Technical feasibility of a project
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The document discusses the technical feasibility study that should be conducted for a new business. It outlines key areas that must be analyzed including selecting products/services, determining production needs, providing cost estimates, considering technological developments, and describing the manufacturing process, equipment requirements, facility needs, raw materials, and labor requirements. Conducting a thorough technical feasibility study is important to determine if the business has the necessary expertise, infrastructure and capital to operate successfully.
Technical feasibility of a project
- 2. A business is considered technically and operationally feasible if it has the necessary expertise, infrastructure and capital to develop, install, operate and maintain the proposed system, and that by establishing such a system, the business will be able to deliver goods or services at a profit. When considering a new business, it is important to consider if there is sufficient access to resources. One of the primary reasons that new business fails is under-capitalisation - not enough money to keep the business going from startup until it starts to make a profit. This can lead to a lack of resources.
- 3. WHAT SHOULD BE DONE?
- 4. 1. SELECT THE PRODUCT (S) &/OR SERVICE (S) THE MANUFACTURING/PRODUCTION PROCESS THE CAPACITY & DESIGN THE SUPPLIES THE LOCATION THE LAY OUT THE STRUCTURES SPECIFICATIONS THE RAW MATERIALS & THEIR SOURCES
- 5. 2. DETERMINE THE QUANTITY & QUALITY OF THE PRODUCT (S) & SERVICE (S) TO BE PRODUCED THE LABOR NEEDED, BOTH SKILLED & UNSKILLED THE UTILITIES REQUIRED THE WASTE DISPOSAL METHOD THE TRANSPORTATION NECESSARY
- 6. 3. PROVIDE ESTIMATES OF THE TOTAL PROJECT COST, & ENUMERATE THE MAJOR ITEMS OF CAPITAL COST
- 7. 4. LIST DOWN IN DETAIL THE ESTIMATED PRODUCTION & OVER HEAD COSTS THAT WILL GO INTO OPERATING THE PROPOSED PROJECT
- 8. 5. TAKE INTO CONSIDERATION THE MAJOR TECHNOLOGICAL DEVELOPMENT IN THE INDUSTRY WHICH MAY AFFECT THE COMMERCIAL OR TECHNICAL SOUNDNESS OF THE PROJECT.
- 9. THE TECHNICAL STUDY IS PRESENTED BY DESCRIBING & MAKING NECESSARY CALCULATIONS FOR THE FOLLOWING:
- 10. A. THE PRODUCT(S)/SERVICE(S) THIS PORTION DESCRIBES THE PRODUCTS OR SERVICES TO BE PRODUCED/PROVIDED & SOLD. WHICH SPECIFIES THE PRODUCTS’ PHYSICAL, MECHANICAL, & CHEMICAL PROPERTIES THEIR VARIOUS USES, BOTH AS FINISHED GOODS & INDUSTRIAL INPUTS.
- 11. B. MANUFACTURING/ PRODUCTION PROCESS THE SELECTED MANUFACTURING/PRODUCTION PROCESS MUST BE DESCRIBED SIMPLY & CLEARLY, PREFERABLY WITH THE AID OF FLOW CHARTS AND DIAGRAMS. THE ALTERNATIVE PROCESSES & THE WAY THEY COMPARE WITH THE CHOSEN PROCESS MUST BE MENTIONED. THE ANALYSIS SHOULD FURTHER TOUCH ON THE MANUFACTURING/PRODUCTION PROCESSES USED IN EXISTING BUSINESSES WITH THE SAME OR SIMILAR ACTIVITY, BOTH DOMESTIC & FOREIGN. LICENSING AGREEMENTS & PATENTS SHOULD ALSO BE REVIEWED.
- 12. C. SIZE OF THE BUSINESS & PRODUCTION SCHEDULES MINIMUM & MAXIMUM RATED CAPACITY FIXED COSTS ACTUAL CAPACITY UTILIZATION THE NUMBER OF SHIFTS PER DAY NUMBER OF OPERATING DAYS PER YEAR
- 13. D.PRODUCTION SCHEDULES THE EXPECTED GROWTH IN MARKET SHARE THE AVAILABILITY OF FINANCING FOR POSSIBLE EXPANSION THE AVAILABILITY OF MORE RAW MATERIALS THE LEVEL OF UTILIZATION OF PLANT CAPACITY
- 14. E. MACHINERY & EQUIPMENT IDENTIFIED & INDIVIDUALLY LISTED ACCDG TO TYPE & USE SPECIFICATIONS, CAPACITIES & COSTS MUST BE DESCRIBED IN DETAIL THE ORIGIN OF THE MACHINERY & EQUIPMENT, WHETHER LOCAL OR IMPORTED THE MANNER OF & COST OF TRANSPORTING THEM MUST BE INDICATED
- 15. E. MACHINERY & EQUIPMENT What type of equipment and technology will the business need to produce its product/service? What costs are involved to purchase and set up the equipment? What are the costs involved in the ongoing running of the equipment? EQUIPMENT SUPPLIERS: Who are the potential suppliers of the equipment? Where are they located? What sort of service and warranties do they provide? How long will it take to acquire the equipment and begin operations?
