Review the case study. Using the information provided below about the list of projects, describe how one would select, prioritize, rank and group Nutmeg projects into business programs ?

Case Study 400

Nutmeg Enterprises Inc.

Introduction

Nutmeg Enterprises is a beverage manufacturer and distributor. Currently, there is a Headquarters Group with three product divisions, each with separate product lines, though with some customer overlap.

• The Headquarters and corporate function offices are located together with the Brewing Division offices outside Hartford, Connecticut
• The Brewing Division brews beer in two breweries, one outside Hartford and the other in Burlington, Vermont
• The Fountain Products Division produces soft drinks and sodas in Atlanta, Georgia
• The Nutrition Products Division produces fruit juices, health drinks and sports nutrition drinks in Pittsburgh, Pennsylvania

All three divisions operate autonomously and have different information systems, mostly running on the corporate data center in Hartford. Many plans, feasibility studies and projects are imminent, or already underway in both headquarters and the divisions in order to increase sales, reduce costs, expand product lines, increase profits and market share. Some plans and projects involve potential international operations. Headquarters plan to initiate measures to eliminate duplication in systems and processes and to consolidate where possible, specifically focusing on the integration of company-wide marketing, distribution, accounting and IT.

However, before the proliferation of projects gets out of control, the board has demanded that a central Project Management Office be implemented as soon as possible to control all project activity throughout the company. The goal of this project is to develop plans for this eventuality.

Purpose

This case study is designed to support an online, advanced course in Mastering Project Management.

Background

Bev Ridgeway comes from a family that had been associated with the brewing industry in Europe for over one hundred and seventy-five years. Her parents immigrated to the US, and soon after she was born in Connecticut. While at college she harbored a dream to get the family back into the brewing business and then she earned an MBA at the University of Connecticut Business School where her thesis was based around an ambitious plan to build a full range, boutique beverage company serving the East Coast of the USA.

Bev started Nutmeg Brewing as a small microbrewery nine years ago in Hartford, Connecticut. She used a unique and secret recipe developed by her German grandfather to brew a specialty dark malt beer. In the early years the company achieved considerable local success, later gaining recognition throughout the New England and is currently gaining market share in the mid west. She became Chairman of Nutmeg Enterprises seven years ago when the company expanded by buying a small, ailing soft drinks company in Atlanta, turning it round to profitability. Soon the company made another acquisition, this time a growing and profitable sports and nutrition products company in Pittsburgh that recently introduced low carbohydrate fruit juices and health drinks to their product line.

Current Situation

The corporation suffered several business setbacks in the past three years (particularly in the Brewing Division) and had been downsizing and reducing staff. However, business now appears to be stabilized and with an upturn beginning to improve sales there are encouraging prospects ahead.

2005 was an encouraging year for the firm with improving, profitable results from all three divisions. Overall returns definitely need to be increased, but the gradual increase in market share in Nutmeg Brewing and Fountain Products augers well for the future.

The Board has been aware for some time that inefficiencies exist throughout the organization and now believes that the time is right to gain tighter control over the divisions by consolidating and updating operations. A strong push is to be made to streamline the business processes, standardize systems across the divisions and capitalize on the potential synergies that exist in marketing, branding, selling, public relations, procurement, logistics, distribution and financial management (it still takes nearly four weeks to close the corporate books at the end of each month).

The Board had already been discussing the implications of becoming a supplier of beverages to Wal-Mart and the Department of Defense (DoD), perhaps even at a global level, and this opportunity is to be explored with some urgency. Both Wal-Mart and the DoD had mandated in 2004 that all their major suppliers will have provide RFID (Radio Frequency Identification) tracking capability with their products if they wish to continue doing business as suppliers and so a pilot RFID study was conducted in the Brewing Division. This clearly project has much wider implications for the other product divisions in the corporation. The Fountain Products and Nutrition Products divisions should therefore follow soon with projects of their own to introduce RFID inventory management practices and capabilities.

