Page 113 - DMGT521_PROJECT_MANAGEMENT

Project Management

Notes then be evaluated and an optimum location selected using the criteria of material versus
market orientation (see note below), quality standards, infrastructural status, local laws,
and socio-economic and living conditions. Within the geographical location so selected,
alternative sites are similarly identified and the most optimal one selected after considering
factors like terrain, local climate land its impact on plant & equipment and their operation),
availability and cost of land (plus its development), local infrastructural facilities and
their costs (power; water; road/air/water transport; telecommunications; etc.), socio-
economic conditions, availability and quality of labour and construction equipment, valid
waste disposal alternatives and their costs, local living conditions, public policies, local
law, and taxes, etc.

Notes Resource-oriented projects like mining of minerals involve items like geological
analysis covering geological structure, hydrological conditions, characteristics of the
resource, resource reserves, prospecting status, and expected geological problems.

The location decision should be made after giving due consideration to various benefits
and incentives offered by governments or local bodies for setting up production or service
facilities in certain specified areas. These may include assistance in the form of or in
respect of capital loans and grants, tax, concessions, clearances, subsidies, infrastructure,
etc. One way to do this is to evolve (or use available). Location Cost Indices (LCI) for
different sites. If the cost (in a specified currency) of setting up a plant is CA at location A
and CB at location B, the LCI for location A is defined as 100 x CA/CB. If reliable values of
LCI for different locations, whether within one or more countries, are available, the
selection of an appropriate location becomes a bit more easy. Such valuable information
is however kept a closely guarded secret by a consulting company and is therefore difficult
to come by.
3. Plant Size: Determination of an optimum plant size is critical to the success of a project. A
plant represents sunk costs and any under utilization of its capacity means either reduced
profits or, for levels below the Break-Even Point, losses.
The adverse impact of an extra-large capacity is felt all the more keenly during the early
years when profits are all the more important for survival. It is therefore normally better
to err on the lower side and to build a plant having a capacity that is likely to be fully
utilized quickly, rather than to go in for a large capacity in the fond hope of a growing
share of the market.

In a feasibility study, one-begins by looking ‘at projections of the demand-supply gap in
the market and anticipated arrives’ at the possible range of project sizes after considering
various constants like availability of materials, technology, equipment, public policy (for
example, a large company may be precluded from setting up capacities beyond a size) and
finances, etc.. The best possible size of plant and equipment is then recommended after
analysing the availability, economics, and practicability of different size options.
4. Technology: The same product or service can generally be obtained using quite different
technologies. Electricity, for example, can be generated using solar panels, coal (thermal
plants), hydraulic power plants, nuclear power plants and so on. Basic telephone Sol-vices
can similarly be provided using manual, semiautomatic, or automatic exchanges. And,
even the last-named category is available if various technological versions like Stronger,
Crossbar, Analogue electronic and Digital electronic. Needless to say, the latest
technologies usually represent many improvements over the existing or older ones. They

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