Feasibility and Economic Justification
Feasibility and Economic Justification
The construction of a new distribution facility for liquid chemicals near New York City would require a feasibility study. The feasibility study is conducted as a “phase [which] considers the technical aspects of the conceptual alternatives and provides a firmer basis on which to decide whether to undertake the project” (Kerzner, 2009, p. 419).
Thus, it can be seen that conducting a feasibility for the purpose of constructing a new distribution facility would show the relevant information that enables the management to make the necessary actions and likewise serves as the means through which the effectiveness and efficiency of this can be seen in order for decisions to be made on whether it is going to be implemented or not.
In conduct a feasibility study for the said facility, it is necessary to understand the impact it has on other facilities, the transportation costs, and the inventory levels and valuations; all of which require pertinent data for it to be collected. On the other hand, the products which are going to be distributed in this site would also have to be determined beforehand together with the costs for construction, real estate, and operations in the new site.
Data Requirements for Inventory Levels, Transportation, and Impact on other Facilites
In conducting a feasibility study, it is required that quantitative data is gathered for the purpose of producing a baseline and comparison of what is the expected outcome of the project. However, quantitative data can not stand on its own but should be backed up by qualitative interpretation and assessment of the previously-provided quantitative data (Bangemann, 2005). To understand the impact it has on the existing facilities, historical data should be taken on the volume of transactions taking place in these facilities with the special note for the changes that happened with every new facility that are added to the company.
Moreover, an understanding of the transportation changes related to the construction of a new site requires data to be gathered from the distance that this new facility has in relation to the location of the existing clients. For the raw inputs and the need for transportation between one facility to another, the distance and the projected costs should also be considered in light of the volume of each trip made. Aside from the costs, the time spent for transportation should also be assessed and corresponding alternatives should also be shown.
When it comes to inventory and valuation, the capacity of the new location should be known to the one conducting the study in determining the inventory levels and the valuation associated with it.
The inventory, together with the prevailing turnover, for the products in the said area can be known through industry standards and the competitors, if they would allow such information to be known through transparency to the public. The inventory levels could also be checked through the demands for the products being served by the company in the said area and the existing historical data that is available for the company.
Type of Products
Not all of the products can be accommodated into this facilities and careful analysis would have to be considered when actually categorizing the products which are going to be distributed here and those which are not. In doing this, it is necessary to understand that the current demand in the said location would have to affect what products are going to be made available in the new facility. The dependence of supply and demand on one another is because of the interplay of the demand and supply curve, which is primarily driven by economic forces (Hirshleifer & Glazer, 2005).
Definitely, there are going to be clients who are near the new site which is going to be build near New York and would rather go there for their needs. These clients, because of geographical differences, would also have requirements other than that which can be found in other facilities because of changing needs and demographics. More so, there might be pertinent rules and regulations in this particular state which is not present in other states where the company operates other facilities.
These rules and regulations would also affect what is going to be distributed especially with the consideration of the impact it has on the safety of the individuals in the said facility. The density of the population would definitely serve as one of the factors for the regulation in this new site. More so, there are restrictions when it comes to the chemicals which can be made available here because of the transportation requirements and the storage facilities that are going to be used to transport the chemicals from one place to another.
Costs of Real Estate, Construction, and Operations
In order to gather data on the costs for real estate, construction, and operations, it is necessary to evaluate the current prices that exist within the state. There are standards or averages which can be relied upon when assessing the projected costs. Historical data would have to be considered for this purpose and from there, the estimate of the costs for land, construction, and operations can be considered. More so, there are other facilities existing and the costs for these can be obtained through their financial reports.
While it may not exactly be the same for the current facility being considered, it is already enough for the purpose of assessing the projected costs of these three. It should be noted that for real estate, it is now easier to check the prices since the market price for real estate properties are readily made available through the real estate companies or can be obtained through the government agencies which have a database for this kind of information.
Bangemann, T. (2005). Shared services in finance and accounting. Burlington, VT: Gower Publishing Company.
Hirshleifer, J. & Glazer, A. (2005). Price theory and applications: Decisions, markets, and information (7th Ed.). Cambridge, UK: Cambridge University Press.
Kerzner, H. (2009). Project management: A systems approach to planning, scheduling, and controlling (10th Ed.). Hoboken, NJ: John Wiley and Sons.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 29 September 2016
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