FACULTY OF CHEMICAL ENGINEERING

CPE520 – PROJECT MANAGEMENT

MINI PROJECT REPORT

GROUP: EH2204G
GROUP MEMBERS:
1. ANAS IQMAL ZIKRI BIN AHMAD UBAIDILLAH 2018254384
2. DZUL KHILFI BIN ADNAN 2018272384
3. FIRDAUS BIN SALEH 2018436158
4. MUHAMMAD FAHMI BIN SAHARDI 2018402012
5. MUHAMMAD SHARFAWI BIN BURHANUDDIN 2018259708

PREPARED FOR: DR AZIATI HUSNA BINTI AWANG

DATE OF SUBMISSION: 1 JUNE 2020

 TABLE OF CONTENTS

1.0 INTRODUCTION ............................................................................................................................ 2

1.1 INTRODUCTION TO PRODUCT .............................................................................................. 2
1.2 INTRODUCTION TO LOCATION ............................................................................................ 6
2.0 FEASIBILITY STUDY OF MARKET, PROCESS AND TECHNOLOGY ................................. 10
2.1 MARKET ANALYSIS............................................................................................................... 10
2.2 LOCATION ANALYSIS ........................................................................................................... 13
2.3 PROCESS ANALYSIS .............................................................................................................. 14
3.0 COMPANY SET-UP ...................................................................................................................... 16
3.1 ORGANIZATIONAL CHART .................................................................................................. 16
3.2 POSITIONS AND JOB DESCRIPTIONS ................................................................................. 17
4.0 PROJECT PLANNING .................................................................................................................. 20
4.1 WORK BREAKDOWN STRUCTURE (WBS) ........................................................................ 21
5.0 PROJECT SCHEDULLING ........................................................................................................... 22
5.1 ACTIVITY ON ARROW (AOA) NETWORK.......................................................................... 23
5.2 ACTIVITY ON NODE (AON) NETWORK ............................................................................. 24
5.3 GANTT CHART ........................................................................................................................ 25
6.0 MONITORING AND CONTROLLING ........................................................................................ 26
6.1 MONITORING .......................................................................................................................... 26
6.2 PROJECT CONTROL SYSTEMS............................................................................................. 27
7.0 PROJECT BUDGETING ............................................................................................................... 29
7.1 RAW MATERIALS ................................................................................................................... 29
7.2 EQUIPMENT COST .................................................................................................................. 29
7.3 MANPOWER COST .................................................................................................................. 30
7.4 SITE LOCATION COST ........................................................................................................... 31
7.5 OVERALL COST ...................................................................................................................... 32
7.6 CASH INFLOWS ....................................................................................................................... 33
7.7 PAYBACK PERIOD .................................................................................................................. 33
8.0 EVALUATING AND TERMINATING PROJECT ...................................................................... 34
8.1 PROJECT EVALUATION ........................................................................................................ 34
8.2 EVALUATION CRITERIA ....................................................................................................... 34
8.3 PROJECT AUDIT ...................................................................................................................... 35
8.4 PROJECT TERMINATION ....................................................................................................... 36
8.5 TERMINATION PROCESS ...................................................................................................... 38
9.0 CONCLUSION ............................................................................................................................... 39

1
1.0 INTRODUCTION

1.1 INTRODUCTION TO PRODUCT

1.1-1 Ammonia Production

Ammonia production was the first product that was suggested. Generally, ammonia is synthesis by
Haber-Bosch process for industrial production. To have capability to produce large amount of ammonia,
it required high pressure and a high temperature condition, continuous flow, utilizes nitrogen fixation
and recovery of unreacted gases. The raw materials for this process are hydrogen gas, nitrogen gas, and
other gases as catalyst. These materials could be purchase from nearby supplier. By buying the raw
materials instead of producing it, it can save the budget it terms of maintenance.

The process where ammonia is synthesis can be summarized in stochiometric equation:

Ammonia:

Based on Kamal I. Al-Malah in 2018, in 2003, the ADNOC- and TOTAL-owned Ruwais
Fertilizer Industries (FERTIL) achieved a record production of ammonia and urea and leading to higher
exports, especially to Asian markets. New records were set in terms of production, with an annual
production of 473,987 and 653,943 metric tons of ammonia and urea respectively. Production of
FERTIL, at the Ruwais complex, consists of 3,310 metric tons of ammonia per day (MTPD) and 5,800
MTPD granulated urea.

An empirical study of the Aspen method was also carried out. Such an investment project was
found to be sustainable with a payback period of 4.2 years and an adjusted internal return rate (MIRR)
of 21.5%. The total capital cost was $10,300,600 and the total operating cost was $15,439,500/year for
an annual ammonia production of 30.046 tonnes / year.

2
1.1-2 Methyl Alcohol Production

Methyl alcohol or methanol production exceeds 65 million tonnes and continues to rise annually.
Traditionally, methanol has been used as feed for a variety of chemicals like acetic acid and
formaldehyde processing. Methanol has also been used in other applications in recent years, such as the
processing of dimethyl ether (DME) and olefins through the methanol-to-olefins (MTO) process or as
a blend stock for motor fuels. Malaysia produced around 3% of methanol in the Asia-Pacific region in
2012 from the total annual demand. The timeline to complete the construction is 2 years and 4 months,
as estimated in this report's time management section.

