 Purchasing is about finding and buying the materials/services needed for operations.
 Acquisition involves long-term investments in assets or resources for production.

All three are essential for a smooth, cost-effective, and responsive supply chain.

Contracts in Project Management

In project management, the contract outlines the agreement made by a buyer and a seller or
supplier. The contract the buyer and seller sign dictates all aspects of their business transaction.
According to the Project Management Institute, a contract between parties can be oral or written
and is a legally binding agreement that defines their relationship. Any use of PMI’s registered
mark or mark of the project in your services or products has to include the proper trademark
symbols.

Within the category of contracts for project management, there are various types of contracts.
These include Fixed Price Contracts, Time and Material Contracts and Cost Reimbursable
Contracts. The contract dictates the timeframe within which the deal or transaction takes place,
what payment will be and when the payment is due

Why are contracts important in project management?

Having a proper contract for a project provides a legal framework for the job that reduces any
uncertainty about timelines and payment details. The contract dictates what work is required,
who is responsible for completing the specified tasks, when the deadline for the project is, and
how payment will be received. Having a legally binding contract for a project helps facilitate a
positive relationship between buyer and supplier by creating trust that the task will be completed
on time and payment will be received in the agreed upon amount.

3 types of contracts in project management

In project management there are three primary types of contracts. Depending on the type of
project you’re creating an agreement for and how payment will occur, one of these is the best
starting point for drawing a legal framework of the working relationship.

1 Fixed price (FP) contracts

Fixed price contracts are useful when the scope of the project is clearly defined and easy to
understand. Since the parameters of the project are clearly outlined from the outset, the seller or
supplier can provide a definitive price quote for the work. As the name suggests, the price is
fixed and cannot be altered (without making formal contract amendments) once the buyer agrees
to the terms and conditions. FP contracts can be beneficial to the seller if they can complete the
work outlined in the contract for less than they originally thought, allowing them to capitalize on
the profit. However, in a FP contract the supplier is assuming cost-related risks because they
cannot increase their prices if unexpected expenses crop up over the course of the project.

FP contracts are considered lump sum contracts because there is one price to be paid upon
project completion. There are a few types of FP contracts, including:

 Firm fixed price contract

 Fixed price incentive fee
 Fixed price with economic price adjustment
2. Time and material (T&M) contracts

T&M contracts are a good choice for buyers who aren’t sure exactly what they want from the
outset of the project. With a T&M contract, the buyer contracts the seller based on rates for
variables such as materials used and hours or days worked. The contract should include all rates
with possible mark-ups on the cost of materials. Once the contract is signed, the agreed upon
rates remain in place throughout the course of the project and are used to calculate the final
amount the buyer owes the supplies based on the work they do.

3. Cost reimbursable (CR) contracts

A CR contract is often the best choice when there’s little information for all parties starting out
on a project. For example, if it’s a research or development initiative, the CR model removes the
need to set fixed rates for work that is difficult to predict or foresee. Instead, the buyer fronts the
costs for whatever materials, products or labor is necessary to see the project through to
completion.

The responsibility falls solely on the buyer, guaranteeing the supplier that all material costs plus
a fee for their services will be covered. In the case of CR contracts, the buyer needs to closely
monitor the expenses of the project because there is no obligation on the part of the seller or
supplier to keep costs down to stay within a budget. All costs incurred within the scope of work
fall on the buyer. The various types of CR contracts are:

 Cost plus percentage of cost

 Cost plus fixed fee
 Cost plus incentive fee
  Cost plus award fee (CPAF)

Project Termination
Project termination is the end of a project, regardless of whether the project is complete.
Typically, when a project terminates, the resources become unavailable and the senior
management might transfer team members to other projects or the company might end their
contracts. Terminating a project at the right time is beneficial for companies as it can help save
time and money.
Reasons to Terminate a Project
1. Lack of funding: Often, a project might end prematurely when the initial estimate of a
project is wrong. A client or senior management might terminate a project when the
initial cost exceeds the funding cost.
2. Project length: When projects exceed their initial time frame, it might become costly to
complete them because the team requires additional resources. Ending a project with no
definite deadlines allows a company to transfer or reposition employees in other projects.
3. Natural occurrence: Certain unpredictable natural events can be a reason for terminating a
project. Events like earthquakes, floods, tsunamis and hurricanes might prevent project
completion due to damage to the project resources.
4. Unrealistic expectations: A client expects companies to exceed their expectations when
completing a project. Terminating such projects can keep the client's expectations more
realistic.
5. Failure in the testing process: A project might fail during the testing process. Rather than
spending more energy and resources, project managers might prefer to terminate such
projects.
6. Technical failure or infeasibility.
7. Change in strategic priorities.
8. Regulatory changes or legal issues.
9. Stakeholder conflicts.
10. Risk realization beyond acceptable levels.
Main Types of Project Termination
Here are two ways of terminating a project:
1. Natural termination of projects
Typically, natural terminations of projects occur when a project reaches its end goals and
closes naturally. For example, a development team might terminate a project after
delivering software to the client. This allows a team to deliver a report, measure the speed
and efficiency at which the project progressed and ensure the team can save project files.
When a team successfully completes a project, it allows them to close all project needs
and transfer to another project or take a rest period before starting another task.
2. Unnatural termination of projects
 The unnatural termination of a project occurs when a project reaches a premature end.
Reasons such as the end of funding and change in investors might force a company to
terminate a project. For instance, a client might end the contract with a software
development company and give the contract to another company that offers greater
resources at a lower cost.
Types of Project Termination

