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ACKNOWLEDGMENT
I would like to express my profound gratitude to all those who have been
instrumental in the preparation of my project report. To start with, I
would like to thank the organization GMM PFOLDER for providing me
the chance to undertake this internship study and allowing me to explore
the area of marketing which will prove out to be very beneficial to me in
my future assignments, my studies and my career ahead.
I wish to place on records, my deep sense of gratitude and sincere
appreciation to my company guide and mentor, Mr. Chirag Mehta (HR
Manager and Admin)GMM pfaudler Ltd, who suggested and prepared
the frame work of the project. I would also like to thank him for his
continuous support, advice and encouragement, without which this report
could never have been completed.
A thank-you is also deserved for the staff of the GMM Pfaudler.
- Rajal R. Brahmbhatt
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Introduction to the Company
Introduction
Industry Overview
Gmm Pfaudler is a manufacturing company in the market. It is today
among the leading suppliers of engineered equipment and systems for critical
applications in the global chemical and pharmaceutical markets. To drive our
growth, we continue to attract, develop and retain the most talented people.
There is going to offer exciting and challenging careers within a
stimulating knowledge-driven work environment where ideas and skills are
valued; where people can realize their full potential through dedicated
different types of programs; and where individual contribution respected and
recognize.
Products:-
The company is a manufacturer and dealer of various types of
structural steel works, industrial machinery and glass lined chemical vessels.
GMM also manufactures wiped film evaporators, agitated nutche filters,
mixing systems and polytetrafluoroethylene (PTFE)-lined equipment.
It has supplied more than 9,000 reactors for different corrosive
processes to suit clients specific needs, glass-lined stainless steel reactors
and lab reactors.
GMM manufactures storage tanks in both horizontal and vertical
designs. Its fluoro polymer division manufactures various PTFE products,
such as Teflon envelope gaskets, nozzle liners and bushes, and control
system pipes internally lined by is statically molded PTFE liners. Its filters and
filter-dryers are utilized in the inorganic and organic chemical, fine chemical
and pharmaceutical industries.
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GMM fully acquired Switzerlands Mavag AG, a leading supplier of
highly engineered critical equipment for the pharmaceutical, bio engineering
and fine chemical industries through its wholly owned subsidiary GMM Mavag
AG.
Achievements:-
GMM Pfaudler is a world-class organization with ISO9001 certified
processes and is also accredited by ASME and TUV for U Stamp and ADM
HP 0 respectively.
Company Overview
HISTORY AND DEVELOPNMENT:-
GMM PFAUDLER LIMITED formerly Gujarat Machinery Manufacture
Limited was incorporated in India by Late Shri Jethabhai V Patel on
November 17, 1962. The company manufacturing unit is located at
karamsad because Late Shri Jethabhai was interested in social and
economical development of the people of his native place karamsad.
The companys principal activity is the manufacturing of corrosion
resistant glass lined equipment used primarily in the chemical,
pharmaceutical and allied industries.
In the beginning year 1962 only fabrication work was started but in
the year 1968 they started manufacturing of glass lined equipment. At
the primarily stage it was private firm later on it turned into public
company.
GMM PFAULDER LTD is the leading supplier of highly engineered,
application critical equipment and systems for the chemical process
industry. The success of the company is based on close and
continuous interaction with its customers, innovative products, application
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engineering customer support and a competitive manufacturing cost
structure.
The Indian pharmaceutical and fine chemical segment has been
witnessing a strong growth for the past few years. The steady stream
of drugs that are getting off patent protection will provide Indian generic
manufacture for several years to come. Capital expenditure in this
segment will continue in the medium to long term. With never capacities
being added by established companies and new companies being
formed to manufacture generic active pharmaceutical ingredients and to
offer contract manufacturing for both domestic and overseas companies.
Infrastructure
GMM Pfaudler has a state of the art plant spread over 20 acres at Karamsad,
Gujarat,. The plant has a covered area of over 21,000 sq. Meters. It is
equipped with the latest equipment required for quality fabrication. In addition
we have 5 furnaces - 3 electric and 2 natural gas.
GMM Pfaudler has a sales and service presence across India with regional
offices in Ahmedabad, Bengaluru, Chennai, New Delhi, Hyderabad, Mumbai
and Vadodara.
Strength Of the company (in terms of Human Resource)
A company is its people. GMM Pfaudler's 130 trained and motivated workers
are supported by 60 engineers and 110 staff and officers to ensure that the
plant delivers quality equipment on time.
Mission:-
To achieve international standard of excellence in all aspect of
diversified business with on customer delight through value of
produces and cost reduction.
To maximize create on a wealth value and satisfaction for the
stockholders.
To attain leadership in development and assimilating state of the
wet technology for competitive advantages.
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To fast culture of participation and innovation for employee growth
contribution.
To cultivate high standard of business either and total quality
management a strong corporate identity and brand quality. To help enrich the quality of the community and preserver
ecological balance and heritage through a strong environment
conscience.
VISION:-
For the last 46 years GMM pfaudler ltd has contributed to nation
building activity through infrastructure developed and both materialhandling solution there by positive importing. The like hood of millions of
promise to do so in future keeping the interest of our customer
foremost in our minds and needs.
Courageously the company shall continues to improve and
adopted changes and be a market leader by always remaining a step
ahead in technology and quality and strive to wide our horizons
globalization.
They shall create a joyful and happy GMM pfaudler ltd. of family of
smiling focus through love and honesty.
