CHAPTER-5

Technical Analysis
1 of Project

11/14/2024
 2

Components
 Raw Materials, supplies and utility study
 Location and site selection
 Plant Capacity and Production Program
 Technology and Engineering studies
 Structure and civil work study
 Plant and equipment study
 Project charts and layouts

11/14/2024
 3
Raw Materials and Supplies
Study
• There is technical relationship between input and
output; the amount of input determines the
output amount.
• The selection of raw materials and supplies
depends primarily on the technical requirements
of the project and the analysis of supply market.
• The cost of raw material is an important factor
that influences the selection of raw material.

11/14/2024
4

The raw materials and supplies study consists

of thorough analysis on
• What type of input?
• Where to find?
• How much it costs? Etc.
Thus, the following approaches are often used
to study raw materials and supplies.
11/14/2024
 5

Classification of Raw Materials & Supplies

1)Raw Materials (Un processed and Semi-processed):
Agricultural product, Livestock and Forest products
Marine products and Fishery
Mining & Quarrying, Etc.
2)Processed Industrial Materials and Components
3)Factory Supplies: Aauxiliary material/Chemicals,
Additives, Packaging Materials, Paints, and Varnishes/
4)Utilities, and spare parts
5)Recycled waste
11/14/2024
 7 Cont…..
A. Specification Requirement
• The specification of raw materials and factory
supply is the basis for the assessment and
analysis of the availability of the project inputs.
• Measurement and specification of the required
raw materials and supplies, such as heat,
moisture, weight, size, colour, etc.

11/14/2024
 8

• The specification of raw material must show the

following factors
1) User demands: i.e. consumers preferences &
expectations
2) Quantities Required : Units produced applicable to
Raw Material, auxiliary materials required & etc.
 Machine or labour hours applicable
3) Qualitative prosperities – you have specify it
 E.g. Physical, mechanical, chemical, electrical
properties
11/14/2024
 9
B. Availability and Supply
• This involves in deep study about the availability and
supply of the raw materials and supplies. It can be
available from local and/or foreign suppliers.
1)Local Category
Source - Where to find?
Transport - What means of transport to use?
Quantity - How reliable is the availability?
Certainty / Uncertainty
2)Import Category
Source, Transport, Quantity and Certainty / Uncertainty
Input Alternatives: it involves in searching for input
11/14/2024

substitution other than the main raw material and supply.

 Cont..
11

D. Cost of Raw Materials and Supplies:

• It involves in determining:
• The total cost:
Raw material supplies cost
Overhead cost
• Unit cost
• Decision: after the raw materials and supplies study, the
analyst should decide on the abundance of the supply of
raw materials and supplies.
11/14/2024
 12 Location, Site, and Environment
• The location of the project is highly affected by the
nature of the project itself. Projects can be
categorized under three forms of locations.
1)Rooted Projects: are projects rooted at certain
area (proximity to an input) because it is better
to transport end products than raw materials for
the cost involved in transporting raw materials
is greater than the cost incurred to transport end
products.
For example, Cement industry should be located
where limestone is located). 11/14/2024
13

2) Tied Projects: are projects that are tied to the

market (proximity to the market) because the
transportation of the final product is uneconomical.
3) Foot Loose Projects: are projects that can be
located anywhere.
They are neither tied to the market nor rooted to the
raw materials.
For example, candy industry.

11/14/2024
 14
A. Location Analysis (Location Selection)
• Location studies must be carried out over wider geographical
area. The strategic orientation of choice of location includes:
1) Proximity to market and raw materials
• For example, gold mining and cement factory are usually
projected at the raw material site.
2) Natural Environment Assessment
• Climate conditions (temperatures, rainfall, hurricane,
dust, wind, etc).
• Effect on agriculture, industry, transport, construction,
management, etc.
• Ecological requirement, such as avoiding contaminating
water smoke.

11/14/2024
15

3) Environmental Impact Assessment

• It aims at ensuring the development projects are
environmentally sound.
• Assessment of environmental consequences of the
newly planned or existing project and of any related
activities.
• Assessment of environmental conflicts that is
potential conflicts with existing and future
neighboring industries, urban settlements should be
critically assessed for its consequences are
closedown, compensation, purification, etc.
11/14/2024
16
Cont…….