The Board also intends to aggressively investigate new product lines and markets, both at home and abroad. Serious consideration is to be given to acquisition, outsourcing and off-shoring.

Overall, with nearly thirty significant projects in progress, or about to be launched, across the company, it becomes clear why the board has stressed the urgent need for establishing a central Project Management Office to control and coordinate all project activity throughout the company.

Headquarters

A year ago a decision was made to move the company headquarters staff and some of the Brewing Division departments, to new, smaller, more efficient premises that were under construction on the other side of Hartford, Connecticut. This location also had the advantage of considerable space that could be leased when business picked up again. The buildings are now complete and the first group to move was the Human Resources Department of the Brewing Division. This move is now complete. The Chairman's Office will be the next to move, followed by Sales, Marketing and Purchasing of the Brewing Division.

From a new product standpoint, Bev is looking into the pros and cons of wine production and distribution. She has stated for some time that the company's mission is to make, sell and deliver consumer beverages. She further believes that the core competencies of recipe management, production (brewing/fermenting/mixing/carbonating), bottling/canning, packaging and distribution of the different beverages share commonalities and synergies that overcome the disadvantages of (compared to the major producers) relatively small production volumes. To this end, she is looking to possibly purchase a vineyard and a distribution operation.

Bev also believes there is significant potential for beer in Brazil where the economy is improving dramatically and the country has a strong brewing tradition since the 1800s founded on old German expertise. The Brazilians are also demonstrating a voracious appetite for nutritional and fruit drinks and there are strong signs that these are rapidly gaining favor with US customers.

Nutmeg Brewing Division

Two years ago Nutmeg Brewing suffered a series of production difficulties and lost customers and market share in what was an already, rapidly declining market. Profits fell dramatically, but stabilized and started to climb back as a result of improved production efficiencies and focused attention to customers.

Nutmeg Brewing now produces 48,000 barrels of beer a year. The beer is sold in bottles primarily to supermarkets and restaurants while the beer in metal kegs is sold to pubs and hotels. Managing the inventory of 10,000 wooden barrels in 2500 locations in New England and beyond is no small task. They are heavy and difficult to handle. Lacking a capable tracking system many are damaged or lost forever each year, at considerable expense to the company.In any given week about 4,000 are in the brewery production, maintenance, cleaning or warehouse areas, 3,000 are on trucks en-route to customers and 3,000 are on customer premises.

Although Nutmeg Brewing has grown sales to over eight million dollars, the computer systems are old and inefficient. There is no central database of company information or integrated business software.Each department has it's own set of computers and over the years each has purchased software for their own requirements. The financial department has difficulty maintaining accurate cost figures; purchasing receive paper requisitions from operations for raw materials, maintenance and office supplies; forecasting is done on a spreadsheet and inventory is recorded on index cards in the warehouse and managed on a free software package that was downloaded several years ago to a PC in the operations department.

In spite of conscientious and regular maintenance, Nutmeg is now faced with the need to replace most of these barrels due to aging wear and tear. Replacement wooden barrels have become extremely expensive and the CEO has decided to order new metal casks, or kegs, from the Circular Cask Company in Denver.These are primarily half-barrel kegs, i.e. they contain only 15.5 gallons of beer compared with 31 gallons for a full barrel. This replacement project is part of a wider plant modernization and upgrade plan and is expected to greatly improve warehousing, transportation, logistics and customer inventory management while reducing overall costs.

Chairman Bev meanwhile has been closely following developments with RFID technology in the consumer and food market sectors and was particularly interested when she read an article (old, but still very relevant) about how a UK brewery had not only converted to metal kegs, but also installed RFID tags on the kegs. The savings to the brewer in reduced costs from pilferage, lost kegs, damage and spoilage coupled with the benefits from improved on time delivery and retrieval of empty casks have proved very significant.

The intent is to complete a pilot project within eight weeks and to start with a first batch of 1,000 new kegs that, due to a cancelled customer order, can be delivered in two weeks by the manufacturer.