OBJECTIVES:-
GMM PFAUDLER LTD believes in themselves and thus has set
a few objectives for them which they thrive on:-
To delight our customers by supplying the required product in
time.
To attempt continuous improvement in efficiencies and environmental
protection.
To constantly carry out improvements in our product processes
and method.
To built relationship with our sub-contractor business associates.
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COLLABORATION OF THE UNIT:-
In 1963, GMM entered into collaboration with a Hungarian
company namely m/s Repartment emamil industry works and started
making glass lined chemicals vessels with the help of latest and
advanced technology. This collaboration was up to 1973.
In 1988, Gmm had collaboration with Pfaudler Inc a U.S.A. Company.
Pfaudler inc is the world level company in glass lined equipments. Gmm
became subsidiary company of Pfaudler inc as it owned 51% of the
total issued share capital of Gmm in 1999.
KEY PEOPLE:
BOARD OF DIRECTORS:-
P. KRISHNAMURTHY CHAIRMANASHOK J PATEL MANAGING DIRECTORPETER C WALLACE DIRECTORKEVIN J BROWN DIRECTORDR S SIVARAM DIRECTORDARIUS C SHROFF DIRECTORTARAK A PATEL EXECUTIVE DIRECTOR
CHIEF OPERATION OFFICER : ASHOK C PILLAIFINANCIAL CONTROLLER : AMAR NATH MOHANTYCOMPANY SECRETARY : Ms. Mittal MehtaSTATUTORY AUDITORS KALYANIWALLA & MISTRY,
CHARTERER A/C, MUMBAI.
INTERNAL AUDITOR DELOItTE HASKINS & SHELLS, CA
SOLICITOR VIGIL JURISBANKERS STATE BANK OF INDIA
REGISTERED OFFICE
VITHAL UDYOGNAGAR,
ANAND-SOJITRA ROAD,
KARAMSAD-388325,
GUJARAT
PHONE: (02692)-230516, 230416, 236562.
SUBSIDIARY COMPANIES:-
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GMM MAVAG AG.
MAGAV AG.
KARAMSAD INVESTMENT LIMITED.
KARAMSAD HOLDING LIMITED.
TURN OVER:- Rs 42 CR.
MAIN COMPETITOR:- NYLE LTD AT HYDERBAD.
MANUFACTURING PROCESS:-
GMM Pfaudler manufactures the equipments, according to the need of
the customers. Their main raw-material is carbon steel, stainless steel, alloy
steel, haste alloy. They buy raw material from SAIL(Steel Authority India
Limited) and from local market.
Steel plate is the basic raw material. The thickness of the plate
depends on the capacity of the equipment. When GMM gets an order, first the
design of the equipment is prepared so that the raw material is effectively
used. Cutting of plates is done with the help of CNC machine. It is then
bended with help of rolling bending machines. Welding is done on the two
ends are covered by top and lower dish. After that a coat is applied inside to
make the vessel last longer and to avoid the leakage of chemical and physical
properties. Glass lined vessel is corrosive. Then after remaining nuts and
bolts are fitted. Lastly the paint is applied and finally glass lined equipment
gets ready
CONTRIBUTION:-
In the growth and development, the pharmaceutical and oil industries
has occupied important position in the Indian economy.
There are few industries, which are competent among them GMM
Pfaudler is playing a leading role in the reactor systems and in manufacturing
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of glass lined equipment in India. The production and sales turnover of the
company is very impressive and bond a good market.
Looking all the angles and aspects of the company, it can be said that
the company has a better prospects in the coming years
PROJECT MANAGEMENT AT
SIEMENS
4.1 Introduction to Project ManagementProject management is the discipline of planning, organizing, motivating, and
controlling resources to achieve specific goals. A project is a temporary endeavor
with a defined beginning and end (usually time-constrained, and often constrained by
funding or deliverables), [1] undertaken to meet unique goals and objectives, [2]
typically to bring about beneficial change or added value. The temporary nature of
projects stands in contrast with business as usual (or operations),[3] which are
repetitive, permanent, or semi-permanent functional activities to produce products orservices. In practice, the management of these two systems is often quite different,
and as such requires the development of distinct technical skills and management
strategies.
The primary challenge of project management is to achieve all of the project goals [4]
and objectives while honoring the preconceived constraints.[5] The primary
constraints are scope, time, quality and budget. [6] The secondary and more ambitious
- challenge is to optimize the allocation of necessary inputs and integrate them to meet
pre-defined objectives.
The Project Management has different Knowledge Areas describes project
management knowledge and practice in terms of the various component processes.
These processes have been organized into nine knowledge areas, as described in the
below
Project Integration Management describes the processes required to ensure
that the various elements of the project are properly coordinated. It consists of
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project plan development, project plan execution, and integrated change
control.
Project Scope Management describes the processes required to ensure that
the project includes all the work required, and only the work required, to
complete the project successfully. It consists of initiation, scope planning,
scope definition, scope verification, and scope change control.
Project Time Management describes the processes required to ensure timely
completion of the project. It consists of activity definition, activity sequencing,
activity duration estimating, schedule development, and schedule control.
Project Cost Management describes the processes required to ensure that the
project is completed within the approved budget. It consists of resource
planning, cost estimating, cost budgeting, and cost control.
Project Quality Management describes the processes required to ensure that
the project will satisfy the needs for which it was undertaken. It consists of
quality planning, quality assurance, and quality control.
