Crafting an Industrial Feasibility Study: A Comprehensive Guide

Introduction

Turning a bold industrial idea into a successful venture requires more than ambition—it demands a meticulous plan and a deep understanding of every element involved in the process. This is where an Industrial Feasibility Study comes into play. It’s the cornerstone of informed decision-making, ensuring that every aspect of the project is carefully evaluated, risks are minimized, and success is maximized.

In this guide, “A Summary of Steps for Preparing an Industrial Feasibility Study,” we break down the essential deliverables that form the backbone of a comprehensive study. Whether you’re assessing market demand, securing raw materials, or planning the financial and technological framework, each step is critical to building a robust industrial project.

Here’s what we’ll cover:

1. Marketing Study: Analyzing customer needs and market opportunities.
2. Raw Materials and Factory Supplies: Securing inputs for seamless operations.
3. Project Location and Land: Identifying the ideal site for your facility.
4. Production Technology and Quality Control: Choosing technologies and ensuring excellence.
5. Human Resources: Building a skilled and dedicated workforce.
6. Digital Technology Transformation: Leveraging innovation for efficiency and growth.
7. Financial Viability and Funding: Evaluating costs, revenues, and funding options.
8. Implementation Plan: Structuring timelines and execution strategies.
9. Business Plan: showing a roadmap to realise this project.

Whether you’re embarking on a new industrial project or evaluating an expansion, this guide will help you structure your feasibility study with clarity and precision. Let’s dive into the steps that will turn your industrial vision into a reality!

Deliverable (1): Marketing Study

No.	Subjects	Details
1	Target market analysis	Reviewing the target market and customers, competitors, competition, existing market mix, demand and supply structure analysis, market size estimate, average market growth, market attractiveness, influences, trends, key challenges and opportunities, etc.
2	Internal and external environment analysis	Conducting SWOT and external analysis to identify opportunities and threats, gap analysis, risks analysis, etc. Also, running a market attractiveness analysis using Porter’s Five Factors Analysis model.
3	Preparing the project business concept	Identifying the problems/gaps/opportunities, crafted solutions, products, market mix, value propositions, competitive advantages, target segment, target market, size of the target market, market share, market potential growth, associated business/market risks, and justifications for the project.
4	Testing the project concept (Desirability or demand test)	Interviewing potential customers and collecting their feedback on the project concept. We need to ensure that our market mix offer (product, pricing, promotion, and distribution channels) has a sufficient demand in the target market before we create the company.
5	Preparing the marketing and sales strategy for the project	It includes information on the tested project concept, mission and vision, strategic direction (e.g., differentiation, low cost, intensive technology, and targeting niche market), market positioning (e.g., the position of the project in terms of price, quality, market share, brand etc, relevant to competitors), strategic objectives, strategies or initiatives, action plan, KPIs, and metrics for at least three years (target sales, market mix, annual growth, market share, served customers, promotion and distribution budget, etc.).
6	Sales and costs budget	Projection of annual sales (quantity and value), and sales and marketing budget for a minimum of (5) years.

Deliverable (2): Raw Materials And Factory Supplies

1	Raw materials	Identifying the raw material items, their technical specification, annual purchased quantity, sources, costs, and the raw materials budget for at least five years.
2	Factory supplies	Identifying the factory supplies (e.g., all items other than direct raw materials like syringes, needles, hoses, bags, packaging, maintenance oils, cleaning products, etc), their technical specification, annual purchased quantity, sources, their costs, and the budget of factory supplies for at least five years.
3	Non-factory supplies	Identifying the non-factory supplies (e.g., these include all supplies that staff require to work like food and beverages, uniforms, medicines, accommodation supplies, etc), their technical specification, annual purchased quantity, sources, their costs, and the budget of non-factory supplies for at least five years.
4	Spare parts	Identifying spare part items, their technical specification, annual purchased quantity, sources, costs, and the budget of spare parts for at least five years.
5	Raw materials and factory supplies budget	Projection of annual requirements of raw materials, supplies, and spare parts (quantity and value) for (5) years, and annual budget for (5) years.

