The feasibility study must identify the raw materials, spare parts, and supplies of the project, including technical specifications, annual purchased quantity, sources, costs, and budget for at least five years. Raw materials are physical inputs a factory uses to produce semi-finished and finished goods, influencing the quality and the cost of production. Factory supplies are non-raw material items, including, for instance, packaging, maintenance oil, and cleaning products. Non-factory supplies are items staff require to perform jobs like food and beverages, uniforms, medicines, and accommodation supplies. The study will also identify the quantity, cost, and specifications of spare parts a factory requires to maintain and operate the machinery. These raw materials, factory supplies, and spare parts are typically capital items purchased by the factory as inventory capital and expensed when consumed.
Step-By-Step Process
- Identify the raw material items, their technical specification, annual purchased quantity, sources, costs, and the raw materials budget for at least five years.
- Identify the factory supplies (e.g., all items other than direct raw materials like syringes, needles, hoses, bags, packaging, maintenance oils, and cleaning products), their technical specification, annual purchased quantity, sources, their costs, and the budget of factory supplies for at least five years.
- Identify the non-factory supplies (e.g., these include all supplies that staff require to work like food and beverages, uniforms, medicines, and accommodation supplies), their technical specification, annual purchased quantity, sources, costs, and the budget of non-factory supplies for at least five years.
- Identify spare part items, their technical specification, annual purchased quantity, sources, costs, and the budget for at least five years. It is usually included in the list of machinery supplied and will be sufficient for one to two years of operation.
- Projection of annual requirements of raw materials, supplies, and spare parts (quantity and values) and budget for five years.
- Prepare a document highlighting the above outcomes, and share it with your team and experts.
Example
For a manufacturing business producing ceramic tiles, here are the factors you will need to consider identifying the raw materials:
- Tile size and thickness: Determine the size and thickness of the tiles you plan to manufacture. This will help you calculate the amount of raw material needed to produce each tile.
- Production capacity: Estimate the number of tiles you plan to produce per day, week, or month. This will help you determine the overall raw material requirement for your manufacturing process.
- Raw material composition: Identify the raw materials needed to produce ceramic tiles. For instance, you may need clay, feldspar, kaolin, quartz, and other additives.
- Consumption rate: Determine the consumption rate of each raw material for the production of each tile. This will help you estimate the number of raw materials required to produce the required number of tiles.
- Waste and spoilage: Account for any waste or spoilage that may occur during the production process. This will help you estimate the total raw material requirement, including any additional material needed to account for waste.
Useful Tips
- Identify the factory requirement for raw materials and supplies by reviewing the production program and sales plan.
- Clarify the machinery supplies to figure out the spare parts required (quantity and amount) for the initial one to two years
- Identify and estimate the raw materials and supplies (quantity and value) annually and for five years.
- Seek expert advice and involve the team and other stakeholders to identify raw materials and supplies.
Things To Avoid
- Avoid guessing works and inaccurate estimations.
Final Note
This article is sourced from my new book- Your Guide For Preparing An Industrial Feasibility Study.
For more information about the book: https://growenterprise.co.uk/book-your-guide-for-preparing-an-industrial-feasibility-study/
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The author: Munther Al Dawood- Industrial Enterprise Expert
Grow Enterprise 