Methanol and its derivatives, such as ascetic acid and formaldehyde formed by chemical
reactions, are used as base materials in acrylic plastic synthetic fabrics and fibres used to make clothing
adhesives, paint and plywood used in building and as a chemical agent in pharmaceuticals and
agrochemicals. The countless uses have made methanol pervasive in our lives and through society.

Apart from that, the demand for methanol from customers is growing. That is because methanol
is the biggest feed stock for applications such as the plastics industry. Methanol also covers uses such
as aerosol, door insulation, dye processing and plastics. Several of them concerns the manufacture of
polymers, such as polyesters, which use methanol as their original raw material. A number of plastics
developed on the basis of methanol reactions with phenol, a white crystalline solid that is quickly
evaporated at normal temperatures. The gross manufacturing and development costs of methanol are
RM 13,722,987. The company has calculated a 5-year payback period, which then deduces that the
annual payback required to reach this timeline is approximately RM2,744,597.40.

3
1.1-3 Alkylbenzene Sulfonates Production

Linear Alkylbenzene Sulfonic Acid (LABSA) can be neutralized with caustic soda (NaOH) to form a
widely applied anionic surfactant of sodium alkylbenzene sulfonates. Linear alkyl benzene sulfonic acid
is the largest synthetic surfactant due to its relatively low cost, good consistency, the fact that it can be
dried to a solid powder and the environmentally friendly biodegradability because it has a straight chain.

LABSA is very absorbent and is over 90% biodegradable. This is a highly effective flexible
surfactant ideal for usage as a detergent in acidic conditions separately. As an intermediate, sulfonate is
normally neutralized with specific bases and are used in many sectors, most notably in the manufacture
of liquid and powder detergents, household and & cleaners, laundry detergents, dishwashing liquids,
carwash products, rough surface cleaner

LABSA industry has low barriers to development and is a labor-intensive market. There are
actually a number of manufacturing firms in the LABSA sector around the globe. Ho Tung, CEPSA,
Sasol, KAPACHIM, Stepan, New India Detergents, ISU Chemical and Nanjing Gige are the major
players in the industry. LABSA's production rose from 2756.30 MT in 2012 to 3211.81MT in 2016,
with an annual growth rate of 3.90 In 2016, the global usage of LABSA resources stood at about 73%.
The payback period for this project is 2 years 3 months.

4
1.1-4 Weighted Factor Scoring Method for Each Production

Table 1: Weighted Factor Scoring Method

Alkylbenzene
Ammonia
Methyl Alcohol Sulfonates
Selection Production
Weighting Production
Criteria
Weighted Weighted Weighted
Score Score Score
Score Score Score
Production
20 5 100 4 80 3 60
Process
Raw Materials
20 4 80 5 100 4 80
Availability
Marketability 15 4 60 3 45 3 45
Low Cost of
20 4 80 4 80 3 60
Production
Payback
15 3 45 4 60 2 30
Period
Application 10 5 50 4 40 4 40
Total
Weighted 100 415 405 315
Score

5
1.2 INTRODUCTION TO LOCATION

There are few sites that have been considered for site selection based on the market survey and
preliminary feasibility study. The three site that has been suggested are Kulim in Kedah, Kuala Lumpur
and Pasir Gudang in Johor. The location chosen for the existing infrastructure is Kulim, Kedah,
accessibility to road, rail and sea transport, thereby reducing the overall transport costs. Government
assistance is anticipated to promote state growth. The layout of the plant is design based on specified
safety considerations, expenses and accessibility and flexibility.

1.2-1 Characterisation of The Site Suggestion

Table 2: Characteristics of Site Suggestion

Site Suggestion
No Selection Criteria Pasir Gudang,
Kulim, Kedah Kuala Lumpur
Johor
1 Raw Materials Availability 5 4 4
2 Markets 4 3 3
3 Energy Availability 4 4 4
4 Climate Conditions 3 3 2
5 Transportation Facilities 5 5 3
6 Water Supply 3 3 3
7 Waste Disposal 5 5 5
8 Labour Supply 3 3 3
9 Flood and Fire Protection 3 3 3

TOTAL 35 33 30

6
1.2-2 Raw Material Availability
Raw material is the most essential building block for a product, so it is needed to choose a place where
the plant site is near to the raw material sources. This is because it can reduce the cost for transportation
and there is no need for having a large storage site for storing the raw material. Based on research,
below are the company that provide Hydrogen Gas, H2 and Nitrogen gas, N2.

Table 3: List of Supplier

Raw Material Company

Hydrogen Gas (H2) Air Products Malaysia Sdn Bhd
Lot 31, Jalan Hi-Tech 4 Kulim Hi-Tech Park, Kedah, 09000 Kulim
Nitrogen Gas, (N2) Air Products Malaysia Sdn Bhd
Lot 31, Jalan Hi-Tech 4 Kulim Hi-Tech Park, Kedah, 09000 Kulim

1.2-3 Marketability
There are so many uses of ammonia in the Malaysia industries. Ammonia are used as a refrigerant gas,
for purification of water supplies, and in the manufacture of plastics, explosives, textiles, pesticides,
dyes and other chemicals. However, the common use of ammonia is act as fertilizer. About 90%
ammonia produced use as fertilizer. Since all north state in Malaysia popular with plantation. Thus,
there are a lot of organic farm companies highly demand for ammonia fertilizer. For example, Serukam
Organic Farm.

