Chapter 5

CHAPTER FIVE
TECHNICAL ANALYSIS OF
PROJECTS
INTRODUCTION
• Technical analysis is concerned primarily with:
Material inputs and utilities, Manufacturing
process/technology, Product mix, Plant capacity,
Location and site, Machineries and equipment's,
Structures and civil works, Project charts and
layouts, and Work schedule.
• Analysis of technical and engineering aspects is
done continually when a project is being examined
and formulated.
Material inputs and utilities
• An important aspect of technical analysis is

concerned with defining the materials and utilities
required, specifying their properties in some detail,
and setting up their supply program.
• Material inputs and utilities may be classified into
four broad categories:
Raw materials
Processed industrial materials and components
Auxiliary materials and factory supplies, and
Utilities.
Manufacturing Process/Technology
• The acquisition of technology from some other enterprise

may be by way of (i) technology licensing, (ii) technology
purchase, or (iii) joint venture arrangement.
• Appropriateness of Technology
Appropriate technology refers to those methods of production
which are suitable to local economic, social, and cultural
conditions.
Whether the technology utilizes local raw materials?
Whether the technology utilizes local manpower?
Whether the goods and services produced provide to the
basic needs?
Whether the technology protects ecological balance?
Whether the technology is harmonious with social and
Product Mix
• The choice of product mix is guided by market

requirements. In the production of most of the items,
variations in size and quality are aimed at satisfying
a broad range of customers.
• While planning the production facilities of the firm,
some flexibility with respect to the product mix
must be sought. Such flexibility enables the firm to
alter its product mix in response to changing market
conditions and enhances the power of the firm to
survive and grow under different situations. The
degree of flexibility chosen may be based on a
careful analysis of the additional investment
requirement for different degrees of flexibility.
Plant capacity
• Plant capacity (also referred to as production

capacity) refers to the volume or number of units
that can be manufactured during a given period.
• Several factors have a bearing on the capacity
decision including
Technological requirement,
Input constraints,
Investment cost,
Market conditions,
Resources of the firm, and
Government policy.
Location and Site
• The choice of location and site follows an assessment

of demand, size, and input requirement. Though often
used the terms ‘location’ and ‘site’ should be
distinguished.
• Location refers to a fairly broad area like a city, an
industrial zone, or a coastal area; site refers to a specific
piece of land where the project would be set up.
• The choice of location is influenced by a variety of
considerations: proximity to raw materials and markets,
availability of infrastructure, governmental policies,
and other factors such as ease in coping with
environmental pollution, labor situation, climatic
conditions, and general living conditions.
Machineries and Equipment's
• To determine the kinds of machinery and equipment

required for a manufacturing industry, the following
procedure may be followed:
Estimate the likely levels of production over time.
Define the various machining and other operations.
Calculate the machine hours required for each type
of operation.
Select machineries and equipment's required for
each function.
• On the other hand, the equipment's required for the project
may be classified into the following types:
 Plant (process) equipment's,
 Mechanical equipment's,
 Electrical equipment's,
 Instruments,
 Controls,
 Internal transportation system, and others.
• In addition to the machineries and equipment's, a list
should be prepared of spare parts and tools required. This
may be divided into:
 spare parts and tools to be purchased with the original
equipment, and
 spare parts and tools required for operational wear and tear.
Structures and civil works
• Structures and civil works may be divided into three

categories:
 Site preparation and development: This covers the following:
grading and leveling of the site, demolition and removal of
existing structures, relocation of existing removals.
 Building and structures, and: Buildings and structures may
be divided into: factory or process buildings; warehouses,
laboratories, utility supply centers, maintenance services, and
others; administrative buildings;
 Outdoor works: Outdoor works cover supply and distribution
of utilities (water, electric power, communication, steam, and
gas); handling and treatment of emission, wastages, and
effluents; transportation and traffic arrangements (roads,
railway tracks, paths, parking areas, sheds, garages, traffic
Project charts and layouts
• Project charts and layouts define the scope of the project

and provide the basis for detailed project engineering and
estimation of investment and production costs. The
important charts and layouts drawings are briefly
described below:
• General functional layout: In preparing this layout, the
primary consideration is to facilitate smooth and
economical movement of raw materials, work-in-process,
and finished goods.
• Material flow diagram: This shows the flow of materials,
utilities, intermediate products, final products, by-
products, and emissions.
• Transport layout: This shows the distances and means of
• Utility Consumption layout: This shows the
principal consumption points of utilities (Power,
water, gas, compressed air, etc.) and their required
quantities and qualities.
• Communication layout: This shows how the
various parts of the project will be connected with
telephone, telex, intercom, etc.
• Organizational layout: This shows the
organizational set-up of the project along with
information on personnel required for various
departments and their inter-relationship.
• Plant layout: The plant layout is connected with the
physical layout of the factory.
Work Schedule
• The work schedule, as its name suggests, reflects the

plan of work concerning installation as well as
initial operation. The purpose of the work schedule
is:
To anticipate problems likely to arise during the
installation phase and suggest possible means.
To establish the phasing of investments taking into
account the availability of finances.
To develop a plan of operations covering the initial
period (the running-in period).
THE END

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CHAPTER FIVE

• An important aspect of technical analysis is

• The acquisition of technology from some other enterprise

• The choice of product mix is guided by market

• Plant capacity (also referred to as production

• The choice of location and site follows an assessment

• To determine the kinds of machinery and equipment

• Structures and civil works may be divided into three

• Project charts and layouts define the scope of the project

• The work schedule, as its name suggests, reflects the

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