Project Human Resource Management describes the processes required to
make the most effective use of the people involved with the project. It consists
of organizational planning, staff acquisition, and team development.
Project Communications Management describes the processes required to
ensure timely and appropriate generation, collection, dissemination, storage,
and ultimate disposition of project information. It consists of communications
planning, information distribution, performance reporting, and administrative
closure.
Project Risk Management describes the processes concerned with
identifying, analyzing, and responding to project risk. It consists of risk
management planning, risk identification, qualitative risk analysis, quantitative
risk analysis, risk response planning, and risk monitoring and control.
Project Procurement Management describes the processes required to
acquire goods and services from outside the performing organization. It
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consists of procurement planning, solicitation planning, solicitation, source
selection, contract administration, and contract closeout.
4.2 Work Breakdown Structure
The work breakdown structure (WBS) is a tree structure that shows a subdivision of
effort required to achieve an objective for example a program, project, and contract.
The WBS may be hardware-, product-, service-, or process-oriented.
A WBS can be developed by starting with the end objective and successively
subdividing it into manageable components in terms of size, duration, and
responsibility (e.g., systems, subsystems, components, tasks, subtasks, and work
packages), which include all steps necessary to achieve the objective.
The work breakdown structure provides a common framework for the natural
development of the overall planning and control of a contract and is the basis for
dividing work into definable increments from which the statement of work can be
developed and technical, schedule, cost, and labour hour reporting can be established.
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4.3 Project Management at Siemens
A. Sales Department
PM 010 Go/ No-Go decision
Phase Process
Lead Management Document lead
Evaluate and select lead
Identify responsible Internal business
Check lead for cross division
Execute and document the decision
PM 020 Bid Decision
Phase Process
Opportunity
development
Initiate opportunity development
Evaluate expected business
Evaluate customers business situation & competitive
environment
Analyze and structure customers requirement
Define bid strategy
Check commercial feasibility
Check technical feasibility
Check delivery feasibility
Analyze resource implications
Determine bid scope and plan bid
Perform LoA Risk Assessment
Execute and document bidding decision
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PM 040 Bid Approval
Phase ProcessBid preparation Handover to Sales Expert/ Bid Manager
Set up bid preparation
Create technical bid part
Create commercial and contractual bid part
Create delivery bid part
Perform LoA Risk Assessment
Compose bid
PM 070 Project won/ lost
Phase Process
Contract negotiation Handover bid to customer
Obtain and process customer feedback
Repeat bid preparation for changes
Determine negotiation strategy and roles
Nominate project manager for execution
Conduct contract negotiation
Obtain contract approval
Conclude contract with customer
Analyze and document win/ loss
B. Project Execution Department
PM 080 Start of Project
Phase Process
Project Handover Determine Liability
Update, complete and verify relevant data and documents
Handover to execution
Closes sales phase
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PM 100 Order receipt clarified
Phase Process
Project opening &
clarification
Structure & create Project in IT application
Set up project organization
Analyze contract technically & clarify open points
Analyze contract commercially/ legally & clarify open
points
Enter order entry calculation in IT application
Appoint project manager/ conclude target agreement
Planning & teaming workshop
Perform project management assessment
PM 200 Approval of detailed planning
Phase Process
Detailed Create/ release technical realization plan
Confirm & evaluate reference selection
Update product requirements specification
Create project execution plans
Finalize quality plan & hazard analysis
Compose/ release realization plan
Create/ release detailed planning
Realize product integrationPrepare & release to supply chain
PM 300 Dispatch Approval
Phase Process
Purchasing &
Manufacturing
Place purchasing, manufacturing & service orders
Ensure fulfilment of orders
Prepare & release products for dispatch
PM 400 Material and Resource at site
Phase Process
Dispatch Prepare dispatch/ stage products
Conduct & monitor transportation
Prepare infrastructure/ schedule & request resources
Receive & verify products at site
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PM 550 Construction/ Installation completed
Phase Process
Construction/
Installation
Prepare site
Installation of plant/ system
Preparation of the commissioning phase
PM 600 Release for customer acceptance
Phase Process
Commissioning Start up plant/ system
Conduct internal plant & system testsConduct customer training
Release acceptance
PM 650 Customer acceptance
Phase Process
Acceptance Prepare & conduct acceptance test
Update customer documentation
Conduct customer debriefing meetingRequest preliminary acceptance certificate
PM 670 Project Closure
Phase Process
Project Closure Work off open points
Clarify open claims with contract partners
Create closing invoice/ execute receivables management
Create final customer documentationHandover service-relevant documents to after sales
Archive project documentation
Write final project report
Close project
PM 700 End of Warranty
Phase Process
Warranty Perform warranty activitiesRequest final acceptance certificate
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Close warranty
Archive project
4.4 Project Management Process at Siemens
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1. Pre offer & Offer Preparation Stage: -
Scrutinize & Comment on Commercial Terms & Conditions of Tender / Bid
Enquiry
Implication of Taxes & Duties
Organize necessary documents to be submitted along with the offer viz.
