1.

Objectives
a. Establish whether or not the project is technically feasible and make tentative choices among technical
alternatives.
i. Level of production technology
ii. Raw material inputs
iii. Equipment, methods
iv. Organization
v. Facilities design

b. To provide cost estimates of:

i. Fixed investments: cost of land, building, auxiliary installations, equipment and installation
ii. Production costs and expenses: direct material, direct labor and overhead
iii. Start-up costs and expenses: patent, licenses

2. Depth of Technical Analysis

a. Dependent on:
i. Project size
ii. Technological newness and complexity of the product
iii. Number of technical alternatives to manufacture the product
iv. Desired accuracy of cost estimates

b. Inadequate technical analysis may result in:

i. Costly trial and error modification in facilities and processes
A. May eat into your capital
B. Downtime
ii. Erroneous and misleading cost estimates.
A. If you miss out on an important aspect/cost
B. May make your project infeasible

c. Causes of mistakes in technical analysis

i. Inadequate preliminary analysis of technological requirements
A. Ex. Your competitive advantage is the type of material you use to make a certain product.
But it turns out, the supplier for that kind of material does not exist. You just lost your
competitive advantage.
ii. Failure to consider alternatives
A. Presenting alternatives is a requirement
B. So you can have a fallback
C. Find out the implications is you’re forced to switch to another alternative
iii. Neglect of secondary factors
A. Study the entire supply chain to source for suppliers
B. Plan for the production in the intention to deliver to consumers

3. Preliminary Information Requirements

a. Product/Service information
i. Design and Performance Specifications
A. Make sure our bags can really perform its designed functions
B. When it transforms, can it perform the functions of a bag?
C. Is it easy to transform?
ii. Quality/Service Level
A. Service Level Agreement – how quickly will they be able to respond to you when you have
a concern? (response: send a technician/get a replacement part/etc.)
» terms and conditions
» after sales support
» response and resolution time
 » continued business
iii. Service Requirements

b. Market information
i. Demand forecast
ii. Delivery service requirements (transportation)
iii. Customer location (ex. On-site production)

c. Materials Information (i.e. types if materials: strategic, bottleneck, critical)

i. Specifications (present, substitutes, type of mix)
ii. Availability (supplier capacity)
iii. Delivery lead time
iv. Source location (ex. Pampanga-sand, Bulacan-cement, gravel)

d. Others
i. Capital availability (running capital)
ii. Labor availability (present workforce)

4. Technological Alternatives
a. Are there one or more viable technological alternatives that could produce the product?
b. Purpose :
i. To avoid the unquestioned use of an inappropriate technology
ii. To ensure that all alternatives are considered
iii. Availability of the technology

c. Variation in product type:

i. Quality – Bus and light rail provide the same function but different service levels
ii. Product range (by-product)
A. Coconut residue into confectionary use and also coconut shells into charcoal and process
the husks into coir fiber
B. School providing primary, tertiary, secondary levels
C. Fishing port for small, medium and large fishing vessels
iii. Stages of processing
A. Meat products may be sold as hogs, pork, sausages, etc.
B. Power distribution may include generation, distribution and service

d. Variations in production technique

i. Technical process or method
A. Cement can be produced using either wet or dry method
B. Technical skills may be developed through formal instructions, vocational workshops or
actual on the job training
C. Power may be generated by various means such as hydro, coal, thermal, geothermal, or
cogeneration
ii. Equipment (capacity)
A. Data processing- micro, mini or mainframe computers
B. Bus systems- air-conditioned, double deckers, ordinary
C. Cargo handling- industrial trucks, conveyers
iii. Raw materials and supplies
A. Hollow blocks- different combinations of cement and sand, cement and soil, cement and
fly ash, cement and rice hull
B. Power generation- using steam processes, different kinds of fuel such as oil or coal.
iv. Level of technology
A. Fully automated manufacturing system
B. Different methods of crop production in a given farm
C. Self-programmed or video-based instruction for trainings
v. Alternative sizes or scale
A. Small, medium, large scale of project
 B. Refers to its capacity to supply goods/services demanded over a period of time
C. Project cost
D. Geographical scope
E. Employment created
F. Volume and nature of demand
a. Choose capacity large enough to service an increasing net demand over a long
period of time
b. Choose a smaller capacity to cover net demand over a shorter period with
provisions for expansion
Project type Capacity (scale) measure
- irrigation Hectares to be irrigaged
- school # of classrooms
- road # of vehicles
- housing Floor area/unit
- piggery # of heads
NO Sweat! volume