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Deliverable (3): Project Location And Land

1	Project location	Assessment of project location options and selection based on criteria including how near it is to the infrastructure, building requirements, target market, distribution channels, suppliers, efficient operation, costs and profitability, future growth, etc.
2	Requirements for the project location	Identifying the requirements of location that may include the size of the area to suit the factory and other premises of the project, technologies, loading and unloading, storage area, laboratory requirements, civil and electrical, internet, utilities, etc.
3	land costs	Exploring location options and the cost of the land may include the cost of preparing the land for building the project. Or the renting options and estimating the cost of the land rent for at least (5) years.

Deliverable (4): Production Technology, Laboratories, Quality Control, And Building

1	Production program and design capacity	Identifying the production program of the factory to meet the sales and marketing strategy, which includes the list of products, their specifications, sizes, formulas, quality, the scope of uses and instructions, generic or patented items, ways of acquiring patented licenses if any, production design capacity per product item or machinery/production line based on one shift basis of eight hours. High-level briefing on the production inputs to reach the full production design capacity like raw materials, other supplies requirements, manpower, utilities, etc. Also, identifying the levels of production efficiency and productivity of the factory and wastes.
2	Technology options and selection	Identifying the technology requirements to achieve the production program (e.g., machinery, equipment, tools, other technology auxiliaries, specification, automation levels, running costs, etc), collecting at least two acceptable offers of technology, assessing technology options (based on criteria like regulatory license, reputation, references, specifications, recommendations, quality, reliability, cost of production, cost of technology, maintenance, compatibility with marketing requirements, simplicity, etc) and deciding on the best technology, profiling the full description of the chosen technology, inputs, outputs and speed, specifications, the name of the supplier or suppliers, origin, costs, justifications of selection, etc.
3	Product and technology license	Where-ever there is a license requirement for producing a product or using technology, the study must identify this license scope, conditions, terms, costs, the way of acquiring (e.g., lease or buy or joint venture, etc), and any other legal requirements.
4	Factory license and products registration	Set a plan showing the regulatory requirements and steps for qualifying the factory and products in the country of origin for these regulations.
5	The production process, layout and drawings	Identifying the factory layout, the production-line layout, the production process and flow, production drawings, etc. High-level briefing in the processes required to produce and pack products.
6	Civil, electrical, mechanical, and digital engineering works	Identifying all the engineering works necessary to install and operate the production technology, schedule of implementation, and the total costs.
7	Building and Facilities	identifying the building drawings (high-level) for the factory, stores, labs, R&D, etc, and the cost of building the project and facilities, building schedule, furniture, electrical, water, and internet supplies. Estimating the total costs of the building and facilities.
8	Laboratory, quality control, and R&D equipment and facilities	Identifying all the laboratory, quality control and R&D equipment and facilities, including their total costs.
9	Production management system	Preparing the high-level production system, including information about the production flow and recipes, product specification and formula, storage conditions, raw materials, manpower, quality metrics, quality check, quality plan, control and assurance, etc.
10	Technology contracting, delivery period, testing, commissioning, installing and trial operation	Identifying the details of the technology options offered, contracting requirements (high-level), the time required to prepare the technology and transportation to the buyer destiny, testing, commissioning, installation, and trial operating. Estimating the associated cost of transportation, testing, commissioning, installing and trial operation.
11	Estimating the factory running costs (for standard in-house production lines)	Estimating the annual factory costs (direct and indirect) that include the cost of raw materials, factory supplies, spare parts, manpower, utilities, factory overheads, etc for at least five years, and the cost of products (based on factory costs).
12	Estimating the cost of the production technology, laboratory, quality, building and facilities	Estimating the investment cost of the production fixed assets like technology, laboratory, quality, building and facilities of the project.

Deliverable (5): Human Resources

1	Organizational structure	Drawing an organizational structure showing the departments, sections, roles, management levels, communication flows, no. of headcounts, etc. Exploring structure options and choosing the fit structure based on well-defined selection criteria.
2	Jobs structure	Listing all jobs required by the project, their managerial levels, grades, salary and benefits, job description, headcounts, recruitment plans, etc.
3	Staff salary and benefits	listing all jobs, their grades, salary, benefits, and other costs (yearly for five years).
4	Staffing schedule	Showing the schedule for recruiting staff.
5	Training requirements	Setting a plan to train staff according to the job competency framework and staffing skills assessment. This plan should show the training plan, execution, criteria of assessment, and the training cost a year for five years.
6	Human resources manual	Developing a high-level human resources manual comprising policies and procedures to govern all human resources issues like org. structure, jobs structure, staff salary and benefits, staffing schedule, training requirements, recruitment, promotion, authorities and responsibilities, overtime compensation, vacation, performance evaluation, termination, etc
7	Staff costs	Estimating the annual cost of staff for at least five years.