EMD, Solvency Certificates etc
Verifies correctness of Offer Calculation & calculation of Financing costs
Ensures valid Quotations are available for Bought outs
2. Negotiation & Order Confirmation Stage: -
Gets involved during Order Negotiation with Customer / Vendors from the
commercial aspects
Ensuring Purchase Order is in Line with final Quotation i.e. scrutiny of
Terms
Comparing Order Cost Sheet with Quotation Calculation
Organize Bank Guarantee, Insurance, Hedging
Booking of Order Value in the System i.e. Spiridon
3. Order Execution Stage: -
Booking Turnover in Spiridon system, Preparation of invoices / Performa
invoices with relevant documents & its submission to customers as per PO
terms
Periodic review of Unbilled Cost & its Adjustments
Updating of Order Value / Estimated Cost
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Creation & Regular review of Provisions
Understanding Document flow at Customers end to enable quick collection of
payments /TDS Forms & Sales Tax Forms
Interaction with Engineering and Field service dept in case of site related
activities primarily for Project type of business
Involvement in Negotiations with Sub-suppliers & finalising Terms &
Conditions
Discussions with Works on Debits / Excise formalities
Discussions / Finalisation of Forward Covers, Bank Guarantees & Tax matters
with Corporate Finance & Accounts / IDTs
Coordination with Banks, Insurance Companies, Clearing Agents, Customs,
Consulates & Chamber of Commerce primarily for export orders
Interaction with Legal & Company Secretariat Department for Power of
Attorneys & related issues
4. Order Closure Stage: -
Make final payment reconciliation
Get all sales tax forms
Issue all sales tax forms to vendors
Get bank guarantees back
Clear all open provisions
Ask for completion certificate
Close SAP order after closing costs, UOV, release of provisions etc
Return sub - suppliers guarantees
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Regularize retention of sub - suppliers. ( pay or adjust )
Settle all internal claims
Make separate file for retention
4.5 Project Management Models at Siemens
The project phase model describes the standardized process steps of Project
management at Siemens. Each project has to follow this model. The project process
description shall incorporate all necessary elements to ensure the quality of the
execution as well as compliance with internal rules and regulations. At the same time,
the defined process needs to provide an appropriate framework for the project
manager to act and decide as an entrepreneur for this project. At Siemens, often the
same Sales people acquire Product, System, Project and Service business. Therefore,
the Sales processes were harmonized to the same phases and milestones. The project
execution and preparation phase model as well as the project warranty phase model is
divided into three categories according to the type of project (Plant and Solution
Project, Service Project and Small Project).
The completion of every milestone defined in the project phase model has to be
documented. The process documentation needs to define how the authorization to
declare a milestone completed is achieved and how it is documented. Particular care
should be taken on milestones that have to be executed according to the Quality Gate
system. The Quality Gate principle ensures that at critical points during a project all
issues (technical, resources, schedule, commercial, compliance, etc.) that may
endanger project success are systematically analyzed and early decisions can be made
by the responsible project managers.
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A. PROJECT SALES PHASE MODEL
B. PROJECT EXECUTION PHASE MODEL
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C. PROJECT WARRANTY PHASE MODEL
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4.6 Contract Management
Contract Management starts with the generation of the bid (PM020). Contract
Management is important for all customer projects, independent of the project
category or allocation of the project to a group or region. An integrated approach and
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the necessary contract management competencies are required to ensure overall
project success.
Contract Management represents the sum of all actions that are designed to:
Create sound contractual agreements for the project
Provide a strategy for how to manage change orders and claims
Support the systematic enforcement of legitimate claims against contracting
parties, mainly customers, consortium partners and suppliers or third parties
Fend off unjustified claims and
Manage changes to the respective contract.
Unclear scope of services, unclear rules of cooperation and escalation with customers
and suppliers, as well as terms and conditions in the contract are the main reason for
non-conformance costs (NCC). Professional contract management helps to identify
the risk of NCC, to prevent the occurrence of these costs or to minimize the impact.
This requires strong involvement of appropriate management levels early in the sales
process as well as during the project execution if changes occur.
The various definitions in the projects are with regards to:
1. Scope of Work
2. Price
3. Terms of Payment
4. Warranty
5. Delivery
6. Liquidated Damrages7. Performance
8. Insurance
9. Title Transfer Deed
10. Limitation of Liability
11. Export Control
12. Inspection
13. Termination Clause
14. Jurisdiction
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4.7 Payment Terms
Payment terms are timelines and commitments that depends on the completion of the
work and receiving the amount associated with it. A payments term varies from
contract to contract, depending upon the nature and type of risk the project carries and
relationship with the customer. A typical payment contract terms are shown in the
table below.
Percentage ofcontract value Commitment to the level of work
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5% - 10% Advance payment signing of the contract against Pro-forma invoice
Advance bank guarantee for the same
5% 10% Against after submission of GA drawing
10% - 15% Against pro forma invoice on release of purchase order for equipments to be
procured from vendors outside Siemens
70% - 80% Against Pro-forma invoice on dispatch of materials10% Against Performance Bank Guarantee
The Modes of Payment are
1. Cash in advance
With Cash in advance payment terms, the exporter can avoid credit risk
because payment is received before the ownership of the goods is transferred.
Wire transfers and credit cards are the most commonly used cash in advance options available to exporters.
2. Letter of Credit
A letter of credit is a document issued by a financial institution, or a similar party,
assuring payment to a seller of goods and/or services. The seller then seeks
reimbursement from the buyer or from the buyer's bank. The document serves
essentially as a guarantee to the seller that it will be paid regardless of whether the
buyer ultimately fails to pay. In this way, the risk that the buyer will fail to pay is
transferred from the seller to the letter of credit's issuer. The letter of credit also
insures that all the agreed upon standards and quality of goods are met by the supplier.
