Before diving down to the components let us first know what exactly is technical analysis in business.
Another element of project management is Technical Analysis. Technical analysis in project management is the study of the aspects of the project in order to evaluate the technical and engineering aspects of a project at a stage when the project is in examination stage, analysed and formulated.
However, Technical Analysis seems to be a continuous process in the project management system which determines the prerequisites for meaningful commissioning and establishment of the project.
In this post, we will learn about the components of technical analysis which are a part of project management
- Purpose of technical analysis
- Components of Technical analysis
- Schedule for project implementation
- Need for considering alternatives
Purpose of Technical Analysis
- The primary purpose of conducting technical analysis is to find out the technical feasibility of the project. It’s done to know whether all the inputs required to set up the project are available or not.
- In order to find out the most suitable and optimal structure of the project in terms of technology, location etc.
- Deciding from all available alternatives which will be the best option for the organisation.
Components of Technical Analysis
1. Choice of Technology/Manufacturing Process:
Firstly the component associated with technical analysis is the choice of technology or the choice of the manufacturing process. The several factors which influence the choice of technology are:
- Plant Capacity: also known as the production capacity is the number of units that can be produced in a specific Alsoperiod of time
- Principal Inputs: these inputs used to make final products and constitute at least 10% of the cost of material
- Investment Outlay and production costs: investment outlay is the cost incurred to acquire an asset or execute a strategy similarly production cost are the business costs involved in the production process
- Use by other units: the technology adopted should prove to be successful earlier by other existing units
- Ease of adoption and modernization must be an important factor while making a choice for technology
Also Read: 8 Techniques of Risk Analysis in Business
2. Technical Arrangements:
This aims to make arrangements to obtain the technical know-how needed to conduct the proposed production process.
- Price of the technology in terms of infrastructure and licensing fee
- Suitable modes of payment available must be available
- Collaboration time of the agreement
- Benefits from research and development services
- Process and Performance guarantees of the technology
3. Material Inputs and Utilities:
Another aspect of technical analysis is the analysis of the required material inputs and utilities. Material inputs majorly consist of raw material and hence its deep analysis must be done. The areas to study are:
- Raw Material: In short it is the basic material which upon processing is converted into the final product. It is basically of four types:
- Agricultural products- field crops, fruits, vegetables, rice, wheat etc.
- Mineral products- industrial rocks, minerals, clays, sand, gravel, talc, ceramics, paints etc.
- Live Stock and forest products- farm animals, sheep, horses, goats, pigs, dyes, wood, paper, rubber etc.
- Marine Products- fish, corals, bacteria, sponges, seashells, crabs etc.
While deciding for the raw material we must find the answer to questions like what materials required for us, in how much quantity we need them, the frequency of the need for materials, from where will we get the supplies, transportation and warehouse cost involved etc.
- Utilities: Utilities include power, water, steam, fuel etc. While deciding over the utilities we must find out what quantity of utilities required, the potential availability of the utility, the source of utility, the shortages and complexity of fetching the utility must keep in mind at the time of analysis.
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4. Product Mix:
It is also known as product assortment is the total range of products offered by the company. Market requirements guide the choice of product mix.
While planning the production facilities some flexibility in product mix should be thought in accordance with the technical aspects.
It is an important area in technical analysis. It must aim to satisfy a broad range of customers and to do so it must be compatible with other available resources.
5. Plant Capacity:
Plant capacity also known as the production capacity is the number of units that can be produced in a specific period of time or can be called the maximum output rate of production.