1.2-4 Infrastructure

The current plant site is already equipped with paved road in a flat terrain area which make it accessible
to the customers and workers of the plant. In terms of energy availability, Tenaga Nasional Berhad
(TNB) will be the one who provided the plant with electricity with the standard pricing and tariffs for
industrial consumers. In terms of water, Syarikat Air Darul Aman Sdn Bhd (SADA) will be the one
who provided the plant with domestic water with the rate based on Table 4.

Table 4: Domestic Water Rate

Minimum Charge
Code – Tariff Category Usage Rate per m3
(RM)

0 - 1,000 m3 RM 1.40
1,001 - 10,000 m3 RM 1.60
T4 - INDUSTRY / HOTEL RM 15.00
10,001 - 50,000 m3 RM 1.80
>50,000 m3 RM 2.10

7
1.2-5 Transportation Network

The plant needs to be situated in the proximity of major transportation network for ease of transportation
of the raw material, product and for installation of machinery. The way of connection to the plant site
are through main road, North-South Expressway, Port of Penang and Penang Airport. By having these
as transportation network, it does make Kulim to be the most accessible site and in par with Kuala
Lumpur but we decided to choose Kulim as it situated in Northern Province of Malaysia which are
known and famous for their paddy fields.

1.2-6 Climate Condition

Inclement weather at a plant will cost more. Abnormally low temperatures can allow extra insulation
and special heating to be provided for equipment and pipe runs. Locations exposed to high winds or
earthquakes would require stronger infrastructure. However, Malaysia enjoys tropical weather all year
round, but the atmosphere is also very humid due to its proximity to water. Given this, the weather is
rarely too hot and during the year temperatures range from a moderate 20 °C to 30 °C average; however,
the highlands experience colder temperatures.

Table 5: Climate Condition

Site Location
No Weather Condition
Kulim, Kedah Kuala Lumpur Pasir Gudang
1 Humidity (%) 81 81 81
Maximum wind velocity
2 7 6 8
(km/h)
3 Precipitation (mm) 87.1 124.4 75.1

1.2-7 Water Disposal

All industrial processes produce waste materials, and the complexities and costs of their disposal must
be taken into full consideration. Local legislation will include the handling of hazardous and unsafe
effluents, and the relevant authorities will need to be consulted during the initial site assessment to
decide the requirements are to be met.

1.2-8 Labour Supply

The construction of the plant and its operation will require labor. Skilled construction workers would
typically be brought in from outside the site area, but an sufficient pool of unskilled workforce capacity
should be locally accessible and workforce qualified to run the factory. Skilled traders are required for
the maintenance of the plants. Local trade union rules and discriminatory procedures would have to be

8
taken into consideration when determining the quality and suitability of local labor for recruitment and
training.

1.2-9 Community Factor

The proposed plant must be compliant with and appropriate to the local community. Complete
consideration must be given to the secure location of the plant so that there is no substantial unnecessary
risk to the environment. The local community will be able to provide sufficient services for plant
workers on a new site.

1.2-10 Plant Layout

Figure 1: Full Layout

Figure 2: Plant Layout

9
2.0 FEASIBILITY STUDY OF MARKET, PROCESS AND TECHNOLOGY

2.1 MARKET ANALYSIS

Table 6: Economic Analysis

Product Fertilizer Alcohol Detergent

Materials Price Materials Price Materials Price
Nitrogen RM25.500 RM0.26
Coal For Powder
gas per kg per kg
Carbon Sodium
RM0.93 RM65.67 RM40.00
Methane monoxide tripolyphosphate
per kg per kg per kg
gas (STP)
RM28.00
Sodium sulphate
per kg
RM3.00
Soap Noodles
per kg
Sodium
RM2.50
Carboxymethyl
per kg
cellulose

2.1-1 Current Selling Price

i. Ammonia – RM 8.74 per kg

ii. Alcohol – RM 3.50 per kg
iii. Detergent – RM 7.50 per kg

2.1-2 Combined Purchase Cost of Raw Materials

i. Ammonia – RM 7.07
ii. Alcohol – RM 32.97
iii. Detergent – RM 9.90

From the combined purchase of raw materials, ammonia has lower cost than selling price of the product
while detergent and alcohol has higher cost of raw materials than selling price.

10
2.1-3 Market for The Chemical
The location for ammonia plant is at Kulim, Kedah where it easy to get raw materials from the suppliers.
There also has good markets and energy availability. Climate conditions at Kulim is moderate. So, it is
suitable place for ammonia plant. The product can be local sale and export. The sale and production
over 5 years can be constant or higher.

As the alcohol plant at Kuala Lumpur, it is good place where it has good availability of raw
materials but moderate in market. There also has good energy availability but also moderate climate
conditions. The product can be sale at local and export. The sale and production over 5 years can be
constant as people use it as routine.

Detergent plant’s location at Pasir Gudang, Johor. There is easy to find raw material for making
detergent but moderate in markets. Energy availability is good at the location but poor climate
conditions. The product sale can be both at local and export. It will be constant of sales and production
over 5 years.

