Feasibility Study

There are basically six parts to any effective Feasibility Study:

1. The Project Scope which is used to define the business problem and/or opportunity to be addressed. The old adage, "The problem well stated is half solved," is very apropos. The scope should be definitive and to the point; rambling narrative serves no purpose and can actually confuse project participants. It is also necessary to define the parts of the business affected either directly or indirectly, including project participants and end-user areas affected by the project. The project sponsor should be identified, particularly if he/she is footing the bill.
I have seen too many projects in the corporate world started without a well defined project scope. Consequently, projects have wandered in and out of their boundaries causing them to produce either far too much or far too little than what is truly needed.
2. The Current Analysis is used to define and understand the current method of implementation, such as a system, a product, etc. From this analysis, it is not uncommon to discover there is actually nothing wrong with the current system or product other than some misunderstandings regarding it or perhaps it needs some simple modifications as opposed to a major overhaul. Also, the strengths and weaknesses of the current approach are identified (pros and cons). In addition, there may very well be elements of the current system or product that may be used in its successor thus saving time and money later on. Without such analysis, this may never be discovered.
Analysts are cautioned to avoid the temptation to stop and correct any problems encountered in the current system at this time. Simply document your findings instead, otherwise you will spend more time unnecessarily in this stage (aka "Analysis Paralysis").
3. Requirements - how requirements are defined depends on the object of the project's attention. For example, how requirements are specified for a product are substantially different than requirements for an edifice, a bridge, or an information system. Each exhibits totally different properties and, as such, are defined differently. How you define requirements for software is also substantially different than how you define them for systems.
4. The Approach represents the recommended solution or course of action to satisfy the requirements. Here, various alternatives are considered along with an explanation as to why the preferred solution was selected. In terms of design related projects, it is here where whole rough designs (e.g., "renderings") are developed in order to determine viability. It is also at this point where the use of existing structures and commercial alternatives are considered (e.g., "build versus buy" decisions). The overriding considerations though are:

• Does the recommended approach satisfy the requirements?
• Is it also a practical and viable solution? (Will it "Play in Poughkeepsie?")

A thorough analysis here is needed in order to perform the next step...
5. Evaluation - examines the cost effectiveness of the approach selected. This begins with an analysis of the estimated total cost of the project. In addition to the recommended solution, other alternatives are estimated in order to offer an economic comparison. For development projects, an estimate of labour and out-of-pocket expenses is assembled along with a project schedule showing the project path and start-and-end dates.
After the total cost of the project has been calculated, a cost and evaluation summary is prepared which includes such things as a cost/benefit analysis, return on investment, etc.
6. Review - all of the preceding elements are then assembled into a Feasibility Study and a formal review is conducted with all parties involved. The review serves two purposes: to substantiate the thoroughness and accuracy of the Feasibility Study, and to make a project decision; either approve it, reject it, or ask that it be revised before making a final decision. If approved, it is very important that all parties sign the document which expresses their acceptance and commitment to it; it may be a seemingly small gesture, but signatures carry a lot of weight later on as the project progresses. If the Feasibility Study is rejected, the reasons for its rejection should be explained and attached to the document.

Conclusion

It should be remembered that a Feasibility Study is more of a way of thinking as opposed to a bureaucratic process. For example, what I have just described is essentially the same process we all follow when purchasing an car or a home. As the scope of the project grows, it becomes more important to document the Feasibility Study particularly if large amounts of money are involved and/or the criticality of delivery. Not only should the Feasibility Study contain sufficient detail to carry on to the next succeeding phase in the project, but it should also be used for comparative analysis when preparing the final Project Audit which analyses what was delivered versus what was proposed in the Feasibility Study.

 

Practice Exercises

Transportation Models
1.  The following example demonstrates the formulation of the transportation model.  Wheat is harvested in the Midwest and stored in grain elevators in three cities - Kansas City, Omaha, and Des Moines.  These grain elevators supply three flour mills, located in Chicago, St. Louis and Cincinnati.  Grain is shipped to the mills in railroad cars, each capable of holding one ton of wheat.  Each grain elevator is able to supply the following number of tons of wheat to the mills on a monthly basis.