FNC( feasible normal capacity)- the capacity achievable under normal working conditions and on the other hand NMC( nominal maximum capacity- capacity achievable technically or the installed capacity
Following factors have bearing on the plant capacity decision:
- Technological requirement
- Input constraints
- Investment cost
- Product Mix
- Latest Developments
- Ease of absorption
- Auxiliary Materials & Factory Supplies
- Processed Industrial Materials & Components
- Period of collaboration & Assistance provided
- The continuing benefit of R&D work being done
- Market conditions
- Resources of the firm
- Government Policy
6. Location and Site:
In other words this is the process of identifying the best geographical location for conducting operations
Factors influencing the Choice of site location:
- Proximity to the source of raw materials: so the location must be close to the area from which raw material is to be acquired
- Proximity to markets: for instance, the markets in which the product will sell must be close to the production site and flow of goods must be smooth
- Availability of infrastructure: infrastructure must be available and suitable in order to conduct operations at that location
- Government policies: above all the government restrictions must be minimum
- Other factors: for example the climatic conditions, general living conditions, ancillary units, pollution
7. Machinery and Equipment:
The requirement of machinery and equipment is so much dependent on the production technology and plant capacity. It is also dependent on the type of project. In addition, the estimation of the levels of production helps a lot in this.
The factors considered are:
- Procurement of plant and machinery
- Constraints in the selection of machinery and equipment
- Acquiring spare parts, tools etc.
- The internal transportation system, mechanical instruments, electrical instruments etc. are also to be taken into consideration
8. Structure and Civil Works:
These tasks require a lot of time to be executed because of the scale which is involved and also the amount of work to be done. This is generally be divided into 3 categories:
- Site preparation and Development: This includes levelling and grading of the desired site in addition to removal of the existing structure if any, allocation of gas&water pipelines, power cables, construction of power network, communication network etc.
- Buildings and Structure: This generally includes the factory or setup building, support units or buildings, administrative areas, and residential areas if required.
- Outdoor Works: Subsequently these include supply and distribution facilities of utilities, disposal of waste methods, a system of disposal and treatment of harmful emissions, external supervision etc.
9. Environmental Aspects:
In addition to the points discussed above the environment is a very great and important factor as far as the current situation is considered. The amount of pollution irrespective of its kind is also a big threat to society.
The government also favours organisations those who work without damaging the environment. It also becomes our moral responsibility to do so. Therefore the following key issues must be considered and taken care of when it comes to the environment:
- What are the types of emissions generated? What can be done to minimise these emissions?
- Will the project be able to clear all the environmental restrictions imposed by the government?
- What should be done for the proper disposal and treatment of effluents and treatment of other waste products?
- Other environmental aspects include surface water quality, air quality, erosion, land quality, the noise of operations, public health factors etc.
10. Project Charts and Layouts:
Charts and layouts certainly define the scope of the desired project and provide the basis of detailed engineering and estimation of investment and production costs.
It also takes into account the general functional layout and the organizational layout with the embedded layout for communication.
Above all these are prepared after completion of dimensions like market size, demand analysis etc.
- Labor Situation: the current situation of labour in that area during different times
- Transport layout: certainly the means of transport outside the product line
- Government Policies, for instance, the strictness of these policies
- Other factors, for example, the climatic & living conditions
Also Read- Market and Demand Analysis in Business
Schedule for Project Implementation
The schedule for project implementation is basically a chart to list all the tasks necessary to complete the project and deadlines related to it.
Moreover, this tool is used in the monitoring and evaluation stages of the project and above all is considered to be the most important part of the project planning.
In addition, the schedule provides us with a framework for the whole project implementation plan and facilitates the creation of the work breakdown structure by placing the related activities, tasks and responsibilities on timeline.
Need for Considering Alternatives
The need for considering alternatives which can also be called the alternative analysis, therefore, refers to the evaluation of different options available to us to in order to achieve a particular objective.
For instance, it is a comparison of various related factors among the choices available to us. So with the need for considering the alternative, options to the solution are identified to satisfy the needs of an existing or new program.
The decisions regarding the setting up of a plant location are not easy and moreover irreversible. Therefore the use of technical analysis becomes important so that such decisions can be taken with the utmost care and diligence.
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Frequently Asked Questions
It works because it tries to cover every aspect related to the project in detail and tries to cover the smallest of the areas possible.
It is important because it helps the investor make a more financially sound investment decision.
Usually, the project manager executes the job of technical analysis.
It works by analysing various project components to make more sound decisions.