2.1-4 The Main Application of The Products

Table 7: The Main Applications

Ammonia Methyl Alcohol Alkylbenzene Sulfonates

i. Used as stabilizer, i. Production of acetic i. Household detergent
neutralizer or source of acid
nitrogen in industries
ii. Wastewater treatment, ii. Used as an antifreeze in ii. Laundry powders
leather, rubber, paper many pipelines
and food
iii. Production of fertilizer iii. Sewage treatment for iii. Dishwashing liquids
plants
iv. Used as cleaning agent iv. Used as fuel
v. Used as fuel

2.1-5 Production Capacity

Table 8: Production Capacity

i. Ammonia 5,800 metric tons of ammonia per day

ii. Methyl Alcohol 20,000 tons of methanol per year
iii. Alkylbenzene Sulfonates 3211.81 tons of alkyl benzene sulfonic acid per
month

11
2.1-6 Capital Cost for Existing Similar Plant

Table 9: Capital Cost

i. Ammonia Plant The capital cost for the Ruwais Fertilizer

Industries was RM 45,219,634.
ii. Methyl Alcohol Plant RM 2,458.40 ton per year is the capital cost for
making methanol.
iii. Alkylbenzene Sulfonates Plant RM 7,399.04 is the capital cost of detergent plant
produce linear alkyl benzene sulfonic acid.

2.1-7 Payback Period for The Plant Capital Cost

Table 10: Payback Period

i. Ammonia Plant The Ruwais Fertilizer Industries has 4.2 years for
payback period.
ii. Methyl Alcohol Plant Payback period for capital cost of alcohol plant
is 13 years.
iii. Alkylbenzene Sulfonates Plant 2.25 years for payback period of capital cost of
detergent plant.

12
2.2 LOCATION ANALYSIS

For the production of ammonia, high temperature and pressure is vital for the process called Haber-
Bosch process. The temperature needed is 500-degree Celsius and the pressure is 20MPa. It amounts to
about 1% of world’s total energy production. This will lead to excessive amount of CO2 emission.
According to the Institute for Industrial Productivity in 2010, this accounts for roughly 1% of global
annual CO2 emission, more than any other chemical reaction. Excessive CO2 emissions will lead to
various harmful effects to our environment. Climate change will occur where earth’s surface
temperature and ocean water levels will increase. Greenhouse effects will also take place where carbon
dioxide traps radiation at ground level, producing ground-level ozone. This will eventually prevent earth
from cooling in the night-time.

Next, the production of methanol. Methanol is clear, colorless liquid with a characteristic odor.
It is highly flammable and is considered as volatile organic compound. Methanol may affect wildlife
nature to death. Exposure to plants will cause low growth rate. However, long term exposure can affect
its fertility, appearance and behaviours. Methanol is soluble in water. In addition, it remains vapor in
air for 18 days, eventually breaking down to other chemicals. It is volatile, so it can be carried for quite
a long distance. Methanol does not bind well to soil, so it can enter the groundwater. Ultimately, it will
evaporate when exposed to air and dissolves completely when mixed with water.

Finally, the production of detergents. Discharge of large amount of detergents to the river will
cause eutrophication of rivers. Components in detergents such as phosphorus and nitrogen will be
concentrated in water. This will enable the increasing growth of algae that invade the river. When it
dies, the decomposition of the plants will consume oxygen. Aquatic creatures will have less oxygen to
breathe to and eventually die. The decomposition is also known as anaerobic fermentation will release
hydrogen sulphide and the smell of rotten eggs. The surfactants and minerals in the detergents such as
phosphates, nitrates, ammonium and boron will also contaminate groundwater. Surfactants such as
ethylene glycol will disrupt the hormonal system of aquatic animals.

In any power plants, chemical accidents are fatal to both humans and environment. All
hazardous installations must have an appropriate on-site emergency plan that includes both best and
worst cases scenario. The plan must consist of complete evaluation of hazard from information,
handling, processed and stored. Management of hazardous installations must supply enough medical
supplies such as antidotes in case of any chemical accidents. First aid to the employees and public must
present in case of spillage or leakage. The emergency plan must also identify the top chain of command
in case of accidents. There must be a main coordinator to guide things thoroughly during accidents to
prevent any fatalities. Employees must also be informed and trained precisely how to react during any
chemical accidents in the plant.

13
2.3 PROCESS ANALYSIS

2.3-1 Process Selection

The main industrial method for ammonia synthesis is the Haber-Bosch process, created by Fritz Haber
in 1905 and developed for industry by Carl Bosch in 1910. The overall process synthesizes ammonia
from molecular nitrogen and hydrogen by feeding the reactants over iron catalysts at a high pressure
and temperature, requiring bulky, well-insulated reactors to house the process. However, in the 1870s,
ammonia was first created industrially as a by-product in the production of coke, though this method of
ammonia synthesis could yield only two-thirds of the nitrogen exported from South America. In the late
1800s, chemists agreed that the demand for nitrogenous compounds would likely soon exceed the
natural supply, catalyzing the search for more effective industrial processes. The creation of the Haber
process in 1905, and its subsequent industrial scale-up by Carl Bosch in 1910, marked the first practical
procedure for synthesizing anhydrous liquid ammonia from hydrogen and atmospheric nitrogen, which
is still used industrially today.

2.3-2 Process Background

The processes by which ammonia is synthesized can be simplified as stoichiometric equation:

N2 (g) + 3H2 (g) → 2NH3 (g)

The common method for the industrial production of ammonia has been the Haber-Bosch
process for over a century worldwide. The overall process requires high temperatures and pressures and
utilizes nitrogen fixation (reacting atmospheric nitrogen), continuous flow and the frequent recovery of
unreacted gases, resulting in a method capable of producing large amounts of ammonia more efficiently
than earlier methods of synthesis.