- 16. F. LOCATION A THOROUGH & COMPARATIVE ANALYSIS FOR EACH POTENTIAL LOCATION SHOULD BE MADE TO DETERMINE THE MOST IDEAL SITE. IT HAS TO CONSIDER THE FOLLOWING FACTORS: THE ACCESSIBILITY TO, & AVAILABILITY OF, RAW MATERIAL SOURCES THE AVAILABILITY OF CHEAP OR MODERATELY-PRICED UTILITIES SUCH AS POWER, WATER, OR FUEL THE COMBINED COST OF TRANSPORTING RAW MATERIALS & FUEL TO THE SITE THE PROXIMITY TO DISTRIBUTING OUTLETS THE AVAILABILITY OF SKILLED & UNSKILLED LABOR MAPS & CHARTS OF THE PROPOSED SITE MUST BE INCLUDED
- 17. G. LAYOUT THE LAYOUT SHOULD BE CLEARLY DEPICTED THROUGH DIAGRAMS & DESCRIPTIONS. A GOOD LAYOUT IS CHARACTERIZED BY MINIMUM MATERIAL HANDLING EFFECTIVE SPACE UTILIZATION SMOOTH WORK FLOW SAFE & CONDUCIVE WORKING AREA FOR THE WORKERS SAFETY AND SANITATION FACILITIES, & FLEXIBILITY OF ARRANGEMENTS
- 18. H. BUILDING & FACILITIES What are possible locations for the facility (office/manufacturing plant)? What size facility is needed? What are the costs involved in the building? Do you need to fit it out? How much will it cost to get all necessary utilities connected? Does the proposed location have adequate access to infrastructure and services such as highways, railway and utilities? Will you need to build your own facility, or purchase an existing one? Where will the facility be located in relation to your customers? Who will be responsibile for transport of goods between the facility and the market? What are the costs involved?
- 19. H. BUILDING & FACILITIES THE SITE, TYPE, & COSTS OF THE BUILDING AND LAND, AS ENVISIONED IN THE PROJECT, SHOULD ACCURATELY BE PRESENTED. THE CONSTRUCTION COST OF THE BUILDING & FACILITIES SHOULD BE PRESENTED AS ADAPTED TO THE MACHINERY & EQUIPMENT THAT WILL BE USED IN THE PROJECT. LAND IMPROVEMENTS SUCH AS ROADS, DRAINAGE FACILITIES, ETC. & THEIR RESPECTIVE COSTS SHOULD BE COMPUTED & INCLUDED.
- 20. I. RAW MATERIALS & SUPPLIES THE REQUIRED RAW MATERIALS SHOULD BE LISTED DOWN AND THE BASIS FOR THEIR SELECTION MUST PRESENTED. DESCRIPTIONS AND SPECIFICATIONS ON THEIR PHYSICAL, MECHANICAL, AND CHEMICAL PROPERTIES MUST ALSO BE GIVEN. CURRENT AND PROSPECTIVE COST OF RAW MATERIALS, THE AVAILABILITY AND CONTINUITY OF SUPPLY, AND THE CURRENT PROSPECTIVE SOURCES SHOULD ALSO BE INCLUDED. THE VOLUME REQUIRED AT VARIOUS PHASES OF OPERATIONS MUST BE CLEARLY PRESENTED.
- 21. J. UTILITIES THIS PORTION DESCRIBES THE AMOUNT, COST, AND SOURCES OF ELECTRICITY, FUEL, WATER, AND/OR STEAM REQUIRED. THIS MUST BE DETERMINED IN RELATION TO THE PRODUCTION SCHEDULE AND CAPACITY UTILIZATION DEFINED. ALTERNATIVE SOURCES OF THESE UTILITIES AND THE FEASIBILITY OF THEIR USE MUST ALSO BE DESCRIBED.
- 22. K. WASTE DISPOSAL A DESCRIPTION OF THE QUANTITY, MANNER OF DISPOSAL, AND THE COST INVOLVED IN DOING AWAY WITH EXPECTED WASTE FROM PRODUCTION IS NECESSARY. THE ANALYSIS MUST BE EXPANDED TO CONSIDER THE POSSIBILITIES OF FURTHER USING THESE WASTES.
- 23. L. PRODUCTION COST THE MONETARY ASPECT OF ALL THE PRODUCTION PLANS IS PUT INTO PERSPECTIVE. HOW MUCH DOES IT COST TO PRODUCE ONE UNIT OF OUTPUT? TO ARRIVE AT THIS, THE FF MUST BE DETERMINED: RAW MATERIAL COSTS LABOR COST OVERHEAD COST( FIXED COST), OPERATING COSTS (VARIABLE COSTS) OTHER PERTINENT COSTS
- 24. M. LABOR REQUIREMENT THE VARIOUS JOBS AND FUNCTIONS NECESSARY FOR THE OPERATIONAL STAGE MUST BE DESCRIBED. FOR COSTING, LABOR IS GENERALLY CLASSIFIED INTO THREE TYPES: DIRECT INDIRECT ADMINISTRATIVE THE NUMBER OF WORKERS TO BE EMPLOYED FOR EACH JOB CLASSIFICATION THE PAY SCALES EMPLOYEES DEVELOPMENT PROGRAMS THE ORGANIZATION SET-UP THE AGGREGATE LABOR COSTS
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