Phases and Structure of Environmental Impact

Assessment
• Preliminary environmental impact assessment:
Use checklist to check which impact need to be
analyzed.
• Detailed analysis, site visit (in depth study)
• Preparation of environmental impact
statements report

11/14/2024
 17 Location Analysis (Location
Selection)…
4) Socio - Economic Policies: It involves in the study of,
• Government regulations and restrictions
• Local government policies: incentives, restrictions, fiscal and legal
regulations, procedures, utility supplies, building regulations,
taxes, etc.
5) Infrastructure Conditions: It studies,
• Technical infrastructure; Transport and communication
• Social infrastructure (Police, Court, etc);
• Factory supplies (electricity, water, fuel, etc)
• Availability of human resources;
• Infrastructure services (construction, erection, garages, etc)

11/14/2024
 18 Final location choice/Decision:
• It may be difficult to find out a location where all those
factors are available.
Therefore, a locational model is necessary to choose a
suite location.
The simplest locational model is to calculate the
transport, production, and distribution costs at
alternative locations.
The best choice of location would be one where the
cost of production is the minimum.
11/14/2024
19 Site Selection
• A project may depend on particular site
condition.
• Heavy machinery and technical installations
may require specific ground conditions.
• Site selection should pay attention to the cost of
site preparation (like; cost of demolishing,
relocation of existing structure, utility)

11/14/2024
20

During site selection, the following requirements

and conditions should be assessed:
 Site requirements such as ground condition, soil
condition, site preparation and development, etc.
 Construction requirement such as requirements
by the municipality.
 Land conditions that are infrastructure, such as
an out let to the main road.
 waste matter and waste disposal;

11/14/2024
21 CONT….
 Once the broad location is chosen, attention needs to be
focused on the selection of a specific site.
 Two or three alternative sites must be considered and
evaluated with respect to cost of land and cost of site
preparation and development.
 The cost of land tends to differ from one site to another
in the same broad location.
 Sites close to a city cost more whereas sites away from
the city cost less.
 Sites in an industrial area developed by a governmental
agency may be available at a concessional rate. 11/14/2024
 22 SITE SELECTION
 from site to site:
 power transmission lines from the main grid,
 railway siding from the nearest rail road,
 feeder road connecting with the main road,
 transport of water, and disposal of effluents.

11/14/2024
24
Technology and Engineering Study
 An outcome of project analysis will be the selection of
the most appropriate methodologies and technologies.
 Technology and Engineering Study Covers:
A. Production program and plant capacity
B. Technology choice
C. Technology acquisition and transfer
D. Plant lay out and basic engineering
E. Civil engineering works
F. Maintenance and replacement requirement
G. Estimate of investment costs. 11/14/2024
 25 A. Production Program and Plant
Capacity
 The production program and plant capacity study was
should be consider in determining production program:
• Market requirement
• Input requirement
• Technology (software and hardware)
• Plant capacity:
Feasible normal capacity
Nominal (maximum or design) capacity
11/14/2024
26 B. Technology choice

 The selection of appropriate technology and know-how is

a critical element in any feasibility study because the
appropriate technology is suitable for the local labour,
local inputs, social and cultural condition.

11/14/2024
27

The advocates of appropriate technology urge that

the technology should be evaluated as follows.
 Whether the technology utilizes local Raw
Materials?
 Utilizes local human, goods produced centre to the
basic needs?
 protects ecological balance?

 harmonious with social and cultural condition. 11/14/2024

 28
C. Technology Acquisition and Transfer
 How to acquire those technologies? The analyst should consider
the following factors:
1) Industrial property right (patent and franchise)
2) Means of technology acquisition: The acquisition of
technology from some other enterprises may be:-
• Licensing/
• It is a contract/Exclusive License/Non-Exclusive
License
 It gives the licensee the right to use patented technology
and get related know-how on mutually agreed basis.
11/14/2024
29
Technology Acquisition and
Transfer…
• Outright Purchase of Technology
 ownership secured
 no additional support/know-how/
 pay purchasing price, no fee…
3)Contract terms and conditions
(warrants/certification/ and guarantees)
4)Cost of technology