                                  Grain Elevator                         Supply
                           1.  Kansan City                                 150
                           2.  Omaha                                          175
                           3.  Des Moines                                  275

Each mill demands the following number of tons of wheat per month.
                                    Mill                                        Demand
                             A.  Chicago                                      200
                             B.  St. Louis                                     100
                             C.  Cincinnati                                   300
The cost of transporting one ton of wheat from each grain elevator to each mill differs according to the dstance and rail system.  These costs are shown below.  For example, the cost of shipping one ton of wheat from the grain elevator at Omaha to the mill at Chicago is $7.
                                                                      Mill
 Grain Elevator            Chicago (A)                 St. Louis (B)            Cincinnati (C)
Kansan City                       6                                   8                                10
Omaha                               7                                    11                              11
Des Moines                       4                                     5                                12

2.   A concrete company transports concrete from three plants to three construction sites.  The supply capacities of the three plants, the demand requirements at the three sites, and the transportation cost per ton are as follows:

Plant                             Construction  Site                       Supply (tons)
                           A           B           C   
1                         8             5           6                                       120
2                        15            10         12                                        80
3                         3              9           10                                       80
Demand (tons)  150         70          60


3.  Given the following  transportation tableau, determine the initial solution using any method and compute the total cost for each.

FROM/TO                        A                             B                        C                          Supply
1                                         10                            9                        5                                60
2                                         6                              8                        7                                30
3                                          4                             3                        2                                 60
Demand                              40                            40                     70                              150




FROM/TO                             1                         2                    3                            4            Supply
1                                             7                         6                     2                          12              70
2                                             3                         9                     8                            7              40
3                                             10                       4                     11                          5              100
Demand                                  30                      60                    90                          30


FROM/TO                            1                              2                             3                        Supply
A                                            6                             7                             4                          100
B                                            5                              3                            6                           180
C                                            8                              5                            7                           200
Demand                               135                          175                         170

4.  Green Valley Mills produces carpet at plants in St. Louis and Richmond.  The carpet is then shipped to two outlets located in Chicago and Atlanta.  The cost per ton of shipping carpet each of the two plants to the two warehouses is as follows.
                                   From/To                     Chicago                          Atlanta
                                       St. Louis                     40                                    65
                                       Richmond                   70                                    30

The plant at St. Louis can supply 250 tons of carpet per week; the plant at Richmont can supply 400 tons per week.  The Chicago outlet has a demand of 300 tons per week, and the outlet Atlanta demands 350 tons per week.  The company wants to know the number of tons of carpet to ship from each plant to each outlet to minimize the total shipping cost.  Solve this transportation problem.

5.  Tobacco is stored in warehouses in four cities at the end of each growing season
Location                      Capacity (tons)
A.  Charlotte                      90
B.  Raleigh                        50
C.  Lexington                    80
D.  Danville                       60

These warehouses supply the following  of tobacco to cigarette companies in three cities.
Plant                               Demand (tons)
1.  Richmond                       120
2.  Winston-Salem               100
3.  Durham                           110

The railroad shipping costs per ton of tobacco are shown below:
FROM/TO                      1                  2                     3
A                                     7                 10                   5
B                                     12                9                    4
C                                      7                 3                    11
D                                      9                  5                   7


6.  Oranges are grown, picked, and then stored in warehouses in Tampa, Miami, and Fresno.  These warehouses supply oranges to markets in New York, Philadelphia, Chicago, and Boston.  The following table shows the shipping costs per truckload, supply, and demand.

FROM/TO           New York           Philadelphia             Chicago          Boston            Supply
Tampa                      9                             14                           12                   17                   200
Miami                     11                             10                             6                   10                  200
Fresno                     12                              8                            15                   7                    200
Demand                   130                          170                        100                 150

7.  A  manufacturing firm produces diesel engines in four cities - Phoenix, Seattle, St. Louis, and Detroit.  The company is able to produce the following numnbers of engines per month.

