Dr.

Janardhan G Naik
M.com, LL.B, AICWA,Ph.D

Cost Accountant and Professor, Head Dept of Accountancy Gogte College of Commerce, Belgaum 590 006 Karnataka State, INDIA Cell : (0091) 9448578089 Email: jgnaik52@yahoo.com

Technical Analysis
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Plant capacity Production technology Machinery & Equipments Plant location & site selection Material inputs & utilities Product mix Plant structure & civil works Environmental issues Project charts & Layouts Work schedule

1. Plant Capacity

1. 2.

Volume or units that can be manufactured during a given period. Types of plant capacity: Feasible normal capacity under normal working conditions Nominal plant capacity-technically attainable, so equal to installed capacity guarantee by the supplier of the plant

Factors in Plant Capacity Decision

a. b. c.

d. e. f.

Technological requirement Input constraints Investment cost investment cost per unit of capacity decreases with increase in the capacity. Capacity-cost relation factor is normally 0.2 to 0.9 Resources of the Company Market condition Government policy

2. Production Technology

1.

A product may be made in one or other ways eg. Cement can be made by wet or dry process technology Technology acquisition ways:
2. 3.

Technology licensing Purchase of technology Joint venture agreements Technical & financial participation by supplier

Choice of Technology
a.
b. c. d. e. f. g.

Plant capacity Principal input Investment outlay & production cost Product mix Latest development Ease of absorption Use by other units

3. Machinery & Equipments

Choice depends on plant capacity, production technology and type of project Classification
Plant process Equipments

Mechanical Equipments
Electrical Equipments Instruments Controls Internal transport system Other Equipments

Assessing Machinery Requirement

a.
b. c. d.

Estimate the production level over periods Describe various machining & other operations Calculate machine hours required for each operation Select the Machinery & Equipments for each operation

Constraints in selection of Machinery & Equipments

a.
b. c. d.

Limited availability of power supply Difficulty in transportation of heavy Machinery & Equipments to remote or hilly area Inability of labour to operate equipments in the initial stages Govt. import policy

4. Plant Location & Site Selection

Location city, industrial zone or coastal areaFactors to be considered:

Proximity to raw materials & market Availability of infrastructure facilities Govt policies & Other factors labour wage level, migration, climate, general living, pollution, ancillary units

Site specific piece of land near city, developed by Govt. or private

5. Material inputs & utilities

a.
b. c. d.

Raw material Processed industrial materials & components Auxiliary materials & factory supplies chemicals, oils, packing materials, Utilities power, water, fuel, steam, chilled water, oxygen etc

6. Product mix
Variation in size, quality and contents
Highly dependent on market requirement Provide flexibility in production plan

7. Plant structure & civil works

a.
b. c.

Site preparation and development Building & structure Outdoor works

8. Environmental issues
Project may cause pollution
How to tackle ? Clearance from regulatory bodies

10. Project charts & Layouts

General function lay out Material flow diagram Production line diagram Transport layout Utility consumption layout Communication layout Organisational layout Plant layout

11. Work Schedule

Concerned with installation and initial operations Purpose is to

Anticipate likely problems Phasing of investments Develop plan for running-in-period