Process of eliminating alternatives that are inappropriate for producing the product
a. Is the estimated cost of any alternative such that it must be excluded?
b. Conduct research and make tests to ensure technical feasibility
c. New products that depend on utilization of new tech for production obviously require tests and research to
ensure that such tech is available in suitable state of perfection
d. Are satisfactory estimates available for the following: (1) fixed investments, (2) manufacturing costs and
expenses

G. Production processes
a. Economies of scale
H. Physical resource bases: availability and cost of primary and intermediate production
inputs (i.e. capital, labor, power, water, raw materials)

I. Location and transport costs: there is trade-off between and location of project re the
side-effects of each alternative consistent with the national and company policies, goals
and restrictions?
a. Factors to be considered “side effects” include:
i. contribution to employment
ii. requirements for scarce skills, expatriates
iii. energy requirements
iv. capital requirement
v. environmental requirement
vi. need for imported equipment
vii. support of indigenous industry
viii. multiplier effect of the venture operation
ix. safety and health hazards

5. Production Process
a. Sequence of operation, moves, inspections
b. Choose the production methods, equipment required
c. Use process or operations chart, flow diagrams, materials flow diagram, quality flow diagrams, production
line diagrams
d. Transport layout, utility consumption layout, etc.

6. Materials Requirements
a. Primary purpose of inventories is to absorb the shocks of fluctuating demand; buffer
 b. Types of inventories: raw materials and purchased parts, WIP, finished goods, supplies
c. Supply programme:
i. Prepare supply program, show alternatives, selection, cost estimates
ii. When setting up the supply program, consider the following based on the production program:
a. Availability of supplies/suppliers
b. Characteristics of suppliers
c. Delivery schedules
d. Storage measures and capacity
e. Losses, replacements
f. Cost estimates: annual costs

7. Equipment and Tooling

a. Equipment and tooling requirements
i. Should be classified into production, auxiliary, service equipment, spare parts and tools
b. Evaluation of equipment and tooling suppliers
c. Summary of equipment and tooling suppliers
d. Select equipment and tooling
e. Production Equipment and tooling selection is facilitated by the process chart
f. For each operation, determine the alternative methods and Equipment to accomplish the work

Sources: existing manufacturers of the product, trade publications, trade associations and
organizations, equipment manufacturers
As the process chart can verify, material handling is an important part of the production process
Transportation of material usually follows each operation
Civil Engineering works; set-up, installation of equipment, etc.
Cost estimates, investment costs, site preparation, annual maintenance and repair, etc.

8. Capacity Planning
a. Determine the production capacity needed by an organization to meet changing demands for its products
b. Capacity is the maximum amount of work that an organization is capable of completing in a given period
of time

9. Production Labor Needs

Design the production/service organization
a. How many and what type of supervisory and staff employees are required in the production/service
organization? Factory overhead
b. Includes: receiving, packaging, shipping, maintenance, tool room, inspection, methods analysis, janitorial,
production planning and control, supervision.
c. Estimate production labor needs
d. How many employees/workers are needed?
e. What skills must these employees/workers possess? (competencies)
i. Ex. Soft skills- communication, customer service, leadership, people skills
ii. Ex. Technical
f. Type and level of training needed?
g. Salaries?
i. What salary skill will you adopt?
A. At market rate?
B. Below market rate? But there are better benefits, and the learning experience is assured.
C. Higher than market rate? Pirate employees, “buy the skills”
10. Production Planning
a. Describes the overall detailed manufacturing (5 years) plan of the project
Includes:
i. Product/service plan over the project horizon
A. Ex. In our case, 5 years
ii. Materials plan
 iii. Manpower and equipment plan
iv. Utilities plan
A. Electricity
B. Web accessibility/connectivity
C. water
b. Production budget
i. Includes schedules (amount and the timing), especially if there is seasonality

