Project Portfolio Selection

A typical company involved in the chemical, pharmaceutical, or fuels industries will evaluate many projects each year. Only a few of these projects are selected for implementation. This section discusses some of the criteria and methods used in 

Regulatory compliance projects are often required as a result of changes in environmental or other legislation. If the government changes the rules on plant safety, emissions, or product specifications, then unless an exemption can be obtained, the plant must be modified or closed down. Regulatory compliance projects often have poor financial performance unless the costs of going out of business are considered. 

Cost-reduction projects are aimed at reducing the cost of production of an existing plant. The most common cost-reduction investments are for preventive maintenance, in which equipment is replaced, repaired, or cleaned after a planned interval and before the equipment deteriorates to the point where it could impact process performance or safety. Most preventive maintenance projects are small and are handled through the plant maintenance budget, but some can be very large, expensive projects requiring a major plant shutdown, for example, replacing the fired tubes in a main 

Whenever possible, companies also seek to fund growth projects that can be expected to give high returns on the capital invested. Growth projects include expansions of existing units, often referred to as debottlenecking or revamp projects, as well as construction of entirely new plants in grassroots projects. 

The most obvious limit on the portfolio of projects that can be funded is the availability of capital, which is in turn limited by the financing arrangements of the company (see Section 6.6). 

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The problem of portfolio selection is easily expressed numerically as a constrained optimization maximize economic criterion subject to constraint on available capital. This is a form of the knapsack problem, which can be formulated as a mixed-integer linear program (MILP), as long as the project sizes are fixed. (If not, then it becomes a mixed-integer nonlinear program.) In practice, numerical methods are very rarely used for portfolio selection, as many of the strategic factors considered are difficult to quantify and relate to the economic objective function. 

Ability to increase POS of the selected portfolio of projects by selecting groups of targets with similar biological properties. 

Use portfolio analysis techniques to select and progress research and development projects. Research cannot be scheduled, but finances can be budgeted and milestones set. Development, on the other hand, should be done well and as rapidly as possible to maximize profit. 

Allen Clamen The quality of the data, the input that goes in, is determined by the effort of the portfolio planner before all the portfolio management team s meetings. These can take place once a month, once a quarter, or as often as is necessary to select projects. All of those data go into the portfolio tool through the database and are collected. 

The need to evaluate production sites can arise in different situations. Most obviously, a network optimization project resulting in the decision to establish new production capacity may require a site selection phase in one or more countries (cf. Chap. 2.4.4). Depending on the status quo, the task either is to identify and evaluate potential production sites or to choose the most suitable one from a set of existing sites. Conversely, if capacity is to be reduced potential closure candidates might have to be assessed to identify the one least suitable for future use. Additionally, as pointed out in Chapter 2.4.5, a regular evaluation of all production sites is also required in the context of site controlling. Here the objective is to rank a company s entire portfolio of existing sites to identify action needs. 

Creation of the Growth Council to select projects and oversee our portfolio to assure growth. 

The first section introduces and elaborates on the four stages of the proposed methodology. The second section introduces interdependencies eunong projects relevant to the selection of portfolios of projects and illustrates methods of selecting portfolios. The third section develops the mathematical basis for computerizing the methodology and applies it to the case of solar heat for residences. The fourth section presents conclusions. 

Project evaluation and prioritization. The business of valuing potential additions to the portfolio, to select a portfolio which will be an addition to the potential value of the business. 

The economic evaluation studies are based on normative criteria, independent of subjective opinions, which indicate preferences in any course of action. Every alternative is independent of the other ones and the measure of the economic preferences is made separately. Renkema and Berghout [10] distinguish four basic approaches to evaluate investment alternatives the financial approach, the multicriteria approach, the ratio approach, and the portfolio approach. Methods from the financial approach are usually recommended for the evaluation and selection of investment alternatives. Often used financial approach methods are the payback period (PP) method, the internal rate of return (IRR) method, and the NPV method. The latter is used to evaluate this project. 

When a single project is being considered without reference to other possible projects the use of NPV or DCF will lead to the same conclusion on the economic acceptability of the project. This results from the fact that if a project shows a positive NPV, it must also show a DCF return higher than the discount rate used to calculate the NPV, that is a DCF rate above the cost of capital to the company. However, a more usual situation is one in which a choice must be made between alternative forms of a project which are mutually exclusive or in which a portfolio of projects must be selected. In this... 

This book describes tools for developing or overhauling supply chains. As important as the execution step is the project selection step — that is, deciding which tool to use. The assessment tools described in this chapter will yield a more effective portfolio of supply chain projects to implement avoiding the pursuit of ineffective, dead-end efforts. 

Before selecting projects from the portfolio of projects in front of them, management should look at the projects strategic fit with the organization, the timing of cash flows, and the availability of company capabilities, skills, and expertise. For a company to implement projects, it needs resources, qualified project managers, and competent and available team members. Moreover, at the end of the project selection and evaluation process, managers and executives have to answer (1) can we do it and (2) should we do it ... 

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