4.8 Limits of Authority (LoA)
The Limits of Authority (LoA) process is the internal approval procedure for all
division external projects of Siemens AG, its subsidiaries and affiliates. The LoA
process limits the authority to approve the acquisition of projects and the submission
of bids to specific management levels. A total project risk class will be determined on
the basis of certain risk assessments such as a project classification, an Anti-
Corruption Risk Assessment, and a Business-specific LoA risk classification. The
LoA process improves the quality of the decision at the bid / no bid stage for a project
because it systematically incorporates major:
technical
commercial / contractual
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pricing- and costing-relevant, and
ethical / legal
criteria into the decision. To make this possible, it governs the interaction of the main
persons participating in the process, their roles and their responsibilities.
The main goals of the LoA process are:
To ensure an acceptable result for the project and keep non conformance costs
to a minimum.
To ensure conformity with all internal guidelines and regulations, particularly
the Siemens Business Conduct.
Guidelines and the internal rules on preventing corruption.
To ensure that all applicable laws are obeyed.
To ensure that all necessary resources are available to prepare bids with a
sufficient probability of securing an order.
To ensure that the project is in accordance with the business strategy (e.g.
warranty terms, creditworthiness, payment plan, portfolio, etc.).
To ensure that risks deriving from the possible complexity of the project
structure are identified and manageable.
To ensure that the solution offered is feasible and available
To ensure that the costing is realistic.
To ensure that the bid is prepared in accordance with the applicable Siemens
AG processes, and is fully documented.
Integration into the Project Management at Siemens Process
The LoA process is a part of the Project Management at Siemens process in the
project sales phase, with its defined phases, milestones and quality gates. The key
milestone is approval of the bidby the responsible business managers at PM040 (LoA
meeting). At milestone PM070 the documents are finallyreviewed and updated.
Execution of the LoA process
The LoA process comprises at least the steps shown in the figure:
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1. LoA preparation starts at PM010 or PM020 at the latest. It includes
arranging the standardized LoA documents in preparation for the decision-
making process, including the timely involvement of any relevant experts.
2. LoA meeting is held at PM040. Additionally, LoA Meetings can be held any
time before PM040. E.g. at PM010 / PM020. At the LoA meeting, a decision
is made as to whether or under what conditions the project will be bid on.
3. LoA update takes place, if needed,
After the first bid has been submitted (PM040 is completed) and before the
contract has been signed (PM070).
At milestone PM070 the project data are finally reviewed and updated, and
released by the project manager and the Compliance officer if necessary
by his/her sign-off.
Anti-Corruption Risk Assessment (ACRA)
The Project Management at Siemens LoA Tool supports the mandatory review and
assessment of issues relevant to corruption in accordance with the Siemens Business
Conduct Guideline and the relevant Compliance circulars. The project manager
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confirms that these requirements have been met with his/ her electronic signature. The
more detailed Anti-Corruption Risk Assessment has to be completed mandatorily,
with project category is A or B and/or
involving business partners and/or
involving export credit agencies and/or multilateral development banks /
financial institutions and/or
Where the customer country or any of the project execution countries (i.e. at
least one of these) is a high-risk country, which is different from the country
of the Siemens ARE.
When completing the Anti-Corruption Risk Assessment the project is assigned to
Anti-Corruption (AC) Risk Class 0, 1, 2, or 3. Depending on the Risk Class, the Risk
Mitigation Level will additionally be determined.
To include a Sector or Division specific Risk Assessment in the project evaluation, a
Business Risk Classification is included in the LoA process. The Business Risk Class
is a further factor in deciding the escalation level.
Escalation within a Group or a Region
Based on the results of the three risk analysis methods, the management level whose
LoA meeting will decide on submitting the bid will be determined according to
standardized rules. This assignment is called escalation.
The criteria for escalation are the three elements in the LoA Tool risk report:
Siemens uniform project categorization (categories A-F)
Anti-Corruption Risk Assessment (AC Risk Class 0-3)
Business-specific risks (Business Risk Class 0-3)
Based on the determined escalation level, a corresponding escalation path has to be
followed. Normally all projects are escalated upward through the hierarchy. For
projects that the Region itself executes under the above principles, the rules for
interaction with the Sector and Division must also be taken into account.
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4.9 Risk and Opportunity Management in a Project
With enhanced Enterprise Risk Management (ERM), Siemens seeks to take risk and
opportunity management to the next level as a holistic, integrated management tool.
The Siemens ERM methodology is designed based on principles rather than on rules,
which ensures consistency across Siemens while allowing the individual units to
embed the approach in their specific environment. Moreover, Siemens ERM is an
interactive and management-oriented approach, facilitated by workshops and ensuring
appropriate management attention. It should be emphasized that the ultimate purpose
of ERM is not to avoid or eliminate all types of business risks, but rather to support
entrepreneurial spirit by finding the right balance between managing risks and seizing
opportunities. These general principles also apply in the individual project. The focus
of the Siemens Risk and Opportunity Management policies is not on avoiding risks
by all means. The focus lies in:
Early detection and identification of risks and opportunities
Detailed analysis and evaluation with a clear strategy for how to
manage them.
Project and Line Management should at all times have full understanding and
knowledge of risk and opportunities in all projects. Decisions should be made on the
basis of such knowledge and Siemens should at all times have room to manoeuvre.