11/14/2024
 30
F. Civil Engineering Works
 The feasibility study should provide plans and estimates
for the civil works related to the project. It considers:
• Site preparation and development: grading and
levelling, relocation of pipelines and cables
connection of utilities and etc.
• Factory and other buildings: what type of building,
for what purpose (factory, administrative, residential
etc)
• Out door works: fencing, guardhouse, supply and
distribution of utilities, transportation, outdoor
lights. 11/14/2024
 31 G. Maintenance and Replacement
Requirement
 Maintenance and replacement requirement is basically related to
the building and machineries and equipments. It covers:
• Establish ages (life span of each of the building, machinery and
equipment)
• Major repair schedule of building, machinery and equipment.
• Preventive maintenance, and Spare parts
 How to maintain? There are two ways:
1) Own workshop: own workshop maintenance requires
acquisition of tools, equipment, trained manpower, etc for
maintenance.
2) Outside workshop services: but, are they knowledgeable
enough? Etc.
11/14/2024
 Factors Considered in setting the Production
34
Program

1. Production Level (Capacity Utilization):Production may

not be at full capacity during the initial period due to:
Production and technological difficulties
New technology,
Design of the production process,
Flow of operation, etc
2. Production Problems: Machine breakdowns and problems
of line balancing in operations; raw material shortages or
materials may not be up to the standard; utilities shortage

11/14/2024
 3. Input Constraints:
35
 In developing countries, there often are constraints on the
availability of certain inputs
 Power supply may be limited
 Basic raw materials may be scarce
 Foreign exchange available for imports may be inadequate

4. Investment Cost: In general, investment cost per unit

of capacity decreases as the plant capacity increases (i.e.
capacity cost increases at a decreasing rate).
In other words, as capacity increases, the investment cost
per unit of capacity decreases.

11/14/2024
 36 5. Market Conditions:
The anticipated market for the product has an important
bearing on plant capacity.
If the market for the product is likely to be very strong, a
plant of higher capacity is preferable.
If the market is likely to be uncertain, it might be
advantageous to start with a small capacity.
If the market starting from a small base, but is expected
to grow rapidly, the initial capacity may be set to be
higher than the initial level of demand.

11/14/2024
37 PROJECT CHARTS AND LAYOUTS
 Once data is available on the principal dimensions of
the project (market size, plant capacity, production
technology, machineries and equipment, buildings
and civil works, conditions obtaining at the plant site,
and supply of inputs to the project) project charts and
layouts may be prepared.
 These define the scope of the project and provide the
basis for detailed project engineering and estimation
of the investment and production costs.

11/14/2024
40 PROJECT CHARTS AND
 LAYOUTS
Plant Layout.
 The plant layout is concerned with the physical layout of
the factory.
 In certain industries, particularly process industries, the
plant layout is dictated by the production process adopted.
 In manufacturing industries, however, there is much greater
flexibility in defining the plant layout.
 The important considerations in preparing the plant layout
are:
 Consistency with production technology
 Smooth flow of goods from one stage to another
 Proper utilization of space
 Scope of expansion
 Safety of personnel 11/14/2024
41 SCHEDULE OF PROJECT
 InIMPLEMENTATION
order to prepare the project implementation schedule, the
following information is required:
 List of all possible activities from project planning to
commencement of production.
 The sequence in which various activities have to be
performed.
 The time required for performing the various activities.
 The resources normally required for performing the
various activities.
 The implications of putting more resources or less
resources than are normally required
 The schedule of project implementation begins with the
11/14/2024
identification of key stages.
42 Projects scheduling: 1. The Work
Breakdown Structure (WBS)
 It is a convenient means of graphically
presenting the work of the project in readily
understandable format.
 The project key stages form the highest level of
the WBS, which is then used to show the detail
at the lower levels of the project.
 The WBS does not show dependencies and is
not time based (no time scale on the drawing).
11/14/2024
Questions
???
T.H.A.N.K Y.O.U F.O.R
L.I.S.T.E.N.I.N.G