Dr. Silky Vigg Kushwah

Technical Analysis

Why to do technical analysis?To ensure that the project is technically feasible in the

sense that all the inputs required to set up the projects are available and

To facilitate the most optimal formulation of the project in terms of technology, size, location and other technicalities

Appropriate technology has to be selected and it refers to those methods of production which are suitable to local, economic, social, and cultural conditions

Work involved in Technical Analysis1. Manufacturing process/technology2. Technical arrangements3. Material inputs & utilities4. Product mix5. Plant capacity6. Location and site7. Machinery & equipments8. Structures and civil work9. Environmental aspects10. Project charts and layouts11. Schedule of project implementation

1. Manufacturing process/technologyOne has to make a choice of technology for the

project.

The choice of technology is influenced by a variety of considerations like:Plant capacityPrincipal inputsInvestment outlayUse by other unitsProduct mixLatest developmentsEase of absorption

2. Technical arrangementsThe nature of support to be provided by the

collaborator through the phases of capital budgeting

The price of the technology in terms of licensing fee and royalty fee.

Process and performance guarantees in terms of plant capacity, product quality, and consumption of raw material and utilities.

The continuing benefits of research and development work being done by the collaborator.

The period of the collaborator agreement.

The assistance to b provided and the restrictions to be imposed by the collaborator with respect to exports.

The level of equity participation by them.

In 1988 Airbus’ with Hindustan Aeronautics Limited (HAL) to manufacture passenger doors for the A320 aircraft.

Today, HAL produces half of all A320 forward passenger doors.

In addition, Airbus’ list of Indian partners and suppliers has expanded to encompass engineering, IT services, training, technical publications, research and technology, and the manufacturing of parts and some sub-assemblies.

3. Material inputs & utilitiesTechnical analysis also involves defining the material

and utilities required.

Material inputs and utilities may be classified into four broad categories:

Raw materialsProcessed industrial materialsAuxiliary materials Utilities

Raw material may be classified into four types:Agriculture productThe quality of agricultural RM must first be examined.The assessment of quantities of agricultural RM

available currently and potentially is required.Mineral productA study on the location, size and depth of the deposits

of mineral RM.Forest productA survey on the quantum of live stock produce and

forest products.Marine productA study on availability of marine products and the cost

of collection has to be done.

Processed industrial materialsWhat is the total requirement of the project?What quantity would be available from domestic

sources?What quantity can be produced from foreign sources?How dependable are the supplies?What has been the past trend in prices?What is the likely future behavior of prices?

Auxiliary materialsThe requirement of auxiliary material like chemicals,

packaging materials, paint, oils, grease, cleaning material etc should be take into account in the technical study.

Utilities A broad assessment of utilities like power, water, steam,

fuel may be made at the time of technical analysis.What quantities are required?What are the sources of supply?What would be the potential availability?What are the likely shortages?What measures may be taken to augment supplies?

4. Product mixThe choice of product mix is guided by market

requirements.

In the production of most of the items, variations of size and quality are aimed at satisfying a broad range of customers.

During technical analysis some flexibility with respect to product mix must be sought.

5. Plant capacityIt refers to the volume or number of units that can be

manufactured during a given period.

It depends on various factors that need to be studied during technical analysis:

Technological requirement(min. prod.)Input constraints (energy, raw mat.)Investment cost(inverse relationship)Market conditions(demand)Resources of the firmGovernment policy

6. Location and siteThe choice of location is influenced by a variety of

considerations like:Proximity to raw material and markets

A perfect locational model is the one where the total cost i.e. raw material transportation cost, production cost and distribution cost for the final product is minimised.

Availability of infrastructureAvailability of power, transportation, water and

communications should be carefully assessed.

Labor situationAvailability of laborPrevailing labor ratesLabor productivityDegree of unionization

Government policiesIn case of public sector projects, location is directly

decided by the govt..In case of private sector, location is influenced by

certain govt. restrictions and inducements.

Other factorsClimate conditionsGeneral living conditionsEase in coping with pollution

7. Machinery & equipments The requirement of M & E is influenced by the

production technology and plant capacity.It is also influenced by the type of project.

Constraints in selecting M & EThere may be limited availability of powerThere may be difficulty in transporting heavy

equipments to a remote locationWorkers may be able to operateThe import policy of the govt. may stop the import of

certain machineries

8. Structures and civil workIt is divided into three categories:

Site preparation & developmentGrading & leveling of the siteDemolition & removal of existing structuresRelocation of roads, power lines etcConnections of utilities like electric power, drinking water,

communication through telephone, internetOther site preparation and development

Building & structureFactory or process buildingsAncillary buildings required for stores, warehouses, lob., Administrative buildingsStaff welfare buildingsResidential buildings

Outdoor worksSupply and distribution of utilitiesHandling and treatment of emissionTransportation Outdoor lightingsBoundary wall, fencing, gates ,doors security posts

9. Environmental aspectsA project may cause environmental pollution like

It may throw gaseous emissionsIt may produce liquid and solid dischargeIt may cause noise , heat etc

The key issues areWhat r the types of effluents and emission generated?What needs to be done for proper disposal?Will the project be able to secure all environmental

clearances and comply with the statutory requirements?

10. Project charts and layoutsCharts and layouts provide the basis for detailed

project engineering and estimation of the investment and production costs.

Some of the charts and layouts are:1. General functional layout:This shows the general relationship between

equipment, buildings, and civil works.

2. Material flow diagram:This shows the flow of materials, utilities, intermediate

products, final products and emission.

3. Production line diagrams:This shows how the production would progress in the

main equipment.

4. Utility consumption utilityThis shows the principle consumption points of utilities

and their required quantities and qualities.

5. Communication utilityThis shows how the various part of the project will be connected

with telephone, internet, intercom etc

6. Organizational layoutThis shows the organizational set up of the project along with

the information on personnel required for various departments.

7. Plant layoutIt is considered with the physical layout of the factory.

8. Transport layoutThis shows the distances and means of transport outside the

production line.