The Risk and Opportunity management systematic consists of two major elements:
Risk and Opportunity Categories
Risk and Opportunity Management Process.
The Risk and Opportunity Management Process consists of four process steps that are
repeated consistently. The
project core team members and
selected experts participate as
needed in this process
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1. Identify and assess Risks and Opportunities:
The prerequisite of an effective identification process is a good knowledge of the
customer, the tender / contract situation, the technical implications and the
geographical conditions. In any case, a discussion among (sales) project members
using one or more of the above methods is more successful than the analysis and
opinion of a single person. The identified risks and opportunities need to be assessed
in accordance with the Siemens risk and opportunity categories. This helps to get a
good overview of the actual risk and opportunity portfolio of a project. Finally, for
efficiency purposes the risks and opportunities need to be prioritized according to
their impact and likelihood. The focus is on financial impacts, but non-financial risks
and opportunities shall also be integrated.
Starting with the highest priority of risks and opportunities, the project members and
experts need to find out more information about the risks, such as their sources and
reasons, special triggers and multipliers or interdependencies.
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The analysis leads to the calculation of the impact (most realistic case) and the
estimation of the likelihood, both before any actions are taken. The multiplication of
these factors is called expected value of risk / opportunity.
2. Respond to and monitor Risks and Opportunities
The project members and experts now focus on mitigation actions to reduce or avoid
the individual risks and on enhancement actions for the identified opportunities. The
costs of the actions need to be calculated and will become costs of sale of the project.
After the initial Risk and Opportunity Analysis that consists of steps 13, the
controlling of the implementation of the defined actions and the analysis of the actual
status of the already identified risks and opportunities marks the start of the new Risk
and Opportunity Management process loop. The identification of new risks and
opportunities shall take place at any time they occur. At a minimum, during the
regular Risk and Opportunity Management process existing and new risks and
opportunities are analyzed.
3. Report and escalate Risks and Opportunities
Depending on the nature and impact of a risk or opportunity, the appropriate
management levels need to be involved. Clearly defined escalation procedures
including ad-hoc reporting lines allow for timely reaction and reduction of negative
impacts.
4. Sustain and continuously improve Risk and Opportunity Management
Ultimately, from an analysis of all risks and opportunities and their mitigation or use,
the organization shall learn and improve their capability for risk prevention, early
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detection of risks and opportunities as well as creating the best possible effect from
them. This requires a culture of risk and opportunity management throughout the
organization and thus also all projects.
Risk and Opportunity Management during the different project phases
In the preparation of PM010 and PM020, Risk and Opportunity Management has a
more strategic and less detailed character. Depending on the knowledge of the future
project, detailed analyses may not be possible or advisable in all cases. Nevertheless,
the results of the analysis together with other strategic inputs like PM project
portfolio analysis and customer relationship shall build the basis for a Go / No-Go
and Bid / No-Bid decision respectively.
At PM040 all inputs for a concise binding offer from Siemens shall exist. Thus, in this
phase Risk and Opportunity Management becomes vital for future project success. A
lack of risk analysis and respective actions, which often influence the contract or
calculation, deprives the project of almost all possibilities to transfer risks to other
contractual partners.
As of PM070 till the end of the project (PM700 / PM(S)1000) the newly initialized
list of risks and opportunities (often named Risk and Opportunity Log) shall be
updated in the respective regular process loops with the focus on early detection of
new topics and consequent action implementation and controlling of effectiveness of
such actions.
How to create a Risk and Opportunity Management Plan in a project
The Risk and Opportunity Management Plan serves as clarification for the whole
project team with regard to the following topics and is part of the PM Siemens Project
Management Plan.
Aim and goals of Risk and Opportunity Management
Roles and responsibilities
Tools to be used
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Cycle and frequency of the Risk and Opportunity Management Process
Content and frequency of risk and opportunity reporting
Addressees of risk and opportunity reports.
A Risk and Opportunity Management Plan shall be drafted at latest prior to PM040
and established at latest prior to PM100, e.g. during a PM planning and teaming
workshop for the project, and be documented in the Risk and Opportunity Log in
writing respectively. The Risk and Opportunity Log is maintained throughout the
project life cycle.
4.10 Check list of various Risks encountered in a
Project
Sr.No
Risk Type
(A)
Risk
Category(B)
Risk Definition ( C)
1Commercial
Risk
Have the Price, Mode of invoicing and Mode of payment is
arranged?
2Commercial
RiskAre there enough costing approaches available during packaging?
3Commercial
RiskDito for Transportation
4
Commercial
Risk Dito for Commission
5Commercial
RiskDito for Travel costs, including field allowances
6Commercial
RiskDito for delegated customer personnel
7Commercial
RiskIs cost sharing to be expected when tolerance limits are exceeded?
8Commercial
Risk
Are there special documentation guidelines and have their effects
been taken into costing?9 Commercial Are tax payments that result from legal uncertainties possible?
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Risk
10Commercial
Risk
Are there deviations between the costing of the offer, the contract
and the levied costing with respect to the performance?
11 CommercialRisk
Dito for cost objectives
12Commercial
RiskDito for technical and commercial houses
13Commercial
RiskDito for delivery date and time, terms of delivery and Incoterms?
14Commercial
Risk
Are modifications to components / materials to be expected during
processing and their effects on time and cost and their further
consequences unclear?
15Commercial
RiskHave various insurance policies been taken?