Recently Completed Projects:

1. Human Resources Office move

2. RFID Pilot Project: The urgent need to replace the old wooden beer barrels with new aluminum kegs in the Brewing Division was used as the platform for a pilot project to install RFID control.This pilot was successful and a new project is being planned to install RFID tags on all kegs and barrels within this division and with a view to eventually expanding the capability technology to the entire group.

3. Study to examine the feasibility of installing a system to perform material requirements planning (MRP) for the plant. This entails integrating the data of production, warehousing, inventory, accounting, purchasing, sales and brewing. This is expected to include reduced inventory along with more accurate control, reduced labor in the warehouse, more efficient purchasing and improved relations with suppliers, improved customer relations due to improved on time deliveries.

Fountain Products Division

Established with one mint based soda, this company enjoyed a successful niche market and customer following until some years ago. When acquired by Nutmeg it was floundering under the management of a family feuding within itself and the organization simply suffered from lack of management attention and focus. When the CEO died the remaining siblings were all to ready to sell out and get rid of a money losing business.

By that time however, the three products had a loyal customer base in the southeast states and with little investment, other than a catchy advertising campaign sales devised by Helen Leaditon when she was Director of Sales, sales have nearly doubled in the past five years. Management now believes that with a revamped marketing campaign and more efficient production and warehousing facilities this trend can continue. However, the infrastructure needs attention, systems require upgrading and there is an urgent need to replace one antiquated bottling line.

Nutritional Products Division

Founded by an Olympic marathon runner Jose Diette, this company enjoyed immediate success in Pennsylvania and nearby Midwest states. Acquired four years laterby Nutmeg it has been maintained as an autonomous division with little capital investment. The division recently introduced low carbohydrate fruit juices and health drinks to their product line and these are selling well, but marketing and advertising needs updating and enhancement. There is also an urgent need to expand the warehouse facilities.

Planning Approach

It is important to recognize that the exercise of developing this plan and the subsequent theoretical implementation are both projects in themselves.

The concept of a central project support office to control the portfolio of projects across the company is an ambitious venture. It will require an approach that enables the deployment of the people needed anywhere in the company where they can, due to their mix of skills and competencies, add the greatest value. The objective is to break through the functional and departmental barriers to the extent that the word "cross-functional" becomes unnecessary (Buttrick).

A central organization may have descriptions such as Project Office, Project Management Office, Business Program Office, Project Management Resource Team, Project Management Center of Excellence or Enterprise Project Office. A typical PMO is responsible for deploying a consistent project management methodology within the organization to include frameworks, methodologies, processes, procedures and best practices. The development of such an organization may take many years. While such a venture demands precious resources, the hope is that the investment will be more than compensated for by the consistent practices that allow every project to be completed better, faster and at less cost.

Framework for Plan

It is suggested that you start with a framework that addresses such topics as:

1. The PMO Value Proposition: Develop a description of the viability, fit and common

responsibilities that a PMO would perform, including:

• Common project processes and templates
• Methodologies, procedures and best practices
• Common communication processes, deliverables and terminology
• Education, training and ongoing coaching to help avoid problems
• Tacking status of current projects and organization wide metrics
• Overall advocacy for project management in the organization

2. Outline a Logical Organization for Nutmeg Enterprises and include:

• Mission
• Objectives
• Strategy
• Sponsor
• Staffing and roles (some will be staff already in the divisions)
• Location(s)
• Stakeholders
• Clients
• Product/Services
• Transitional Activities

3. Deployment

4. Culture Change

5. Methodology and Best Practices

6. Training and Coaching

7. Audits

8. Organizational Metrics

9. Document Repository

1. Benchmarking
2. Grouping and prioritization of the 27 current and pending projects

Supporting documentation to this case study includes:

• Nutmeg Enterprises Organization Charts
• Nutmeg Enterprises Project Portfolio
• Nutmeg Enterprises - Project Portfolio Status by Division
• Nutmeg Enterprises Financial Summary