CH 5

Chapter 5:Technical Feasibility analysis
BY
ATAKELT HAILU ,
MBA,M.COM & Ph.D.
DEPT. OF MANAGEMEN
Technical Analysis
 Details analysis of how your business will produce, store,
deliver, and track its products or services. (i.e., know how of
production, location, appropriateness of technology, experts and
material input, suitability of production process,).
 Selection of technology, material input and utilities, plant
capacity, location & site, machinery and equipment, project
charts and layouts.
 Two Broad Purpose:
• To ensure that the project is technically feasible i.e. all inputs
required are available.
• To facilitate the most optimal formulation of the project in
terms of technology, size, location and so on.
3 of 35 Technical Analysis
Two important questions:

 are all the inputs required to set up the
project available?
 can we facilitate optimal formulation
of the project in terms of technology,
size, location…?
Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

 Manufacturing process/technology
 Market inputs and utilities
 Plant capacity
 Location and site
 Machinery and equipment
 Structure and civil works
 Environmental aspect

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1. Manufacturing process/technology
Choice of technology depends on:
 plant capacity
 principal inputs
 investment and production cost
 use by others-proven successful

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1. Manufacturing process/technology…
 product mix
 latest developments
 ease of absorption

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1. Manufacturing process/technology…
The selected technology should be evaluated
based on whether it:
 utilizes local raw materials and man power
 produces goods/services that cater to basic
needs
 protects ecological balance
 harmonous with social & cultural
conditions
2. Technical arrangements
-arrangements need to be made to acquire the
technical know how for the manufacturing
process
-considerations should be given to the
following aspects:
• nature of support to be provided by
collaborators during design,
implementation...
2. Technical arrangements
• process and performance guarantees
• price of technology-one time price & royality
• benefits from R & D work of the

collaborator
• period of agreement

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Technical Analysis
3. Material inputs and utilities

 define materials and utilities needed
 specify their properties
 set up supply program


Types
I. Raw materials
II. processed industrial materials &
components
III. auxiliary materials & factory supplies
IV. utilities

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Technical Analysis

I. Raw materials
 Agricultural products
• quality
• quantities available
• present area under cultivation
• likely change in yield per hectar

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Technical Analysis

I. Raw materials
 Mineral products
• quantity of exploitable deposit
• properties of the raw materials

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Technical Analysis

I. Raw materials
 Livestock and forest products
• livestock population and possible future trends
• quantity of forest and future levels

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Technical Analysis

I. Raw materials
 Marine products
• pottential availability
• cost of collection

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Technical Analysis

II. Processed industrial materials &
components
 properties and total required for the project
 quantity available from domestic/foreign
sources
 dependability of supplies
 trends and prospects of price
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Technical Analysis

III. auxiliary materials & factory supplies
 include factory supplies such as
chemicals, additives, packaging materials,
paint, varnishes, oil , etc

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Technical Analysis

IV. utilities
 include power, water, fuel etc
 Concerns include
 quantity available
 Source of supply
 Potential availability
 Likely shortages and measures to be taken
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Technical Analysis
4. Product mix
 choice of product mix is determined by
market requirement
 involves size and quality differences aimed
at satisfying demands of different category of
customers
 enhances flexibility when market conditions
change
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Technical Analysis
5. Plant capacity
the volume of goods that can be
produced during a particular period.
 Feasible normal capacity Vs nominal
maximum capacity

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Technical Analysis
5. Plant capacity
 Feasible normal capacity is
determined by considering:
 Technological requirement
 Input constraint
 Investment cost
 Market conditions
 Resources of the firm
 Governement policy
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Technical Analysis
5. Plant capacity...
 Technological requirement
-the minimum amount of units the technology
requires
 Input constraint
-unavailability of RM in the desired quanitity,
power shortage, lack of foreign currency to
import materials

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Technical Analysis
 Investment cost
 The relation between cost and capacity should
be considered.
 Cost per unit of capacity needs to be taken into
account.

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Technical Analysis
 Market conditions
- higher capacity if strong market is anticipated
-lower capacity if market is uncertain
 Resources of the firm
- financial and managerial capacity of the firm
 Governement policy
-anti-trust law
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Technical Analysis
6. Location and site

Determinants of location selection
 Proximity to raw materials and markets
The rule is minimizing RM and Finished good
transportation cost.
(a) Resource-based projects-close to where the resource
is situated
(b) Imported material dependent projects- near the port
(c) Manufacturing perishable goods-near the market

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Technical Analysis

 Availability of infrastructure
- power supply, transportation, water and
communication
 Labor situation
- availability
- prevailing labor rate
- labor productivity
- state of industrial realtions (strikes and lockouts)
- degree of unionization
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Technical Analysis

 Government policies
-for public projects based on regional
dispersion
-for private projects governemts may offer
incentives or impose restrictions

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Technical Analysis

 Other factors
 climatic conditions
 general living conditions
 proximity to ancillary units
 ease in coping with pollution

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Technical Analysis

 Site selection
- Consideration need to be given to cost of land,
cost of site development and cost involved in
obtaining utility connection

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Technical Analysis
7. Machineries and equipment

- Depends on plant capacity and production
technology.
STEPS
(a) Level of production over time
(b) Number of machining operations
(c) Amount of machine hours required for each
operation
(d) Select machineries and equipments required for each
operation
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Technical Analysis
8. Structures and civil works

 Site preparation and development
- Grading and leveling of land
- Demolition and removal of unwanted
structures
- Relocation of existing pipelines,cables,
roads,power lines
- Connection to utilities

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Technical Analysis

 Buildings and structures
(i) Factory or process buildings
(ii) Ancillery buildings(store, warehouse, laboratory,
utilities supply,maintenance services)
(iii) Administrative buildings
(iv) Staff welfare buildings(cafeteria & medical
service buildings)
(v) Residential buildings
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Technical Analysis

 Outdoor serevices
(i) Supply and distribution utilities
(ii) Handling and treatment of emission,wastage, and
effluents
(iii) Transportation and traffic signals
(iv) Outdoor lighting
(v) Landscaping
(vi) Enclosure and supervision(boundary
wall,fencing,gates,doors security posts...)
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Technical Analysis
9. Environmental aspects
 a project may cause various environmental
pollutions
 Gasious emissions
 Liquid and solid discharges
 Noise
 Heat
 Vibration

9. Environmental aspects
 Considerations
 Types of effluents and emmissions
generated
 Ways of disposing effluents and treatment
of emissions
 Ensuring that the project will meet all
environmental clearances and comply with
statutory requirements

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End of Chapter 5

CH 5

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CH 5

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Chapter 5:Technical Feasibility analysis

Two important questions:

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

• benefits from R & D work of the

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

3. Material inputs and utilities

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

6. Location and site

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

6. Location and site

6. Location and site

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

6. Location and site

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

6. Location and site

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

7. Machineries and equipment

8. Structures and civil works

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

7. Structures and civil works

7. Structures and civil works

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

Project analysis and evaluation-Technical Analysis Wednesday, December 20, 2023

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