Ch5 technical feasibility study

Chapter 8
Technical Feasibility Study

What is a technical feasibility study ?
The Technical Feasibility Study assesses the details of how
you will deliver a product or service (i.e., materials, labor,
transportation, where your business will be located,
technology needed, etc.).
Think of the technical feasibility study as the logistical or
tactical plan of how your business will produce, store, deliver,
and track its products or services.

Preparing an Outline for Writing Technical Feasibility Study
Materials and Supplies
Location, Site and Environment
Engineering and Technology
Human Resources

Technical Feasibility Study answers the following questions
Are enough raw materials available of the correct quality
when needed for year-round production?
Is the cost of the raw materials satisfactory?
Is the correct size and type of equipment available for the
expected production level and at a reasonable cost?
Are maintenance and repair costs affordable?

Technical Feasibility Study answers the following questions
Are distribution procedures to retailers or other sellers
established?
Is a suitable building available and what modifications are
needed?
Are services (fuel, water, electricity etc.) available?
Are trained workers available and are their salaries
affordable?

Row material and Supplies
1. Characteristics of raw materials and factory supplies
Specify list sources of materials and inputs, classified into
raw materials,
Processed industrial materials, components, auxiliary
materials, factory supplies and utilities)
2. Supply program, you have to study the following:
Specify list sources of materials and inputs, classified into raw
materials,

1. Material inputs (approximate input requirements, their
present and potential supply positions, and a rough
estimate of annual costs of local and foreign material
inputs):
 Raw materials
 Processed industrial materials
 Components
 Factory supplies (Auxiliary materials, utilities (especially
power and energy requirements)

Supply program:
Quantitative supply program, seasonal variations, subdivided into
a program for the entire plant, project components, and cost centers
Development of supplies, seasonal restrictions
Possible substitutes
Organization of supplies (purchase, transport etc.)
Prices
Annual cost of supplies, seasonal variations
Inventory of materials and inputs in terms of quantities and
seasonal
variations, as well as book and market value of inventories

Location, site and environment, includes the following
 re-selection, including, if appropriate, an estimate of the cost
of land
Preliminary environmental impact assessment
Location, site and environment:
Location
Describe the location of the plant and show it on appropriate maps
Give country, district, town
Show connections to existing infrastructure (traffic, electricity,
water, population etc.)
Describe socio-economic environment, nearness to market etc.

Location, site and environment:
Site
State town, street, number
Show situation and size on geodetic maps
Existing rights of way, easements etc.
Value of land
Annual costs of rights of way, rents, taxes, payments to neighbors
etc.
Local conditions and environment
Describe impacts of project on population, infrastructure,
landscape, etc.
Evaluate the tendency of impacts (positive or negative)
Assessment of environmental impacts, public and corporate
policies, conflicts, costs and environmental forecast

 Technology and equipment, includes the following:
A. Technologies and processes that can be adopted,
B. Technology description and forecast
C. Environmental impacts of technologies
D. Rough estimate of costs of local and foreign technology
E. Rough layout of proposed equipment (major components):
E.1. Production equipment
E.2. Auxiliary equipment
E.3. Service equipment
E.4. Spare parts, wear and tear parts, tools
Rough estimate of investment cost of equipment
classified as above.
Engineering and Technology

Production programme
Production programme of products and by-products: quality
specifications, quantities produced, time schedule of production
(seasonal variations),
percentage of spoilage and waste
Plant capacity
Installed nominal maximum capacity
Feasible nominal plant capacity of entire plant, main
departments, major equipment units
Plant layouts and charts (show existing structure of plant on
physical layouts and on functional charts and layouts)
Scope of enterprise (show scope of enterprise on layout
drawings, and divide it into project components and cost centres)

Technology
List and describe technologies used, historic development
Sources of technology
Type of acquisition: licensing, purchase, joint venture
Experiences (positive or negative)
Technology forecast
Annual costs of technologies (royalties, fixed payments)

Equipment:
List and specify equipment, classify into production, auxiliary
and service equipment
Show equipment on plant layouts
Describe sources, age, type (automatic, semi-automatic etc.)
State capacity, condition (up-to-date, obsolete etc.)
Value of installed equipment
Annual depreciation and repair costs
Estimated life and replacement costs

 Civil engineering works, includes the following:
A. Rough layout of civil engineering works,
B. Arrangement of buildings,
C. Short description of construction materials to be used,
D. Site preparation and development
E. Buildings and special civil works
F. Outdoor works
Rough estimate of investment cost of civil engineering works (local
and foreign), classified as above.

 Estimated human resource requirements
 Estimated annual human resource costs
Human resources:
Labor
List and describe labour force
Describe skill and availability
State annual cost of labour at nominal feasible capacity, subdivide
into production labour (variable) and non-production labour (fixed)
Staff
List and describe staff, show structure on manning tables
State annual staff cost

Capital expenditures (CAPEX)
Capital expenditures (CAPEX) are expenditures
creating future benefits. A capital expenditure is
incurred when a business spends money either to buy
fixed assets or to add to the value of an existing fixed
asset with a useful life extending beyond the taxable
year.
Capital expenditures (CAPEX) are expenditures
creating future benefits. A capital expenditure is
incurred when a business spends money either to buy
fixed assets or to add to the value of an existing fixed
asset with a useful life extending beyond the taxable
year.
Costs

Capital expenditures include:
 acquiring fixed, and in some cases, intangible assets
 repairing an existing asset so as to improve its useful life
 upgrading an existing asset
 preparing an asset to be used in business
 starting or acquiring a new business

Operational expenditures (OPEX)
Operational expenditure (OPEX) OPEX is an
ongoing cost for running a product, business, or
system.
Operational expenditure (OPEX) OPEX is an
ongoing cost for running a product, business, or
system.

Operational expenditures include:
License fees
maintenance and repairs
advertising
office expenses
Supplies
legal fees
utilities, such as telephone
Insurance
property taxes
travel and vehicle expenses

Estimation of Operation Cost
Comment : ( Qt ) the expected sales data for the period are given
and ( Pt ) should be calculated using the formula

Ch5 technical feasibility study

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