Technical and Organizational Project Study
Part 3: Technical and Organizational Project Study
Technical Study
The technical study involves collecting and analyzing background information related to the feasibility of producing the good or service by the project and the impact of its variables on profitability.
Aspects to Consider in this Study
- Objectives
- Defining the project’s technology
- Definition of the producing unit
- Project size
- Project location
- Conclusion of the technical study
Technical Feasibility
The technical feasibility of the project involves searching for technological alternatives, size, and location, ensuring the project has access to these options according to its possibilities.
Background for the Technical Study
- Existing technologies at home and abroad to manufacture the project’s product.
- The production processes used.
- The equipment and raw materials used by the project.
- Stock levels of raw materials, work in process, and finished products.
- Supplies, facilities, and types of energy required.
- Location and size alternatives.
The effects on the project’s profitability from a technical point of view involve determining the investment amounts and production costs in product development.
The technical study should include, for example:
- Rates of land, warehouses, machinery, raw materials, labor, equipment, and facilities.
- Calculation of various costs and investment relations.
- Likely income for purposes of marketing products or waste.
Project Technology
Analysis of existing technologies in a descriptive and economical manner.
Craft
One where the product is primarily dependent on the work done by a person, usually using only hand tools and not machinery.
Mass Production
A serial process with a high degree of mechanization, involving several sequential work stations that combine machines and humans to achieve an efficient outcome.
Process Production
Associated with the idea of automation, which proposes intensive use of technology over human labor.
Choice of Appropriate Technology for the Project
The selection criteria for the project technology are associated with feasibility and profitability. Feasibility because the chosen technology should be accessible to the project, and profitability because the technology should be associated with lower costs.
Production Process
Production systems that may be adopted for the project are classified as:
Customer Order Type
- Production of specific orders to inventory, taking orders
Flow-Type Process
- Production by lot or intermittent
- Continuous or serial production
- Yield per project
Matrix of 6 Dimensions for Process Selection
The production process refers to the stages through which raw materials are transformed into the final product or service.
Details of the Physical Works
This concerns the definition of physical space and the type of construction the project will require to develop a normally defined production process.
PHYSICAL SPACE depends on: integration, travel, cubic space, and flexibility of maneuver.
TYPE OF CONSTRUCTION depends on: existing legislation, technological, and financial constraints.
Details of Machinery and Equipment
Machines are characterized by being fixed to the ground and having movement through engines.
Equipment can be moved manually from one place to another.
Premises consist of elements that, unlike machines, do not have movement.
For each machine and piece of equipment, the following information is required: name, origin, state of use, acquisition value, useful life, capacity, space, energy required, and characteristics.
Details of Inputs Required
- Type of raw material and inputs
- Source
- Supply (availability of inputs)
- Prices of key raw materials and inputs
- Quantity of raw materials needed to meet the business cycle
Business cycle refers to the period between the supply of raw materials and the collection of revenue from sales of final products.
Project Size
§ Definition of production capacity is the amount of product the project can produce during a period considered normal operation.
§ Size optimization means that production capacity is associated with the maximum return achievable given market conditions, the nature of the technology, and its limits.
§ Variables of size constraints:
- Market size
- Input availability
- Technological process
- Location
- Financial capacity
Variables Determining Size
Market Size
Three basic scenarios:
- Total demand well below the capacity of the smallest possible production units to install.
- Total demand greater than or equal to the minimum capacity that can be installed, but less than maximum capacity.
- Total demand exceeding the largest possible production units to install.
§ To measure this demand, a function is defined that the project under consideration faces.
§ The goal is that the size should not respond to a short-term economic situation but should be optimized against the dynamism of demand.
§ It is recommended to define a size larger than necessary to meet current demand but adequate to growth expectations.
Cost of Operation
Should be measured by:
- Installed capacity
- Intensity of use
The more the installed capacity is used, the lower the unit manufacturing cost, as fixed costs are apportioned over a larger number of units.
Talking about variable costs and fixed costs.
Talking about optimum plant size – Long term vs. short term
Availability of Inputs
Inputs may not be available in the desired quantity, limiting the project’s ability to utilize its capacity due to the availability of any input, also increasing operating costs.
Many times, this requires a minimum production level, which in some cases might be beyond the planned capacity, and therefore raises operating costs to levels that may make it advisable to abandon the project idea.
Project Location
Macro location: This refers to determining the geographic area where the project will be located.
Micro location: This corresponds to determining the specific location within the selected macro area for operating the project.
Location Factors
- Availability and cost of labor
- Proximity to sources of supply and the market
- Environmental factors and the possibility of disposing of waste
- Cost, availability, and terrain features
- Legal structure and taxes
- Availability of water, energy, and other supplies
Choosing the Most Convenient Location
- Define the most appropriate macro area based on legal, climate, technological, and even market aspects.
- Define the most appropriate potential locations within the macro area by analyzing the availability of land, buildings, or constructs that exist in the area where the project will be located and that comply with its requirements.
- Assess the potential locations, identifying for each alternative the benefits and costs associated with choosing it.
- Choose the location that involves the lowest cost or highest profit.
Technical Study Conclusions
- Tentative production
- Balance of physical works
- Balance of machines
- Schedule of investments
- Balance of staff
- Balance of inputs and raw materials
- Supply balance
Here again, it must be concluded, based on the information collected and analyzed, whether it is desirable to continue with the project study or if the background information is compelling enough to abandon the idea of implementation.
The tentative production schedule defines the physical quantities to be produced for each product during the project’s operation.
The balance of physical works is an arrangement of information on all the physical works the project will require.
The inventory of machinery is an arrangement of information on all the machinery, equipment, and facilities the project requires.
In the balance of these machines, the following concepts are increasingly important:
Depreciation is the monetary value assigned to the wear and tear of a fixed asset.
Fixed assets consist of tangible assets acquired or constructed for use in the company’s operations over a period of time and without the intent to sell.
Residual value is the asset’s book value at the end of its useful life.
Reinvesment schedule is for systematizing information on machines that must be renewed before the end of the project’s duration.
Personnel balance is information management regarding the direct and indirect labor that the project will demand during its operation.
Supply balance is information management regarding the types and amounts of energy the project will require.
For each of the aforementioned areas, a table should be prepared containing the complete information required for determining the monetary resources needed for the final evaluation involved in the project.
Organizational Study
This study addresses the following questions:
- How will the project be managed in its operational phase?
- What is its organizational structure and authority relations?
- What administrative staff will be required for the project’s operation?
The answers to these questions will determine the investment amounts in office space and equipment, and operating expenditures in administrative salaries and office expenses, which are processed through the organizational study.
Organizational Study Objectives
Feasibility from an organizational standpoint involves verifying that the defined structure for managing the project will be sufficient and adequate.
Profitability is associated with estimating the investment and costs to be incurred as a result of the organizational structure’s operation.
Organizing involves determining the functions necessary to achieve the objective, establishing authority, and assigning responsibility to the people who will be responsible for these functions.
Factors Affecting the Organization
- Strategy
- Technology
- Stability
An organizational chart or diagram generally represents the various positions with rectangles connected by lines that are important because they define the relationships of authority and power within the organization.
Aspects Linked to the Project’s Profitability
- There are costs in wages and/or fees not covered at the market and technical study level, such as for managers, accountants, etc.
- There are space needs not considered in the plant distribution study, such as offices.
- There are furniture, supply, and equipment needs, such as desks, shelves, staplers, etc.
- It is necessary to define an administrative process that involves records, checks, tasks, among others, that directly affect the cost of administration.