Stoichiometrically, the reaction of one mole of nitrogen with three moles of hydrogen produces
two moles of ammonia in an exothermic process. The reaction, however, is unfavorable on its own and
is made possible through the manipulation of physical factors. To lower the activation energy required
for synthesis, the reactants (both in gas phase) are passed over an iron catalyst with an added potassium
hydroxide promoter for increased efficiency. The reaction is reversible in nature, though the production
of ammonia can be made favorable using Le Chatelier’s Principle, which dictates that an increase in
pressure makes the reaction favor the side with fewer moles, ammonia in this case.

However, the pressures required to optimize ammonia synthesis are very high and expensive to use
industrially at a large scale, so a compromised pressure of typically 200 atm is often used. While Le
Chatelier’s Principle also suggests that low temperatures would cause the reaction to favor ammonia
production, low temperatures slow the reaction to impractical rates, leading manufacturers to apply a
compromised temperature of 400-450°C. Each time the reactants undergo this process, only 10-18% of

14
the potential ammonia is converted, but by recycling unreacted gas, no reactants are wasted or lost and,
after multiple passes, 97% of the reactants can be converted overall.

2.3-3 Equipment

i. Compressor Increase the pressure on nitrogen and hydrogen gas and transport
them through a pipe.
ii. Absorber Unreacted nitrogen and hydrogen are recycled and given another
chance to react.
iii. Cooler Maintaining a reasonable equilibrium constant.
iv. Heat Exchanger The gas mixture is cooled to 450 °C in a heat exchanger using water,
freshly supplied gases and other process streams.
v. Reactor The catalyst ferrite (α-Fe) is produced in the reactor by the reduction
of magnetite with hydrogen. The catalyst has its highest efficiency
at temperatures of about 400 to 500 °C.
vi. Condenser The reaction mixture contains some ammonia, plus a lot of
unreacted nitrogen and hydrogen. The mixture is cooled and
compressed, causing the ammonia gas to condense into a liquid.

2.3-4 Technology

15
3.0 COMPANY SET-UP

3.1 ORGANIZATIONAL CHART

16
3.2 POSITIONS AND JOB DESCRIPTIONS
Table 11: Positions and Jobs Description

POSITION JOB DESCRIBTIONS

Project Manager 1. Responsible to plan the whole project including

• setup the project goals

• determine the number of staff required

• what tasks should be done.

2. Organizing the project by giving a structure to the project

team including

• assign tasks to the project team

• set up the dateline of the tasks

• brief the project team

3. Lead and make the decision about the project

4. Monitoring the project including

• Measure the project progress

• Evaluate the cause of the deviation

• Correct the deviation appropriately

5. Responsible to be the middle person the communicate

with project sponsors, clients, external vendors,
important stakeholders, and project team

6. Indicate and manage the risks of the project

Accountant 1. Responsible in managing the project financial

2. Record all the financial transactions

3. Analyzing accounting options and recommends

financial options.

Administrative Manager 1. Planning and planning of administrative procedures and

systems and how processes can be streamlined

17
 2. Recruiting and educating employees, and allocating
office space and responsibilities

3. Assessing the performance of employees and providing

coaching and feedback to ensure optimum effectiveness

Sales Engineer 1. Carrying out detailed sample samples of the product

2. Presenting the product and all the functionality at events

such as conferences and workshops to clients

3. Negotiate the contract terms with the clients

Process Engineer 1. Responsible to design, run, test, and upgrade the process
of making the product

2. Develop best practices, procedures and creative

approaches that will increase production levels and
performance quality

3. Provide the documentation of the process and the

process instructions

Safety Engineer 1. Get certificate from OSHA

2. Brief the employee about safety in workplace

3. Identify the potential hazards in workplace

4. Install safety equipment in workplace

Waste Management Engineer 1. Responsible in handling the waste from the process of
the factory

2. Develop the best ways to reuse the waste and sustain the
environment.

3. Record all the data of waste management

Mechanical Engineer 1. Develop and design the equipment according to process

2. Provide the instruction of operating and safety pre-

caution of the system

Technician 1. Provide maintenance of the equipment regularly

18
 2. Identify and fix any equipment problems

Logistic Manager 1. Oversee the warehouse

2. Handling the material and transportation of the products

Warehouse Officer 1. Receive and record the new stock coming

2. Schedule and monitor stock level

Operator 1. Operate the equipment of the process

2. Feed raw material into the production line

19
4.0 PROJECT PLANNING

20
4.1 WORK BREAKDOWN STRUCTURE (WBS)

21
5.0 PROJECT SCHEDULLING

Table 12: Details of Activities

DURATION
ACTIVITY DESCRIPTION PRECEDENT
(WEEK)
A Team formation 2 -
B Project planning 4 A
C Site selection 6 B
D Safety evaluation 1 B
E Legal approval 3 D
F Contract and purchasing 8 C
G Plant construction 12 E, F
H Equipment installation 6 F
I Piping and wiring 4 G, H
J Equipment testing 1 I
K Plant test run 1 J
L Production starts 2 L

22
5.1 ACTIVITY ON ARROW (AOA) NETWORK

Figure 3: AOA Network

23
5.2 ACTIVITY ON NODE (AON) NETWORK

Figure 4: AON Network

24
5.3 GANTT CHART

0 5 10 15 20 25 30 35 40

Team formation

Project planning

Site selection

Safety evaluation

Legal approval

Contract and purchasing

Plant construction

Equipment installation

Piping and wiring

Equipment testing

Plant test run

Production starts

Figure 5: Gantt Chart

25
6.0 MONITORING AND CONTROLLING

6.1 MONITORING

6.1-1 Continuously Monitor the Project (Project Manager/Project Members)

The Project Manager tracks the project’s planning parameters, the commitments to and from its
stakeholders, the risks and issues associated with planning and monitoring, the involvement of
stakeholders, and the management of all data associated with planning and tracking.

i. Monitor Project Planning Parameters (Project Manager/Project Members)

Monitor project planning parameters such as budget, schedule, work products, activity attributes,
resources, knowledges and skills.