11. Facilities Design

a. Estimate production space requirement: space directly used for manufacturing
i. Work station areas
A. Machine space
B. Auxiliary equipment
C. Operator space
D. In-process material storage
ii. Inspection areas
A. Space for inspector and his work area
B. Storage space for materials awaiting inspection, materials inspected and rejected
iii. Storage areas
A. Quantity of materials and space requirements
b. Estimate office/service space requirements
i. General administrative
ii. Marketing
iii. Financial
iv. Plant services
v. Personnel
vi. Product engineering
vii. Manufacturing
c. Estimate building needs/requirements (for really big facilities)
i. High bays and adequate column support for overhead cranes
ii. Multi-storey construction to facilitate gravity flow of materials
iii. Special flooring construction for heavy equipment
iv. Shock and vibration isolation of certain areas where delicate processes are to be located
(assuming you’re not the only one in the area)
v. “clean rooms” or other controlled-environment areas
vi. Sound-proof walls construction
vii. Explosion-proof walls construction
viii. Heavy-duty columns to support overhead handling and storage systems
ix. Large areas of unobstructed floor space
x. Heavy-duty electrical service
xi. Fuel storage

d. Site selection
i. Data and alternatives: possible locations, maps of appropriate scale, selection criteria
ii. Choice of location, description. Local conditions
iii. Requirements such as rights of way, obstacles, required structures, waste disposal, etc.
iv. Cost estimates: cost of land, taxes, site preparation, utilities
v. Legal, zoning restrictions, etc.

12. Cost analysis

integral to the study of the technical alternative schemes. Only by introducing prices can the various solutions
be rendered comparable
a. Major cost items:
i. Investment expenditures
ii. Operational expenditures
b. Methods of estimating costs:
i. Different sources of information include:
 A. Cost structure of similar projects previously undertaken
B. Price survey among possible suppliers
C. Tariff publications, industry or sector surveys of salaries and wages, materials cost and
utility rates, official rates regulating industry pricing (ex of regulated industries.
Telecommunications, food)
D. Expertise of technical consultants
c. Principal sources of errors
i. Inadequate technical analysis
ii. Underestimation of investment expenditures
iii. Exclusion of working capital
iv. Overoptimistic estimates of costs and outputs in the early years of operation
v. Absence of explicit assumptions about the future trends of costs (inflation)

13. Total Project Costs

a. Investment expenditure
i. Preliminary expenditure
ii. Initial investigation, research and technical studies, economic studies, marketing studies,
profitability studies, design studies, financial studies, legal advice
iii. The site and its preparations
iv. Cost of land, notary’s fees, registration duties and fees, drainage, access roads, etc.
v. Construction: foundations, buildings, wells, water pipes and connection to electricity mains, the
telephone systems
vi. Equipment and materials: machines, foundation for machines, machine installation cost, testing
and start-up, prime-movers, electricity and telephone, electrical equipment
vii. Replacement parts: cost a basic stock of spares may be estimated at approximately 20% of the
total cost of the equipment and materials listed above
viii. Consulting engineers
ix. Incorporeal fixed assets
A. Patent, license, goodwill, reproduction rights
x. Costs of establishment
A. Costs of forming the company, costs of issuing shares, interim interests, setting up a
sales network, advertising, recruiting personnel, personnel training (wages, salaries,
teaching, traveling expenses)
xi. Provision for contingent expenditure

b. Technical operating expenditure

i. Purchases
ii. Personnel expenses
A. Wages and salaries
B. Allowances
C. Benefits in kind
D. Commissions
E. Social security commitments
F. Director’s fee
iii. Taxes and duties
A. Direct duties and taxes: licensing tax, land tax, municipal and regional taxes
B. Indirect duties and taxes
C. Registration taxes
D. Customs duties
E. Trade taxes
F. Duties levied by international bodies
iv. Works, supplies and external services
A. Rents
B. Maintenance and repairs
C. Works by outside firms on contract basis
D. Water, gas, and electrical supplies
E. Fees for patents, license, brand marks
 F. Studies, research and documentation
G. Payment for agents
H. Fees, insurance premiums
v. Transport and travelling
A. Personnel Transport
B. Travel and removal expenses
C. Freight and transport purchases
D. Freight and transport expenses
vi. Miscellaneous management expenses
A. Advertising
B. Office supplies
C. Telephone
D. Legal document and litigation
E. Grants and contributions and meetings

14. Evaluation of Technical Feasibility

By integrating the results of the foregoing technical studies, an overall conclusion can be drawn regarding the
technical soundness of each alternative scheme.
*3 key areas: scope, cost, time

In summary, a project is considered technically justified if:

1. Its size, location and production process are commensurate with the demand.
2. All of its engineering features are reasonably defined and found to be architecturally and structurally
adequate.
3. Input sources are available in the required quantities and qualities
4. There is assurance that the facilities will produce the quantities and qualities of the goods/services
required on a continuing and dependable basis

15. Conclusion
If one of the conditions is not met, conclude that the project is not technically feasible. Thus, if it is not feasible,
adjust scope, costing or timeline…