Deliverable (6): Digital Technology Transformation

1	Digital technology transformation plan	Drawing a plan for the project’s digital technology transformation, comprising information on the project requirements for the digital technology (e.g., communication, ERP, production, etc).
2	Cost of the digital technology transformation	Estimating the investment and annual operating costs for five years on the digital technology requirements.

Deliverable (7): Financial Viability Analysis And Funding

1	Assumption and financial inputs	Setting materialistic assumptions about the pricing of inputs and outputs (e.g., market prices), associated risks (e.g., business and financial risks), working capital, discount rate, continuity, growth rate, inflation, terminal values, basic accounting standards, etc.
2	Investment cost	Estimating the initial investment costs, including net working capital, fixed assets and pre-investment costs.
3	Operating costs	Estimating the annual operating costs for five years, including factory costs (direct and indirect), marketing and distribution costs, financial costs, depreciation, administration and management costs, etc.
4	Product cost	Setting cost accounting assumptions, estimating the direct cost of products (incl. raw material and direct factory costs) and total cost of products (incl. direct and overhead costs) based on different scenarios of capacity utilization and assumptions.
5	Income statement	Projecting the annual income statement of the project for at least five years, including the revenues, cost of goods sold, gross profit/loss, operating cost, financial costs, and net profit/loss.
6	Cash flow	Projecting the annual cash flow statement of the project for at least five years, including operating, investment and finance cash flows.
7	Balance sheet	Projecting the annual balance sheet of the factory for at least five years, including current assets, fixed assets, liabilities, loans, and equity.
8	Testing financial viability	Estimating the net present value (NPV), internal rate of return (IRR- for equity and investment), payback period, and average rate of return on investment (ROI). Running risk viability analysis, including the breakeven point and sensitivity analysis. Concluding a final viability decision and influences.
9	Cost of the project and funding	Estimating the initial investment cost and capital structure (loan and equity) of the project, funding as equity and loans, and the cost of funding. Running different scenarios for investment funding and recommending the best one.
10	Performance financial analysis	Running ratio analysis for the projected financial performances, including liquidity ratios, efficiency ratios, leverage ratios, and profitability ratios. Concluding financial performance indicators and assumptions.
11	Macro value-added analysis	Listing expected value added of the project to the macro economy and valuation, including employment, supplies, financing costs, profits, taxes (if any), import substitution, national security, etc.

Deliverable (8): Project Implementation Plan

1	Project business case	Writing the business case of the project, showing the feasibility study findings, business needs, justifications, project values, and viability.
2	Project charter	Signing a project charter to implement the project, including the sponsor’s name and role, appointing a project manager and his mandating duties and authorities, a summary of the project’s business case, project cost, and timelines to deliver.
3	Stakeholders	Identifying the key stakeholders (e.g., target customers, banks, licensing authorities, investors, debtors, etc) and their requirements. These requirements are about the scope of work, delivery schedule, risks, cost and funding, quality, etc.
4	Scope of work	Writing the scope of work for the project, including the end-product (creating the company and operating), deliverables (e.g., appointing project team, product regulatory license, technology licenses, other licenses, purchasing technology, delivery, installation and commissioning of technology, acquiring the land and building, raw material and other supplies, staffing, pilot operation of the company, etc), assumptions and constraints, etc.
5	Project schedule	Drawing a project schedule showing deliverables, timelines of delivery, resources, etc.
6	Project cost	Estimating the project cost (to deliver the project excluding the investment cost) and funding.
7	Project risk	listing all anticipated risks that may arise during the implementation phase till the end product is delivered (risk register), setting risk priorities, risk management strategy, etc.
8	Project quality	Preparing the quality metrics, checks and resources to ensure the quality of deliverables.
9	Project teamwork	Identifying the teams required to deliver the project, including roles, qualifications, headcounts, responsibilities and authorities, communication, etc.
10	Project procurement	Listing all project procurement requirements, costs, and systems for administrating procurements for the project.