Measure the actual data against the project plan, do not forget that requirements changes can potentially
affect project planning parameters as well. Criteria to trigger re-planning are documented during project
planning to define when a significant deviation occurs.

ii. Monitor Commitments (Project Manager/Project Members)

Monitor that the project’s commitments are being met. This involves the project meeting its
commitment to others and determining that others are meeting their commitments to the project.

iii. Monitor Project Risks (Project Manager/Project Members)

The PM establishes monitoring procedures to capture issues and risks associated with planning and
tracking. These procedures include the activities listed below:

a) Measuring the progress of issue/risk resolution

b) Validating risks identified in earlier project activities
c) Determining if there are new risks
d) Updating the project’s Action/Issue/Risk Log
e) Communicating issue/risk status to the project’s stakeholder

iv. Monitor Data Management (Project Manager/Project Members/QA/CM)

Verify that the project’s data are being managed according to plan. Establish that the project data are
being retained as planned.

v. Monitor Stakeholder Involvement (Project Manager/Project Members)

26
Ensure that the project stakeholders are participating according to plan. Determine if there are new,
previously unidentified stakeholders or changes to the status of previously identified stakeholders.

vi. Conduct Progress and Milestone Reviews (Project Manager/Project Members)

Conduct progress and milestone reviews as planned. Progress reviews do not have to be formal.
however, resulting decisions and action items need to be recorded and tracked for implementation and
to closure. Milestone reviews are more formal and should be treated as such since they mark significant
points in the project’s lifecycle.

6.1-2 Analyse Issues (Project Manager/Project Members)

Analyse the issues associated with the deviations. A full understanding of both the obvious and
underlying issues is necessary before determining the necessary corrective action.

6.1-3 Take Corrective Action (Project Manager/Project Members)

Document the needed corrective action by updating applicable project plan and any project records
affected. This may involve re- planning budget, schedule, and/or resources.

6.1-4 Manage Corrective Action to Closure (Project Manager)

Ensure that all steps taken to mitigate significant deviations from the plan are carried out as scheduled.
Ensure any data that needs to be modified as a result of the corrective action is appropriately updated,
using the previously defined change mechanism.

6.1-5 Tailoring Guidance

Tasks may be added to, tasks may not be deleted, tasks may be combined. Tasks may be reworded to
reflect Department terminology so long as the spirit of the task is retained. The process owner is
expected to be changed.

6.2 PROJECT CONTROL SYSTEMS

Project control is that element of a project that keeps it on-track, on-time and within budget. Project
control begins early in the project with planning and ends late in the project with post- implementation
review, having a thorough involvement of each step in the process. Each project should be assessed for
the appropriate level of control needed: too much control is too time consuming, too little control is
very risky. If project control is not implemented correctly, the cost to the business should be clarified
in terms of errors, fixes, and additional audit fees.

Control systems are needed for cost, risk, quality, communication, time, change, procurement,
and human resources. In addition, auditors should consider how important the projects are to the
financial statements, how reliant the stakeholders are on controls, and how many controls exist.

27
Auditors should review the development process and procedures for how they are implemented. The
process of development and the quality of the final product may also be assessed if needed or requested.
A business may want the auditing firm to be involved throughout the process to catch problems earlier
on so that they can be fixed more easily. An auditor can serve as a control consultant as part of the
development team or as an independent auditor as part of an audit.

Businesses sometimes use formal systems development processes. This helps assure that
systems are developed successfully. A formal process is more effective in creating strong controls, and
auditors should review this process to confirm that it is well designed and is followed in practice. A
good formal systems development plan outline:

i. A strategy to align development with the organization’s broader objectives.

ii. Standards for new systems.

iii. Project management policies for timing and budgeting.

iv. Procedures describing the process.

v. Identify the inputs used to direct and manage project execution.

vi. Recognize examples of the tools used to direct and manage project execution.

vii. Recognize examples of outputs of the Direct and Manage Project Execution process.

viii. Distinguish between monitoring activities and controlling activities.

ix. Sequence the steps in the project monitoring and control cycle.

x. Recognize examples of the inputs to monitoring and controlling work performance.

xi. Recognize the actions a project manager would take to monitor and control project
performance.

xii. Recognize the principles associated with updating project baselines.

xiii. Identify the outputs of the Monitor and Control Project Work process.

