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Engineering and technology

 Scope of an investment project
CHAPTER 5  Corporate objective and strategies
 Marketing concepts and available inputs
TECHNICAL ANALYSIS  Design of the functional and physical layout
 All activities to deliver inputs and outputs
 Define corresponding investment expenditure
 Cost during operational phase

 Plant site

Key Project Inter-linkages Manufacturing Process/Technology

For manufacturing a product / service often two or more alternative
Product / Service technologies are available .
• Cement can be made either by the dry process or the wet process
Demand
• Soda can be made by the electrolysis method or the chemical method
Size
• Soap can be manufactured by semi boiled process or fully boiled
Technology
process
Location

Selling Price
Production Costs

Financial
Requirements Investment
Outlay
Profitability

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Manufacturing Process/Technology Technical Arrangements

Choice of Technology Satisfactory arrangements must be made to obtain the technical know-how needed
for the proposed manufacturing process. When collaboration is sought, inter alia, the
The choice of technology is influenced by a variety of considerations following aspects of the agreement must be worked out in detail.

• Plant capacity (close relation between plant capacity and production • The nature of support to be provided by the collaborators during
technology) the designing of the project, selection and procurement of
• Types of Principal inputs equipment, installation and erection of the plant, operation and
maintenance of the plant, and training of project personnel
• Investment outlay and production cost
• Process and performance guarantees in terms of plant capacity,
• Technology used by other units product quality, and consumption of raw materials and utilities.
• Product mix and saleable by-products • The price of technology in terms of one time licensing fee and
periodic royalty fee.
• Latest developments
• The continuing benefit of research and development work being
• Ease of absorption of technology done by the collaborator.
• The period of collaboration agreement (Hero-Honda, Maruti-
Suzuki)

Material Inputs and Utilities

•
An important aspect of technical analysis is concerned with defining the
The assistance to be provided and the restrictions to be imposed by
materials and utilities required, specifying their properties in some detail,
the collaborator with respect to exports.
and setting up their supply programme
• If the technical collaboration is backed by financial collaboration,
the level of equity participation and the manner of sharing
management control.
• Assignment of the agreement by either side in case of change of
ownership.
• Termination of the agreement or other remedies when either party
fails to meet its obligation
• Approach to be adopted in force majeure (inevitable accident)
situations.

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Material Inputs and Utilities Product Mix

Materials and utilities may be classified into four broad categories:

• The choice of product mix is guided by market requirements. In
• Raw materials the production of most of the items, variations in size and quality
are aimed at satisfying a broad range of customers.
•Agricultural, mineral, livestock and forest product,
marine products • While planning the production facilities of the firm, some
• Processed industrial materials and components flexibility with respect to the product mix must be sought.

•Base metals, manufactured parts, components, semi

processed material
• Auxiliary materials and factory supplies
•Chemical, packaging material, paint, oils, grease
• Utilities (power, water, steam, fuel, gases)

Plant Capacity Plant Capacity

• Plant capacity (also referred to as production capacity) refers to • Several factors have a bearing on the capacity decision:
the volume or number of units that can be manufactured during a • Technological requirement
given period. Plant capacity may be defined in two ways:
• Input constraints (Raw material, utility supplies, foreign
exchange)
•Feasible normal capacity (FNC) :- Capacity attainable under
• Market conditions
normal working condition
• Resources of the firm (Managerial capabilities and financial
resources)
•Nominal maximum capacity (NMC) :- capacity which
technically attainable guaranteed by plant supplier • Governmental policy

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Location and Site Machineries and Equipment

Location refers to a broad area; site refers to a specific piece of land.
The choice of location is influenced by a variety of considerations:
• Proximity to raw materials and markets
• Availability of infrastructure
• Labour situation
• The requirement of machineries and equipment is dependent on
production technology and plant capacity. It is influenced by
the type of project.
• For a process-oriented industry, like a petrochemical unit,
machineries and equipments required should be such that the
various stages are matched well.

• Governmental policies • The choices of machineries and equipments for a manufacturing

• Other factors industry is somewhat wider.

Structures and Civil Works Environmental Aspects

Structures and civil works may be divided into three categories: The environmental aspects of projects have to be properly examined.
The key issues that need to be considered in this respect are:
• Site preparation and development
• Buildings and structures • What are the types of effluents and emissions generated ?

• Outdoor works • What needs to be done for proper disposal of effluents and
treatment of emissions ?

• Will the project be able to secure all environmental clearances

and comply with all statutory requirements ?

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Plant Layout Schedule of Project Implementation

The important considerations in preparing the plant layout are:
• Consistency with production technology
• Smooth flow of goods from one stage to another
• Proper utilisation of space
As part of technical analysis, a project implementation schedule is also
usually prepared. For preparing the project implementation schedule the
following information is required:
• List of all possible activities from project planning to
commencement of production.

• Scope for expansion • The sequence in which various activities have to be performed.

• Minimisation of production cost • The time required for performing various activities.

• Safety of personnel • The resources normally required for performing various activities.
• The implications of putting more resources or less resources than
are normally required.

The Need for Considering Alternatives

There are alternative ways of transforming an idea into a concrete
project. These alternatives may differ in one or more of the
following aspects:

• Nature of project
• Production process
• Product quality
• Scale of operation and time phasing
• Location