XYZ Ltd. is into building quality industrial boilers since 1974. By 1990, it was the second largest boiler manufacturer in UK. The company had 750 employees on rolls.

During the 1980s, the company’s profits increased significantly. The success of the company was attributed to its single product line (boilers) with standardized design. During this time, the company concentrated on improving its existing model rather than developing new models or new products. By the late 1980s, the company gained expertise in manufacturing boilers. The company was able to build and deliver advanced boilers to its clients within their budget and on time. Overwhelmed by their own expertise in building boilers, the company was extremely complacent and felt that this successful trend would continue. But the company’s financial statements in 1991 showed decreasing profits due to the sharp decline in orders for boilers. Problems began when the company’s clients began demanding boilers as per their specifications.

Although the company had the technical expertise to build boilers according to customer specifications, it incurred losses due to cost and schedule overruns. These losses were mainly due to the management’s inability to plan and estimate the costs of manufacturing boilers according to the new designs given by the clients.

This made the company search for alternate ways of managing its projects. At a quarterly review meeting, the company’s CEO, said, “We can no longer manage the activities in the company using traditional management practices. It is high time we consider every client’s order as a separate project”. He also commented that, “Managers should understand that managing projects require a completely new set of tools and skills. The need of the hour is operations management”. But, the senior managers who were with the company from its inception felt otherwise. One of the senior managers, felt that there was no difference between a project and a process. He said that the functional approach used to manage processes, which had proved effective for 20 years, would be good enough to handle the new projects also. (1 x 10 marks)

a). Why the project fail at first?

b). Identify the problems faced by the company and suggest how to overcome the problem.