28
7.0 PROJECT BUDGETING

7.1 RAW MATERIALS

Table 13: Price for Raw Materials

Materials Prices (RM / year) Total (RM)

1000 𝑡𝑜𝑛
RM 25.50 per kg x 1 𝑘𝑔
x
Nitrogen gas (N2) RM 255 000 000
10 000 ton

1000 𝑡𝑜𝑛
RM 3.40 per kg x x
1 𝑘𝑔
Hydrogen gas (H2) RM 34 000 000
10 000 ton

Total Cost RM 289 000 000

1 year = approximately 10 000 tonnes

7.2 EQUIPMENT COST

Table 14: Equipment Cost

Price per Unit Total Cost

Equipment Amount
(RM) (RM)

3 (Feed Compressor, Recycle

Compressor Compressor, Ammonia 14 980 44 940
Compressor)
2 (Uptake Absorber,
Absorber 11 556 23 112
Regeneration Absorber)
3 (Ammonia Compression Pre-
Cooler, Absorption Trim
Cooler 719.04 2157.12
Cooler, Absorption Pre-
Cooler)

Heat exchanger 4280 4280

1
Reactor 1 17 120 17 120

Condenser 1 12 000 12 000

Total Cost 103 609.12

29
 7.3 MANPOWER COST

Table 15: Manpower Cost

SOCSO
Monthly EPF SOCSO Staff EIS
Company Number Total Cost
Position Salary (11%) Contribution (0.2%)
Distribution of staff (RM)
(RM) (RM) (0.5%) (RM) (RM)
(1.75%) (RM)

Project manager
8000 880 40 140 16 1 6924

Accountant
5000 550 25 87.50 10 1 4327.50

Administrative
Manager 5000 550 25 87.50 10 1 4327.50

Sales Engineer
4058.33 446.42 20.29 71.02 8.12 2 7024.96

Process Engineer
5000 550 25 87.50 10 2 8655

Safety Engineer
4725 519.75 23.63 82.69 9.45 1 4089.81

Waste Manager
3083.33 339.17 15.42 53.96 6.17 1 2668.61

Technician
1649.16 181.41 8.25 28.86 3.30 5 7136.70

Logistic Manager
5308.08 583.89 26.54 92.89 10.62 2 9188.28

Warehouse
Officer 6082.16 699.04 30.41 106.44 12.16 5 26 170.55

Operator
1478 162.58 7.39 25.87 2.96 15 19 189.20

99 702.11
TOTAL COST

30
7.4 SITE LOCATION COST

Table 16: Site Location Cost

Location Kulim High Tech Park, Kulim, Kedah

Price RM5 880 600
Land Area 217 800 sq. ft.
Site location is a part of the initial investment.

Table 17: Expenditure Cost

Category Type Description Cost (RM)

Variable Cost 1 Raw Material Cost 289 000 000

2 Price for Equipment 103 609.12

3 Land Cost 5 880 600

4 Machinery Installation Estimation 280 000

5 Building Estimation 1 500 000

6 Utilities 2% of capital cost 5 929 684.18

Fixed Cost 1 Maintenance 5% of capital cost 14 824 210.46

RM1200 for 100

2 Operating Labor 120 000
laborers

3 Plant overhead 50% from operating labor 60 000

4 Capital charges 10% from capital cost 29 648 420.91

5 Insurance 1% from capital cost 296 482.09

6 Local taxes 2% from capital cost 592 964.18

7 License 4000

Total (Variable + Fixed) 348 239 970.90

31
 Table 18: Other Costs

Equipment Unit RM/unit Total (RM/unit)

Desk 35 75.00 2625.00

Chair 50 50.00 2500.00

Photostat
3 70.00 210.00
Machine

Fax machine 2 250.00 500.00

Computer 10 1000.00 10 000.00

Telephone 10 50.00 500.00

Shelf 20 150.00 3000.00

Total Cost 19 335

7.5 OVERALL COST

= Manpower costs + Cost of equipment + Other Cost

= 99 702.11 + 103 609.12 + 19 335

= RM 222 646.23

7.5-1 Capital Cost

= Raw materials costs + Land Cost + Equipment Cost + Building Cost

= 289 000 000 + 5 880 600 + 103 609.12 + 1 500 000

= RM 296 484 209.10

32
7.5-2 Work Capital Cost

= 10% of capital cost

= RM 29 648 420.90

7.5-3 Production Cost

= Raw materials cost + Cost of equipment + Utilities cost

= 289 000 000 + 103 609.12 + 5 929 684.18

= RM 295 033 293.30

7.6 CASH INFLOWS

For 1 year

= Total Nitrogen Gas Annually + Total Hydrogen Gas Annually

= 255 000 000 + 34 000 000

= RM 289 000 000

For 5 years

= 289 000 000 x 5

= RM 1 445 000 000

7.7 PAYBACK PERIOD

= Initial Investment / Annual Cashflow

= 326 132 630 / 289 000 000

= 1.13 years

33
8.0 EVALUATING AND TERMINATING PROJECT

8.1 PROJECT EVALUATION

Project evaluation is defined as a systematic and objective assessment of an ongoing or completed

project. The purpose of this evaluation is to determine the relevance and level of achievement of project
objectives, development effectiveness, efficiency, impact and sustainability. Thus, this also helps in
decision- making process of stakeholders, including donors and national partners.

The four phases of evaluation process mention below which involves planning, implementation,
completion and dissemination and reporting. Each of these phases has its own unique issues, methods
and procedures.

i. Planning – to identify stakeholders, specifying short and long-term goals

ii. Implementation – to determine the successful of the program by monitoring all aspects
iii. Completion – summarization of the overall project performances such as its efficiency and
sustainability.
iv. Dissemination and reporting – compilation of results evaluation including guidelines for
future references.

8.2 EVALUATION CRITERIA

Many different of measures need to be taken into consideration in evaluating a project. This is for
references in future planning and decisions and it also involves the committee. The criteria of evaluation
project are:

i. Profitability
ii. Acquiring new competencies for the organization
iii. Getting a foothold in a new market segment
iv. Projects’ success to date
v. Customers’ satisfaction

In order to achieve the objectives of the project, process selection has been made to utilize resources
and budget, and other aspects. Scoring method is used in this selection method to produce benzene.