Plant                   Production
1.  Phoenix               5
2.  Seattle                25
3.  St. Louis            20
4. Detroit                25

Three trucking firms purchase the following numbers of engines for their plants in three cities.
Firm                      Demand
A.  Greensboro           10
B.  Charlotte                20
C.  Louisville              15

The transportation costs per engine from sources to destinations are shown below.
FROM/TO                  A               B                  C
1                                   7               8                   5
2                                   6             10                   6
3                                   10            4                     5
4                                   3              9                   11

8.  The Interstate Truck Rental firm has accumulated extra trucks at three of its leasing outlets, as shown below.
Leasing  Outlet                           Extra Outlets
1.  Atlanta                                          70
2.  St. Louis                                     115
3.  Greensboro                                    60

The firm also has four outlets with shortages of rental trucks, as follows.
Leasing Outlet                            Truck shortage
A.  New Orleans                                  80
B.  Cincinnatri                                      50
C.  Louisville                                       90
D.  Pittsburgh                                       25

The firm wants to transfer trucks from those outlets with extras to those with shortages at the minimum total cost.  The following costs of transporting these trucks from city to city have been determined.

FROM/TO                A                  B                       C                         D
1                               70                 80                      45                        90
2                               120               40                       30                       75
3                               110                60                     70                        80

9.  The Shotz Beer Company has breweries in two cities; the breweries can supply the folloiwng numbers of barrels of draft beer to the company's distributors each month.

Brewery                    Monthly Supply (barrels)
A. Tampa                               3500
B.  St. Louis                           5000

The distributors, spread throughout six states, have the following total monthly demand:
Distributor                   Monthly Demand (barrels)
1. Tennessee                           1600
2.  Georgia                               1800
3.  North Carolina                     1500
4.  SOuth Carolina                    950
5.  Kentucky                               1250
6.  Virginia                                 1400

The company must pay the following shipping costs per barrel:
FROM/TO              1         2           3                 4                5           6
A                            0.50    0.35      0.60            0.45           0.80     0.75
B                            0.25     0.65      0.40           0.55           0.20     0.65

10.  Computers Unlimited sells microcomputers to universities and colleges on the east coast, and ships them from three distribution warehouses.  The firm is able to supply the following numbers of microcomputers to the universities by the beginning of the academic year.

Distribution Warehouse                  Supply (microcomputers)
1.  Richmond                                         420
2.  Atlanta                                              610
3.  Washington, D.C                              340

Four universities have ordered microcomputers that must be delivered and installed by the beginning of the academic year:
University                             Demand (microcomputers)
A.Tech                                            520
B.  A and M                                    250
C.  State                                          400
D.  Central                                      380

The shipping and installation costs per microcomputer from each distributor to each university are as follows:
FROM/TO               A               B               C                  D
1                               22             17              30                 18
2                              15               35              20                25
3                               28              21              16                14

11.  A large manufacturing company is closing three of its existing plants and intends to transfer some of its more skilled employees to three plants that will remain open.  The number of employees available for transfer from each closing plant is as follows:
Closing Plant                       Transferable    Employees
1                                                     60
2                                                    105
3                                                      70

The following number of employees can be accomodated at the three plants remaining open:
Open Plants              Employees Demanded
A                                       45
B                                       90
C                                       35

Each transferred employee will increase product output per day at each plant as follows:
FROM/TO                     A                    B                         C
1                                     5                    8                           6
2                                    10                   9                          12
3                                    7                    6                             8

TRANSPORTATION MODELS

Transportation models are special algorithms of linear programming problems in which the objective of the decision maker or the distributor of goods (services) is to prepare a schedule of shipment from different sources to different destinations such that the total cost of transportation is to be minimized.  There are a number of sources (factories, warehouses, or distribution centers) from where the supply of goods can be obtained and there are a number of destinations (customer outlets, depots, or dealerships) which require these products.  The transportation model should be able to determine how many units of the products should be allocated along each route so as to minimize the total cost of such allocations.

