The following points highlight the sixteen main functions of project planning for an organization. The functions are: 1. Market Survey 2. Project Capacity 3. Selection of Site 4. Plant Layout 5. Design and Drawing 6. Material Requirement 7. Operation Planning 8. Machine Loading 9. Sub-Contract Consideration 10. Equipment Requirement 11. Organization Layout and Staff Requirement and a Few Others.

Function # 1. Market Survey:

Market survey, in a board sense is a commercial survey for the suitability of business. It provides necessary statistics helpful for forecasting and planning a project. Before starting a business, market survey is very essential to know about what must be produced, how much be produced, who are the purchasers and where they are located, margin of profit, etc.

Thus the main objective of market survey is to find out the future of the proposed products. In the initial stage, preliminary survey is done by some experienced analyst and if this preliminary survey supplies sufficient information that there is no profitable market for the product to be manufactured then further detailed survey is not required. If preliminary survey provides some hope then only detailed survey is done.

Function # 2. Project Capacity:

After conducting the market survey, capacity of the project must be decided considering the amount of money which can be invested for the particular type of product and how the money can be arranged, i.e. by partnership, through banks, financing corporations or shares.


While deciding the capacity of the project, following are the factors which should also be considered:

i. Demand of the product in the market.

ii. Whether the demand is regular or fluctuating

iii. Quantity of power, water, land and raw material available.


iv. Type of business organization.

v. Nature of the product.

vi. Investment capacity.

Function # 3. Selection of Site:

When it has been decided to start a factory for manufacturing a particular product, it is most important to select a suitable site for it. While selecting the site technical, commercial and financial aspects should thoroughly be considered. Site should be selected in two stages, in first stage general location for factory should be decided and in second stage exact site should be selected in this location.

Function # 4. Plant Layout:


For the construction of building for the factory and its layout, several factors should be considered thoroughly.

Some of the important considerations in this respect are:

i. Whether single storey building will be more useful or a multistory building.

ii. Provisions for future expansion.


iii. Material movement is kept to the minimum.

iv. Flow of material should be along straight line to minimise the production delays.

v. Flexibility for future changes.

vi. Easy to supervise.


vii. Proper lighting and ventilation.

Function # 5. Design and Drawing:

Having been decided about the product to be manufactured, it must be designed. The work of design should be done very carefully by the experienced designer considering all the relevant factors. After designing the product, its detailed drawings are prepared so that no doubt is left for future. Detailed specifications for raw material and finished product should be decided carefully along with the specification of the machines required for their manufacture.

Function # 6. Material Requirement:

The list of material required for manufacture is prepared from the drawings. This list is known as “Bill of Material”. This bill passes through the storekeeper, who makes the entries of the material available in the store, but in the starting of the project, it directly passes to the purchase organization for the procurement of material.

Function # 7. Operation Planning:

The work of planning department is to select the best method of manufacturing, so that the wastage of material, labour, machine and time can be eliminated, to have more production with least fatigue.


This work is done in two phases, namely method study and time study:

i. Method Study:

Method study is conducted to eliminate the wastage due to ill-directed and inefficient motions. In this study, work is divided into fundamental elements and then these elements are studied separately and in relation to one another, and then develop a method of least wastage.

ii. Time Study:


Exact estimation of time is very essential for correct pricing. Hence time study is required to be performed to find out the correct manufacturing time for the product. Time study is also helpful for production scheduling, machine loading, budgeting and cost control. Time study is performed on average workers and on average machines for the method finalized on the basis of method study.

Function # 8. Machine Loading:

Number of machines to be installed in a plant should be decided very carefully, as excess machines will lead to machine idleness, and shortage of machine means difficulty in achieving the target of production. While planning, proper care should be taken to find out the machines time for each operation as correct as possible, so that arrangement for full utilization of machines can be made and machine loading programmer is prepared accordingly.

Function # 9. Sub-Contract Consideration:

In the past (few decades ago), each and every component of the product was manufactured in the factory. But with the development of technology and specialization, it is difficult to manufacture all the components in the same factory, because specialized machines, plant and skilled workers for each component cannot be afforded by a single concern. The decision about a particular item, whether to purchase or to manufacture, is taken by planning department after making a thorough study of the relative merits and demerits.

Function # 10. Equipment Requirement:

Results obtained from the “time and method study” and the “machine loading” helps in calculation the equipment requirement. Specification of equipment should be laid down by considering the drawings. Drawings will help in deciding the necessary requirement of the tools and accessories. After knowing the number of equipments, their accessories and tools required, cost data can be collected to give an idea of capital requirement.

Function # 11. Organization Layout and Staff Requirement:

Now with all the available information, layout of organization is decided by considering the nature of work, type of industry, size of industry, etc. Organizational set up should be able to provide the co-ordination among men, material and machine in such a way so as to have the maximum output easily and efficiently under minimum total cost.

Total number of persons required to be employed in the organization and their wages are calculated, which will help in deciding the cost of production.

Function # 12. Material Handling:


The material handling problem must be studied before the erection of the factory building and plant layout. Material handling is a prime consideration in designing the new plant building. This problem becomes more important in large scale industries. By proper layout, material handling cost improper handling may cause delays and reduces the efficiency.

Function # 13. Budgeting:

Budgeting is a forecasting and preplanning for a particular future period using past experience and market trends. Planning department prepares the budget, i.e. a programme for future operation and expected results about working capital, material, labour, production, etc.

Function # 14. Cost Calculation:

Total cost of a product can be calculated by adding the following expenses incurred during a particular period on a product:

i. Material expenses.

ii. Labour expenses.

iii. Factory expenses.


iv. Administrative expenses.

v. Selling expenses.

vi. Distribution expenses.

After calculating the total cost of a product, next step is to decide the profit to be taken on each product, which when added to the total cost gives the selling price of a product. Total cost for a product is fixed, as this is the expenditure actually made on the manufacture of a product, hence only profit is a variable factor which affects the selling price of a product.

While deciding the profit fallowing factors should be kept in mind:

i. Whether the business has monopoly or is in competition.


ii. Whether to determine on the cost of production or to change what the customers can pay.

iii. Whether the substation are available in the market.

iv. What is the price of competitive product in the market?

Function # 15. Break-Even Point:

Break-even point is the level of the production/sales where the industrial enterprise shall earn neither profit nor incur loss. In fact, it will just break even. Break-even level indicates the gestation period and likely moratorium required for repayment of loans.

BEP = [F/(S-V)] × 100



F = Fixed cost

S = Sales projected

V = Variable costs

Thus, the break-even point so calculated will indicate at what percentage of sales, the enterprise will break-even.

Function # 16. Critical Report on Feasibility:

In the end, a critical report is prepared on the basis of the cost information available from the above mentioned facts. Generally, rate of return on the invested capital is taken as the criteria for analyzing the feasibility of the project. If the rate of return is too less than some other alternative project may be taken up which may give the highest rates of return on the investment.