Deliverable (9)- Business Plan

This process refers to preparing a plan that leads to implementing and realising a project and includes details on the sales and marketing strategy, technical, organizational, and financial plan. The marketing and sales strategy shows the business concept, strategic framework, and business metrics. The technical plan provides information about the product specification, production program, production technology, area and construction, quality assurance, raw materials, spare parts and factory supplies, operating costs, and technical budget. The organizational plan shows the project team, legal form, location, and the project’s staff costs. The financial plan includes details about the investment cost and funding, revenues, operating costs, product costing, income stamen, balance sheet, cash flow statements, viability testing results, sensitivity analysis, and more. The significance of a business plan reveals the easiest and most effective ways to implement and realise a project, and it gathers all details necessary from the project’s feasibility study.

Step-By-Step Process

• Clarify the feasibility study outcomes and assumptions.
• Sales & Market Plan- Analyse the market and identify the gaps, define the project concept and justification, plan sales, identify the strategic direction and positioning, strategic objectives and initiatives, action plan, KPIs, resources, and metrics (sales, cost of salesforces, market mix).
• Technical Plan- Identify the production program (products and capacities), describe the production technology and cost, describe the production processes and diagrams, factory and machinery layouts, areas and construction costs, and production cost.
• Organizational Plan- Identify the project founding team, project legal form, location, and staff details and costs.
• Financial Plan- Estimate the project investment cost and funding, revenues, operating costs, product costing, income stamen, balance sheet, cash flow statements, viability testing results, and sensitivity analysis.
• Project Schedule- Prepare a project plan showing the milestones, timelines of delivery, and resources.
• Prepare a business plan draft as per the above details and discuss it with your team and experts.

Example

Here is the content table of the business plan for a pharmaceutical manufacturing facility:

About the Project	Sales & Marketing Plan	Technical Plan	Organizational Plan	Financial Plan	Project Schedule & References
DOCUMENT OBJECTIVESABOUT THE PROJECTPROJECT CONCEPT     PROJECT JUSTIFICATIONPROJECT VISION, MISSION, AND GOALS	MARKET OVERVIEWMARKET ANALYSIS- SIZEMARKET ANALYSIS- CHALLEN      MARKET ANALYSIS- SWOT ANALYSISMARKET ANALYSIS- PESTEL ANALYSISMARKET ANALYSIS- PORTER’S FIVE FORCES MODEL – ATTRACTIVENESS ANALYSISSALES PLANPRODUCT-REGISTRATION PLANSALES AND MARKETING STRATEGY	PRODUCTION PROGRAMPRODUCTION MACHINERYOTHER PRODUCTION EQUIPMENTPRODUCTION  PROCESSPRODUCTION DIAGRAMBUILDING AREACOST OF PRODUCTION	TEAM OF FOUNDERSORGANIZATIONAL STRUCTURESTAFF- NO. OF STAFFSTAFF- NON-BAHRAINI STAFF COSTS ($/GRADE/YR.)STAFF- BAHRAINI STAFF COSTS ($/GRADE/YR.)STAFF COST ($)	FINANCIAL ASSUMPTIONSINVESTMENT COST             CAPITAL STRUCTUREREVENUES     OPERATING COSTS- PRODUCTIONOPERATING COSTS- MARKETING AND SALESOPERATING COSTS- ADMINISTRATION  OPERATING COSTS- ALLINCOME STATEMET     BALANCE SHEET  CASH FLOW STATEMENTVIABILITY ANALYSIS       FINANCIAL RATIO ANALYSIS       SENSITIVITY ANALYSIS       RISK ANALYSIS	PROJECT SCHEDULE- IMPLEMENTATIONREFERENCES

The author: Munther Al Dawood

This article is derived from my book- Your Guide for Preparing an Industrial Feasibility Study

Get your copy here: https://growenterprise.co.uk/book-your-guide-for-preparing-an-industrial-feasibility-study/

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