The following assumptions are to be considered in any transportation models:
1.  The decision maker is expected to make the best possible match of sources to destinations in allocating goods that will yield the minimum cost of transportation.
2.  The cost per unit of transportation from every source to every destination is givem.
3.  The products are homegenous in the sense that items allocated from different sources can be freely interchanged.  Only the total cost of transportation might vary from one route to another.
4.  All routes are acceptatble except a dummy source or  a dummy destination if injected.
5.  The total cost along any route is the number of items allocated to that route multiplied by its cost per unit.
6.  Total supply equals total demand, i.e., the distribution or transportation table is balanced.

Kinds of Transportation Table
1.  Balanced table .  The table is said to be balanced if the total supply is equal to the total demand which is a standard table.
2. Unbalanced table.  The table is said to be unbalanced if the total supply is not equal to the total demand. 
3. Non-degenerate table.  A table is said to be non-degenerate if the number of occupied cells is equal to the number of rows plus number of columns minus one which is also a standard table.
4.  Degenerate table.  A table is said to be degenerate if the number of rows plus the number of columns minus one is not equal to the number of occupied cells.

Four Different Ways of Allocating Goods
1.  The Northwest Corner Rule
2.  The Minimum Cost Method
3.  The Vogel's Approximation Method
4.  The Stepping Stone Method of Transportation

Project

Pax!

Submit your project in the comment section of this blog on or before July 15, 2013.

LINEAR PROGRAMMING:GRAPHICAL METHODS

Examples

1.  A small firm manufactures necklaces and bracelets.  The combined number of necklaces and bracelets that it can handle per day is 24.  The bracelet takes 1 hour of labor to make and the necklace takes a half hour.  The total number of hours of labor available per day is 16.  If the profit on the bracelet is $2 and the profit on the necklace is $1, how many of each product should be produced daily to maximize profit?

2.  Two chemical plants produce three grades (A, B, and C) of a certain chemical in a single operation, so the various grades are in fixed proportions.  Assume Plant 1 produces 1 unit of A, 2 units of B, and 3 units of C in a single operation, and it charges $300 for what is produced in one operation.  Assume one operation at Plant 2 costs the consumer $500 and produces 1 unit of A, 5 units of B, and 1 unit of C.  A consumer needs 100 units of A, 260 units of B, and 180 units of C.  How should the consumer place to orders so that costs are minimized?

Practice Exercises

1.  A manufactures two types of electric hedge-trimmers, one of which is cordless.  The cord-type trimmer requires 2 hours to make, and the cordless model requires 4 hours.  The company has only 800 work hours to use in manufacturing each day, and the packing department can package only 300 trimmers per day.  If the company sells the cord-type model for $30 and the cordless model for $ 40, how many of each type should it produce per day to maximize its sales?

2.  In problem 1, if the profit on each type is $10, how many of each type should the company produce per day to maximize its profit?  Can its profit be maximized at more than one point in this case?

3.  Two factories produce three different types of kitchen appliances.  The table below summarizes the production capacity, the number of each type of appliance ordered, and the daily operating costs for the factories.  How many days should each factory operate to fill the  orders at minimum cost?
_________________________________________________________________
                                    Factory 1              Factory 2              Number Ordered
\________________________________________________________________
Appliance 1             80 per day               20 per day                   1600
Appliance 2             10 per day               10 per day                     500
Appliance 3             20 per day               70 per day                   2000
Daily cost                $10,000                    $20,000
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4.  A candidate wishes to use a combination of radio and television advertisements in his campaign.  Research has shown that each 1-minute spot on television reaches 0.09 million people and each 1-minute spot on radio reaches 0.006 million.  The candidate feels he must reach 2.1 million people, and he must buy a total of 80 minutes of advertisements.  How many minutes of each medium should be used to minimize costs if television costs $500/minute and radio costs $100/minute?