
Feasibility Study – an Expense or an Investment?
Feasibility Study
Throughout the world companies set up manufacturing facilities at different locations to increase their reach in the market to bring in more profits.
Companies are investing in the following domains in recent times
1. Solar, wind, microgrid, energy storage & hydrogen
2. Electrical Vehicle
3. Specialty Chemical
4. Data Centers
To begin with, the planning and execution of the new project’s practical viability of the product/project and overall scenario are analyzed. There are different kinds of a feasibility studies that are carried out before the project initiation. These are the general feasibility studies carried out irrespective of the industry.
- Real Estate Feasibility for Manufacturing – Real estate feasibility reports include such features as the land survey, building permits, laws impact on the surrounding environment and natural habits, traffic issues, and general impact on businesses in the area as well as the overall market opportunity. Housing developments such as condos, single-family homes, and apartments, or larger projects such as hotels or buildings or skyscrapers often create real estate feasibility studies before land acquisition and development.
- Comprehensive Feasibility – A comprehensive feasibility study is an all-inclusive report that takes into consideration some of the most rational business practices one should implement before undertaking any project. The comprehensive feasibility includes data on land acquisitions and real estate issues, economic and cultural impact on the greater surrounding areas, and more.
- Financial Economic Feasibility– An economic feasibility study is conducted when a company wants to know if the proposed amount of capital and financing is sufficient to complete a project successfully. an economic feasibility study will be greater in detail and have more statistics and numbers in the financials.
- Marketing Feasibility – The marketing feasibility studies the market impact and penetration, such as the demographics, target market, product testing, and more. Before launching a project into the market, whether in a local, regional, national or global environment, a viable study of the market is imperative.
Apart from that feasibility scope includes checking the following aspects, though these factors are not restricted to this only,
1. Proposed area(dimensions) of the plant
2. Type of soil and land
3. The water level at the location
4. Weather conditions for the proposed locations
5. The nearness of hospitals, police stations, airports, etc
6. Availability of utility resources
Apart from the above-mentioned factors project is evaluated in terms of technical feasibility, geographical, Environmental, Business performance, and Human resource aspects.
Even if the same plant is coming up next to the old plant whose feasibility has already been performed in the past, the feasibility study reports for the proposed one will vary w.r.t changes in cost/time/environment/policies. Companies do carry out feasibility studies but throughout our experience, we have seen/observed that concerned persons ask consultants to carry out a feasibility study in a very short period of time because they feel it is possible to get it done quickly as the consultant has already been working on the similar projects and have all the required things ready in place.
What value does a feasibility study adds to your project
1. Figure out the constraint if there is any
Once the project is started and investment is made companies can’t back out hence figuring out the constraints at the initial level is important.
2. Gives an estimation of the required investment and return on investment, also the employment generation
Manpower requirement and availability is a crucial factor in any project and that is one of the highly weighted factors when it comes to the selection of the process/site/location etc. Also, for businesses getting the estimated ROI is important along with the customer’s satisfaction and project feasibility. But for that estimating practical and logical ROI is necessary.
3. Provides the projections for production
How many products, in how much time, and with how many resources analysis is needed to ultimately plan a cost-benefit analysis.
4. Business and product survival forecast
With changing times and technology very often, having construction and a system that can easily adapt to the changes is the need of an hour, and hence for that scientifically justified planning is required.
5. Provides insights on changes in policies and regulations so that companies can be ready beforehand.
We normally experience changes in policies/regulations in 5-10 years. For smooth operations even if the policy changes having the existing infrastructure, system, and overall scenario properly documented is necessary.
By getting the right feasibility analysis done you avoid
1. Wrong and unnecessary decisions and investments
2. Exhaustion at a physical and mental level
As the doctors treat all patients with different mindsets & bodies differently, the same is the case with the feasibility study. Approximately just 0.2 to 1 percent of the overall project cost goes into the feasibility study. Hence, it’s always better to get it done by spending a little amount rather than suffering due to the wrong investments and understand that feasibility is an investment and not an expense because ultimately it is going to save you from the unnecessary expense and help you with proper streamlined planning of the project which will give a high return on investment.