1. Termination by Completion
o The project has achieved all objectives.
o Deliverables are handed over, and everything is formally closed.
o Example: A construction project is completed and the building is handed over.
2. Termination by Addition
o The project becomes a part of the organization’s regular operations.
o Example: A pilot program becomes a permanent department.
3. Termination by Integration
o The project is absorbed into other existing departments.
o Example: A new IT system project is completed and its functions are merged into
the IT department.
4. Termination by Extinction (Failure)
o The project is stopped due to failure, budget issues, or change in priorities.
o Example: A product development project is canceled because the market changed.

Steps in Project Termination

 Complete All Work: Finish all planned tasks or close them officially if incomplete.
 Obtain Formal Acceptance: Get approval from stakeholders or clients that the project is
complete.
 Close Contracts: Finalize any agreements with vendors or external partners.
 Release Resources: Let project team members and assets return to other roles or
departments.
 Document Lessons Learned: Write down what worked well and what didn’t for future
reference.
 Archive Project Documents: Save important records like reports, contracts, and meeting
notes.
 Celebrate and Communicate: Share results with stakeholders and recognize team
contributions.

Project Termination importance

 Prevents confusion and loose ends

 Ensures accountability
 Captures valuable knowledge for future projects
 Helps in proper use of resources and avoids wasted effort

Procurement Planning
"Closing procurements" is a process in project management, especially emphasized in
frameworks like PMBOK (Project Management Body of Knowledge), where it refers to the
formal completion of procurement-related activities. This occurs at the end of a project or
phase when contracts with vendors or suppliers are finalized.

Closing a project involves several structured activities to ensure everything is properly wrapped
up. Here's a breakdown of the elements you listed, with clear explanations:

1. Administrative Closure Procedures

These are the steps needed to formally close the project on the internal side.

Includes:

 Verifying all work is completed and accepted

 Getting formal sign-off from stakeholders or clients
 Documenting lessons learned
 Completing final performance evaluations
 Archiving project documents (plans, schedules, reports, etc.)

Purpose: Ensure nothing is left hanging and all internal processes are completed.

2. Contract Closure Procedures

Focuses on closing out all external agreements with vendors, contractors, or suppliers
Includes:

 Confirming all contract terms are fulfilled

 Resolving any open claims or disputes
 Ensuring all invoices are paid
 Receiving and accepting all contracted deliverables
 Documenting contractor performance

Purpose: To formally end all legal and financial obligations tied to the project.

3. Final Products, Services, or Results

This is the actual project outcome — the thing you set out to deliver.

Includes:

 Handover of the final deliverable to the client or user

 User training or operational support (if applicable)
 Final testing, inspection, or validation
 Gaining stakeholder approval and sign-off

Purpose: Ensure the deliverable meets requirements and is ready for use.

4. Updates to Organizational Process Assets (OPAs)

These are documents or tools that help improve future projects in the organization.

Includes:

 Lessons learned documentation

 Project closure reports
 Templates and checklists updated based on experience
 Contractor performance ratings
 Risk register updates

Purpose: Capture knowledge and improve organizational maturity

Component Focus Area Purpose

Administrative Closure Internal processes Wrap up project activities
Contract Closure External vendor Legally and financially end
relationships agreements
Final Deliverables Product/service/result Complete and hand over what was
promised
Organizational Process Future project Document knowledge and best
Assets improvement practices
Knowledge Management in PM
Knowledge management is defined as the process of creating, identifying, and managing
knowledge of an organization and structuring it for effective and efficient use among its
employees and teams

Benefits of knowledge management

For enterprises, the benefits of a well-implemented knowledge management strategy are

manifold and far-reaching. Here are a few advantages of having a well-defined knowledge
management strategy.

1. Encourages Collaboration

When people in a company share what they know, they work better together. This teamwork
leads to smarter decisions, happier customers, and even new ideas and innovations. A study also
showed that when people trust each other and use good tools to share knowledge, they work even
better as a team.

2. Allows Faster Decision-Making

If employees can quickly find the right information when they need it, they can make decisions
faster and more confidently. A study found that companies that manage their knowledge well can
make better decisions, more quickly.

3. Avoids Duplication of Efforts

When employees have access to past solutions and information, they don’t waste time solving
the same problems again. Example: If a customer asks about a rare issue and support has already
dealt with it before, they can find the past answer and solve the problem fast — saving time and
improving the customer’s experience.

4. Leverages Existing Expertise

Knowledge management helps people learn from the experts in the company.
Example: If someone is good at a new skill, others can learn from them through shared
resources, guides, or training sessions, helping the whole team grow stronger.

5. Prepares for Crisis

If a company keeps records of how it handled past problems, it’s better prepared for future
challenges. Learning from past mistakes or solutions makes the team stronger and more ready
when something unexpected happens.

6. Enables Digital Transformation

As companies go more digital, they collect a lot of data — some organized, some not.
Knowledge management helps make sense of this data so the company can use it to grow,
improve, and compete better in a digital world.