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
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Product design
Production process
Capacity planning
Location
Human resources
Environmental aspect
Legal aspect
Product selection
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Three successful business trend exist:
 Specializing in offering one type of product
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Megastore that allow one-stop shopping for a large variety of
product
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Example: Wall-Mart, Carrefour
Megastore that specialize in one product area
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Example: Starbucks, Subway
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
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Operational Feasibility
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How well will the solution work in the organization?
Technical Feasibility
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How practical is the technical solution?
How available are technical resources and expertise?
Operational Feasibility
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Questions to Ask
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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
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Questions to Ask
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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
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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
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Capacity planning is done to overcome the demand
fluctuation
Related to: human resources, machines, and other physical
equipment
Factors to be considered (economical aspects):
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Demand (market)
Availability of raw material and supplies
Standard production capacity (technology constraints)
Break event point (BEP) and shut down point (SDP)
Demand
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Three possibilities:
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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
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Raw material and supplies are possible to become
constraints, such as:
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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
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Some technology may have certain capacity constraints
(requirement)
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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
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Location of the plant can be:
 Raw material oriented
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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
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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
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Factors to be considered;
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Production factors:
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Product:
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raw material
Power supply
Human resources
area condition
capital
infrastructure
transportation
material handling
distributor
Environmental:
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Market
Acceptance of the local community
Competitor
Legal aspect
Production factors: raw material
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Factors to be considered:
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Availability
Continuity
Quality
Transportation
Suppliers
Human resources
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Factors to be considered in recruitment:
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Skill
Age
Gender
Educational background
Health
Personality
Other added values
Organization
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Function based
 Grouped based on the function
 Suitable for stable condition
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Product based
 Grouped based on the product
 Each group has its own organizational structure
 Suitable for big organization with many products or plants
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Hybrid
 Combined function based and product based
Function based organization
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Example
Director
R&D
Production
Finance
Marketing
Product based organization
Director
Example
Product A
R&D
Produc
tion
Product C
Finan
ce
Market
ing
R&D
Produc
tion
Product B
R&D
Produc
tion
Finan
ce
Market
ing
Finan
ce
Market
ing
Hybrid structure
Head office
Example
Administration
Finance
HRD
Product A
Purchasing
Production
R&D
Product B
Marketing
Purchasing
Production
Marketing
Matrix structure
Legal aspects
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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
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Waste management
ISO 14000
Environmental is a sensitive issue
Concern on environmental issues increases