34
8.3 PROJECT AUDIT

Project audit helps to manage the project efficiently through examination, record, value the project’s
budgets, expenditures, progress, and others.

8.3-1 Audit Process

Three common steps in auditing a project which includes general audit where it usually constrained by
time and cost and limited to a brief investigation of project essentials. Other than that, is detailed audit
which initiated if general audit finds something that needs further investigation. Lastly, the technical
audit which it is usually performed by a person or team with special technical skills. The steps are:

i. Familiarize the audit team with requirement of the project, including the selection and any
special charges by upper management
ii. Audit the project on-site
iii. Write up the audit report in required format
iv. Distribute the report

8.3-2 Audit Report

The audit is written for future purposes or information. There are few information need to be included
in the audit report such as:

i. Introduction or brief description of project which includes the project’s goals and objectives
ii. Current status which compare actual completed work with planned project along with several
measures of performances
iii. Future project status which include the auditor’s conclusion on project progress and
recommendation for changes in technical approaches, schedule or budgeting.
iv. Critical measurement issues which auditor feels senior management should monitor and
identified
v. Risk analysis and risk assessment which shows the potential for project failure or monetary loss
vi. Final comments that contains caveats, assumptions, limitations and information applicable to
the other project

35
8.4 PROJECT TERMINATION

Project termination or also known as close-out, is the last stage in managing a project which occurs
after implementation phase has ended. After the acceptance test is carried out, the project is delivered
to the client. In this process, project team is disbanded and unused resources is disposed appropriately.
All of the outstanding bills have been passed for payment and final invoices for work carried out will
be issued. The main purpose of this termination is to assess one’s performance and to learn from
previous experience in order to improve for the future.

Termination process can be either quick or slow and it has its own impact. The impacts may affect the
quality of life in organization, success of the project, major effect on residual attitudes toward the project
held by senior management, client, project team and others in organization as well as organization’s
successful use of projects in future.

8.4-1 Criteria(s) of Project Termination

Major criteria of termination used sunk cost approach whether organization is willing to invest the
time and cost required to complete the project. There are two types of criteria to terminate the project.
The criteria include:

i. The degree to which the project has met its goals and objectives
ii. The degree to which project qualifies against a set of factors generally associated with success
or failure.

According to Shenhar, Levy, and Dvir et. al, there are four generic factors associated with project
success which are:

i. Efficiency of project execution

ii. Customer satisfaction and use
iii. Impact on the firm conducting the project
iv. Contribution to the project firm’s future

36
8.4-2 Types of Project Termination

There are fundamentally different ways to close out a project which are extinction, addition,
integration and starvation.

i. Extinction

Termination by extinction occurs when the project activity suddenly stops, even though there is still
property, equipment, material and personnel to disburse or reassign. It is terminated either due to
successfully completed or the expectation of failure rate is high. It faces extinction when the process
yield may have been too low, or drug failed its efficacy tests, or other firms have found other ways.

ii. Addition

Termination by addition occurs when an “in-house” project is successfully completed, and

institutionalized as a new, formal part of the organization. It may take the form of an added
department, division, subsidiary, or other organizational entity depends on the magnitude and
importance of the project.

iii. Integration

Termination by integration occurs when the output of project becomes a standard part of the operating
systems of sponsoring firm or client.

iv. Starvation

Termination by starvation occurs when it is impolitic to terminate a project but its budget can be
squeezed as always until it is a project in name only. The project may be suggested by a special client
or senior executive such as sacred cow, or terminating the project would be an embarrassing
acknowledgement of managerial failure.

37
 8.5 TERMINATION PROCESS

It is appropriate for broadly based committee of reasonably executives to make termination decision
towards all major and non-routine projects in order to avoid and withstand the political pressures that
often accompany such decisions. It is best to appoint a specialist in this process such as a termination
manager to complete the long and involved process of shutting down a project, preferably someone
with some experience in terminating projects. The process of terminations is shown as below:

Project
close-out

Organization Financial Purchasing Site

Compliance Supplier Final

Close Reassignment documents notifications payments
out plan reports
meeting

Close down Equipment

Charge Collect Final facilities material disposal
audits receivables report

38
9.0 CONCLUSION

As conclusion, the company has decided to construct a new chemical plant with ammonia as the main
product. This is due to the easy marketability and high demand especially in Malaysia and its
neighboring country in South East Asia as agriculture plays a central role on their livelihood. The best
method in production of ammonia is through synthesis by Haber-Bosch process as it has the capability
to produce large amount of ammonia by utilizing hydrogen gas and nitrogen gas as the raw materials
and a few other gases as catalysts. The raw materials also are easy to be purchase from nearby supplier
which is from Air Products Malaysia Sdn Bhd so it can help to save the budget in terms of maintenance
if it is needed to be produced by our new chemical plant.

The site that had been chosen also is the best which is at Kulim, Kedah. It is the most excellent
site because it is near to the supplier of the raw materials, located in higher marketability area, has good
infrastructure, situated in proximity of major transportation network and has the optimum climate
condition for the plant to operate. The ammonia plant is expected to be constructed and can be fully
operated in 40 weeks. The total initial investment cost is around RM 326 132 630 with the estimation
of cash inflow for each year of RM 289 000 000. Thus, the payback period will be around 1.13 years
and it will give a huge profit in the incoming years after that.

39