Non-capital analysis:technical and operational aspect

Nur Aini Masruroh

http://aini.staff.ugm.ac.id/ ; Email: aini@ugm.ac.id; n_masruroh@yahoo.com

Overview Product design Production process Capacity planning Location Human resources Environmental aspect Legal aspect

Product selection Three successful business trend exist:

Specializing in offering one type of product Example: Starbucks, Subway

Megastore that allow one-stop shopping for a large variety of product Example: Wall-Mart, Carrefour

Megastore that specialize in one product area Example: Home depot (household megastore), office max

These trends have also emerged on the internet where some sites have been successful in offering a large variety of different products while others specialize in single offering Example: www.BlueDenimShirt.com

Product design Factors to be considered: Function Reliability Maintainability Produceability Human factors Safety Disposeability

Production process :Tests of Feasibility Operational Feasibility

How well will the solution work in the organization?

Technical Feasibility How practical is the technical solution? How available are technical resources and

expertise?

Operational Feasibility Questions to Ask

Is the problem worth solving? will the solution to the problem work? How do end users and management feel about the

solution? Has a usability analysis been conducted?

Technical Feasibility Questions to Ask

Is the proposed solution practical? Do we possess the necessary technology? Do we possess the necessary technical expertise? Is the schedule reasonable?

Production process: Factors to be considered Dependability Quality and specification of the product Economic Scope: the ability to process several products Equipments: related to the technology used,

budget Raw material required Process flexibility Maintenance and replacement Spare-parts availability External factors, i.e. regulation on environment,

labor, etc

Capacity planning Capacity planning is done to overcome the

demand fluctuation Related to: human resources, machines, and

other physical equipment Factors to be considered (economical

aspects): Demand (market) Availability of raw material and supplies Standard production capacity (technology

constraints) Break event point (BEP) and shut down point

(SDP)

Demand Three possibilities:

Capacity lead demand Demand lead capacity Equal demand and capacity

For highly fluctuate demand, the capacity is predicted based on its highest estimated value

The availability of raw material and supplies Raw material and supplies are possible to

become constraints, such as: Mineral industry: limited to availability of mineral Import raw material: limited import quota

If raw material and or supplies become constraints, the predicted market cannot be the only consideration in capacity planning

Technology limitation Some technology may have certain capacity

constraints (requirement) Cement industries require minimum capacity 300

ton/day Steel industry (blast furnace process): 2 millions

ton/year/unit

This limitation is changing as the technology is changing

Location Location of the plant can be:

Raw material oriented Close to the raw material resources Transportation cost of raw material is higher than finished

product or raw material is easily damage Example: mining company, milk, etc

Market oriented Close to customers Transportation cost and warehouse consideration, quality of

the finished product Example: ice cream, soft drink, bakery, etc If the consumers concentrated at a certain location, the

distribution of finished goods is expensive, and high advertisement cost, choose location close to the consumers

Location Factors to be considered;

Production factors: raw material Power supply Human resources area condition capital infrastructure

Product: transportation material handling distributor

Environmental: Market Acceptance of the local community Competitor Legal aspect

Production factors: raw material Factors to be considered:

Availability Continuity Quality Transportation Suppliers

Human resources Factors to be considered in recruitment:

Skill Age Gender Educational background Health Personality Other added values

Organization Function based

Grouped based on the function Suitable for stable condition

Product based Grouped based on the product Each group has its own organizational structure Suitable for big organization with many products or

plants

Hybrid Combined function based and product based

Function based organization Example

Director

R & D Production Finance Marketing

Product based organization

Product B

R&DProduc

tion Finan

ce Market

ing

Director

Product C

R&DProduc

tion Finan

ce Market

ing

Product A

R&DProduc

tion Finan

ce Market

ing

Example

Hybrid structureHead office

Product B

Production Purchasing Marketing

Product A

Production Purchasing Marketing

Administration Finance HRD R&D

Example

Matrix structure

Legal aspects The proposed business should be NOT

included in the Daftar Negatif Investasi (DNI) Clearly stated whether it will be in the form of

PT, CV, Firma (Fa) For small business, it should follow regional

regulation

Environmental aspect Waste management ISO 14000 Environmental is a sensitive issue Concern on environmental issues increases