Strategic business unit

The following proposal for a Project Selection Criteria to assist in Portfolio Management of the Alcoa Fastening Systems (AFS) strategic business unit is submitted for your review and comment. This proposal represents our efforts to develop a methodology for improving the SBU’s ability to manage product portfolio. Utilizing specific selection criteria and numerical models, we have developed prototype for determining the suitability of proposed products for future development and implementation into our array of product offerings. The industry that we have developed the following project selection methodology is in the manufacturing industry.

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Resource allocation in a manufacturing environment is crucial to the profitability of the company due to the high overhead and expenses that are inherent within the industry. Background The name of our company is Alcoa. Alcoa is the world’s leading producer of primary aluminum, fabricated aluminum, and alumina and is active in all major aspects of the industry. Our SBU is engaged in the design and manufacture of hardware for the aerospace, automotive and commercial markets worldwide. Key products manufactured by this Unit include fasteners, metal stampings and forgings.

Our major customer base includes companies like Boeing, Airbus, Lockheed Martin, Honeywell and Ford. The goals and strategies set forth by corporate headquarters for all BU’s within ALCOA are: Profitable Growth- We will continue the drive to profitably grow our revenues as well as to join the first quintile of the S;P Industrials measured in terms of Return on Capital (ROC). Cost Savings- Financial fitness is key to our future. In support of our profitable growth challenge, we have launched our third three-year, cost-savings challenge to eliminate an additional $1. 2 billion in costs by the end of 2006.

Continuing to refine our portfolio of businesses by acquisition and by dropping BU’s that are not meeting their goals.  Strengthening our asset base and improving its productivity. Extending our global reach and repositioning our primary businesses lower on the cost curve. Strengthening our connection to customers. Building on the transformation of our businesses – from making products to delivering solutions… working across businesses in order to help our customers be successful within their markets. Project Selection Process The project selection methodology that is used is based on numeric models.

Below is a list of selection criterion based on the type of project that is to be evaluated. The list below represents factors that are used in the selection process. All or some of the factors may be used at the discretion of the PM and Corporate Team Members. Note: Some projects may go to the top of the project list without going through the project selection project if it is deemed as crucial to the vision and direction of the company. One example is Environmental Health & Safety. Environmental Health and Safety Projects will generally not go through this selection criteria due the importance of the issue to the company.

From the preceding example it has become apparently clear that to the user that Project B s should be selected over Project A since it received the highest weighted score at 4. 25 vs. 3. 85 for Project A. This is a good Project Selection Methodology because it does not look at just the financial implications of the projects but also includes other factors that make a project worthwhile. In conclusion, the above criteria will be used in evaluating all the projects before Alcoa will decide which project to work on and which project to drop.