16Commercial
RiskHave financial arrangements been made?
17Commercial
RiskAre potential rivals interested in the same project?
18Commercial
RiskIs a price war expected?
19Commercial
Risk
Are costs from penalties for delayed deliveries to interim and finish
dates expected?
20Commercial
Risk
Are the claims for the payment covered by the insurance /
guarantees?
21Commercial
RiskHas insurance for export credit been taken?
22
Commercial
Risk
Will financing costs result from reduced liquidity, conditions of
payment, nonpayment, late invoicing and contractor's condition for
payment?
23Commercial
Risk
Are there any discrepancies between customers, price formula and
suppliers price formula?
Is there a possibility of additional cost from escalation?
24Commercial
RiskAre special risks covered by insurance?
25Commercial
RiskWill the customer make advance payment or deposit?
26 Commercial Financial Is financing of the project guaranteed?
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Risk Risk
27Commercial
Risk
Financial
Risk
How can claims of deliveries and performance be accepted by the
customer?
28Commercial
Risk
Financial
Risk
Have inquiries been made about the credit - worthiness of the
customer?
29Commercial
Risk
Financial
RiskAre their experiences with the financial morale of the customer?
30Commercial
Risk
Financial
RiskAre the negotiated dates of payments clearly fixed in the contract?
31Commercial
Risk
Financial
Risk
Does the customer come from a risky country? (War prone,
political instability, etc)
32Commercial
Risk
Financial
Risk
What is the procedure for outstanding customer payments?
33
Commercial
Risk
Financial
Risk
Are there regulations in the contract containing arrears for
payment?
34Commercial
Risk
Financial
RiskDoes an efficient claim management system exist?
35Commercial
Risk
Financial
Risk
Do the chosen partners like suppliers have necessary financial
power?
36Commercial
Risk
Financial
RiskAre guarantees of the sub - suppliers been deposited?
4.11 Project Monitoring: Calculation of Excess Costs /
Excess Billings
For each PoC-project, either excess costs or excess billings are calculated, to indicate
if either the customer or Siemens is financing the project by advance payments or
advance performance.
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Value > 0: Costs and estimated earnings in excess of billings on uncompleted
contracts (WIP).
Value < 0: Billings in excess of costs and estimated earnings on uncompleted
contracts (WIP).
1. Excess Costs: Siemens contract performance exceeds the progress
billings to the customer.
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The following table will help us to clarify the same:
PARTICULARS AMOUNT (RS /- IN LAKHS)
Project Cash Inflows 10
Project Costs 15
Excess Costs (5)
2. Excess Billing: Progressive billing to the customer exceeds the
Siemenss contract performance
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The following table will help us to clarify the same:
PARTICULARS AMOUNT (RS /- IN LAKHS)
Project Cash Inflows 15
Project Costs 10
Excess Billing 5
1) CONTRACT MANAGMENT
The contract is the basis for the project scope, project deliverablesand customer expectations. An unclear scope or unclear terms andconditions create additional costs and effort during execution.
Thus, unclear contracts present a significant risk to achieving theproject targets as well as customer satisfaction.Contract Management provides expert support to draft, comment onandnegotiate contractual and / or cooperation agreements. When thecontract is signed, Contract Management contributesto the contract execution by enforcing legitimate claims against ourpartners as well as fending off unjustified claims and managingchange orders. Contracts with clearly defined scope, terms andconditions provide the foundations for project success Contract Management helps make that happen.
Contract Management starts with the generation of the bid Contract
Management is important for all customer projects, independent ofthe project
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category or allocation of the project to a group or region. Anintegrated approach and the necessary contract managementcompetencies are required to ensure overall project success.Contract Management represents the sum of all actions that aredesigned to:
_Create sound contractual agreements for the project
_Provide a strategy for how to manage change orders and claims
_Support the systematic enforcement of legitimate claims againstcontracting
parties, mainly customers, consortium partners and suppliers orthird parties
_Fend off unjustifi ed claims and
_Manage changes to the respectivecontract.
2) Quality management:-
Quality Management in Projects isan integral part of the GMM Pfaudler process. It enables andcontributes to a process-oriented and transparent projectmanagement across all project phases. It is one of the fundamentalresponsibilitiesof the whole project team and the business organization up to thetop management. Its principles are applicable to projects of allcategories.
The objective of Quality Management in Projects is to fullfill ourcontractual obligations and thereby obtain the appropriatelevel of customer satisfaction. This must be based on systematic,clearand proactive approaches toward fulfilling contractually agreed-upon commitments and performances based on terms andconditions. Quality Management in Projects covers those activities
which assistthe project manager and the project team to meet the projectrequirements in terms of functionality, costs and deadline. In doingso, this will minimize non-conformance costs in the project.Quality Management creates project transparencyand anticipated success.
Quality Management in Projects includes the planning andsafeguarding of product and process requirements over entireproject lifecycle. Deficits occurring in the early phases can strain theentire project substantially
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and can rarely be corrected with all the consequences for thecustomer and our company. The application of sound QualityManagement in Projects has its foundation in theSiemens Quality Management System (QMSystem) and its mandatory elements.
This module describes what kinds ofquality-ensuring activities are required tofulfi ll Siemens standards throughout theproject phases and highlights in particularthe practices of:
_Implementation of Quality Managementin Projects
_Implementation ofPM Quality Gates
_Systematic handling of requirements based on PM RequirementsDefinitionand Management
_Role ofPM Quality Managers in Projects
_Quality planning as part of the
PROJECT PROCURMENT
Stringent customer-specifi c requirements and an ever-increasing
share of external value added are characteristic for procurementwhen involved in project business. With externally purchasedmaterials andservices normally accounting for 4060% of project costs,Procurement plays a major role in achieving positive project resultsand a long-term increase in cost productivity.
For improveing project profit they focused on getting Procurementon the jobAs a result of consistent integration of Procurement, projects benefit from better knowledge of the market and of the supplier situation,
which in turn means that quality is improved, innovation is securedand any risks are minimized. Besides reducing material costs, thisprocess also has an effect on higher hit rates in the bidding processthrough lower costs and risk reserves calculated for relevantsupplier contributions. Procurement must be continuously involvedover the entire project duration, from lead management right up tothe end of the warranty period, if effective project control is to beachieved.Before getting under way, projects are rigorously examined in termsof their suitability for supplier integration with a view to exploiting
potential for innovation and cost reduction. A decision must be
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made at PM.The individual process steps for successful supplierintegration in projects are laid outin the Guideline Professional Supplier integration.
COLLOBRATION IN PROJECT:-
Projects are highly interactive and executed across the usual linestructures of an organization. Clear PM roles and responsibilitiesare an important basis for the successful execution. As importantas clarifying who is responsible for what is to establish and maintaina sound basis within the team and supporting organization for theongoing efficient collaboration of all employees involved in thesuccessful project acquisition and execution.Collaboration is the secret of efficient and effective teamperformance.
Every team member of the Siemens organization and the customerorganization has his or her own background, competencies andexperience to draw from and contribute to the project success.Accessing this knowledge and creating the willingness to supportthe targets defi ned for the project,as well as creating a common understanding of what those targetsare and how to achieve them as a team, is individual to each projectteam. Nevertheless, there are methods and tools for achieving andmaintaining this important personal basis for project success.
IMPLICATIONS:-
GMM has sucessfully done projects for more than 50 years.Nevertheless, the overall slippage of profits during project executioncompared to the order entry in project sales was and is significant.
Therefore, Siemens created and maintained a virtual organizationby thename of PM@GMM to exchange best practices as a basis for the
joint definition of minimum standards for project business since2000. Based on the positive results, the existing core team wasestablished in 2008 as a corporate function to drive PM@GMM
further. The main objective is to achieve the targets of each project,contributing as planned to the organizational units overall results.
The purpose is to create an organization able to adapt quickly tochanges in the market, personnel and innovations, reducingdependence on the quality of the individuals in the process.
The successful principles of the virtual PM@GMM organization wereused to define the cooperation of the central function (PM Core
Team) with the representatives of the Sectors / Divisions andClusters / Regions with project business:
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_Steering Comittee Innovation decides on general direction andobjectives
_Every CEO / CFO or business manager is responsible for thesuccessful implementation of these standards in his / her
organization
_PM@Siemens Global Coordinator Board steers all operativeactivities
_Work Teams are staffed by all interested parties to jointly developand mandate minimum standards
_Minimum standards reflect existing rules and regulations and helporganizations and individual project managers ensure compliancewith them
_PM Core Team facilitates all involved parties and supports themwith knowledge and consultancy on successful implementation
_PM Core Team creates transparency for STC Innovation and othertop management about the PM@GMM implementation status andsuggests actions to improve the implementation.
This module defines the global organization to implement PM@GMMand create value for each organization with significant project
business, as well as create the basis for efficient cooperation inprojects across Sector / Division or regional borders. This willstrengthen the competitiveness of GMM projects, contribute to theongoing financial success of GMM project businessand make it easier for the organizations to ensure compliance withall rulesand regulations for project business.
INTERNAL PROJECTS..
To ensure the operational ability and increase the profitability of the
GMM businesses, different investments and ongoing efforts need tobe undertaken in all Siemens organizational units. The targets are:
1. to ensure current and future ability to deliver in all businesses
2. to improve performance and quality of the internal processes bycontinuously increasing the productivity of operations. Theseinvestments and process improvement efforts are usually executedas internal projects, which require substantial financial means.
Therefore, they initially have a negative impact on the bottom line
of a business before their results become effective and help to
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achieve the defined targets of the investment. To limit theseinvestments to the necessarybudget and to avoid the internal burning of profi t, all internalprojectsmust be managed with the same professionalism as customer
projects.To support this, the PM@GMM minimum standards as described inModules 111 shall be applied to internal projects wherever possibleand adapted or supplemented when needed.
There are different types of company internal projects:Process Improvement / IT Projects: Internal process improvementprojectsand related internal projects for the development of necessary ITsupport In scope of this PM Real Estate Projects: infrastructureprojects to provide a building or other Guide facilities Infrastructureprojects:infrastructure projects such as the construction and commissioningof a plant for the manufacturing of a new product line Not yet inscope of PM@GMM set up community to analyze good practices anddevelop standards
M&A Projects:Merger & Acquisition projects to enhance the business portfolio as
well as disinvestment / carve-out projects
R&D Projects:product development projects to define and realize new productsiA project is defined as a Company Internal Project if the endcustomer isa business consolidated within Siemens and the delivering unit is acost center.
Company internal projects enable Siemens to act successfully in itsever changing and challenging business environment. Theirprofessional management ensures that this ability is achieved in
time and budget.