Chapter 1 Introduction

1. Chapter 1 Introduction

2. Today’s Objectives: • By the end of this lecture students will be able to • understand: • 1- The Problem Solving Process. • 2 - Nonmonetary Considerations. • 3 - Present Economy Examples.

3. WHAT IS ECONOMICS ? The study of how limited resources is used to satisfy unlimited human wants

4. WHAT IS ENGINEERING ECONOMY ? Engineering economy is the application of economic analysis techniques In the comparison of engineering design alternatives.

5. The Problem Solving Process 1- Formulating of the problem 2- Analysis of the problem 3- Search for alternatives solutions to the problem 4- Selecting of the preferred solution 5- Specification of the preferred solution

6. The problem solving or engineering design process begins when a decision maker is dissatisfied with something, or recognizes a need, and then decides to do something about it. The process ends with plans for correcting the dissatisfaction or satisfying the need.

7. The formulation of the problem: • involves the establishment of the boundaries for the problem. • cause / effect relationship are not missed. • Avoid being overly influenced by the presence of a present solution, because it produces a incremental improvements rather than radically new solutions.

8. 2- The analysis of the problem: consist of relatively phrasing of the characteristics of the problem, including restrictions and the criteria to be used in evaluating alternatives.( budget, quality, safety, personnel, environmental, and service level constrains).

9. 3-The search of alternative solutions: involves the use of the engineer’s creativity in developing feasible solutions. Use a team. Gender and racial diversity on the team. Brainstorming, total quality management, breakthrough thinking principles by Nadler and Hibino

10. breakthrough thinking principles by Nadler and Hibino: Uniqueness: each problem is unique and should be approached as such. purposes: focus on the underlying purposes to strip away nonessential and distracting aspects of the problem. solution after next: recognize that you are designing for the future, think about the next generation of designs. systems: solutions to problems seldom exist in isolation, there is a bigger system that will be impacted by your solution

11. e) limited information collection: there is a time for data collection, and it is not at the initiation of the problem solving process. • f) problem design: people will be impacted by the solutions, then they should be involved in developing the solution. • g) betterment timeline: one of the worst axioms ever articulated is “if it isn’t broken, don’t fix it”. If it isn’t broken break it. Fix it before it breaks. Whether it is broken or not , improve it.

12. 4- the selection of preferred solution, consist of the measurement of the alternatives, using the Appropriate criteria. The alternatives are compared with the constraint, and infeasible alternatives are eliminated. 5- the specification of the preferred solution consist of a detailed description of the solution to be implemented. Prediction of the performance Characteristics of the solution to the problem are included in the specification.

13. Example 1.1 As an illustration of the application of the problem solving approach, consider the case of locally owned electrical power generating company faced with an air pollution problem that had to be solved. The power plant was using low grade coal with sulfur content of 1.9% by weight, and the air pollution control board for the state directed the power plant to comply with newly adopted standards for air quality.

14. A consulting engineer was hired to study the problem and recommend the best course of action. A search for alternative solutions to the problem resulted in a consideration of bunker C fuel oil, low sulfur furnace fuel oil and natural gas. Compare the alternatives using benefit cost analysis.

15. Example 2.1: A leading manufacturer of automotive bearings was faced with the need to expand its distribution operations. A study team was formed to analyze the problem and develop a number of feasible alternative solutions. After analyzing the problem and projecting future distribution requirements, the following feasible alternatives were determined:

16. Consolidate all distribution activities and expand the existing distribution center, located in Michigan. • Consolidate all distribution activities and construct a new center, location to be determined. • Decentralize the distribution function and build several new distribution centers geographically dispersed in the United States. • The officers of the company directed the study team to pursue the second alternative.

17. The location study resulted in five candidate locations being selected for final consideration, the criteria used to make the final selection included: • Land cost and availability. • Labor availability and cost. • Proximity to supply and distribution points • Taxes and insurance rates. • Transportation • Community attitudes. • Building costs.

18. The officers of the company selected a site in Alabama. Then they directed the study team to develop design alternatives for the material handling system. • Four alternatives were obtained: • 1- Use of pallet racks, lift trucks and flow racks. • 2- Use of automated stacker crane system, lift trucks, conveyors and flow racks. • 3- Use of narrow aisle, guided picking machines, high rise shelving, conveyors, driverless tractor trains and lift trucks. • 4- Use of an automated stacker crane system, a rail guided picking vehicle system, a sortation and accumulation conveyor system and a high rise narrow aisle lift trucks. • For a planning of 10 years , the fourth alternative was the most economical and was recommended to top management.

19. Nonmonetary considerations: multiple criteria in the decision process Managers have multiple criteria to be considered in reaching a final decision about The alternative to be adopted. Some of these factors: Quality – safety – environmental impact – community attitudes – labor management relationship – cash flow position – risks – system reliability – system availability – system maintainability - system operability – system Flexibility – impact on personnel levels –etc.

20. Present economy examples: Example 1.5

27. Example 1.6 For one product that a company manufactures, the purchased raw material is 2 inch diameter × 10 feet long extruded aluminum bar stock. This material costs $1.05/pound. Since the company purchases an average of 100,000 pound/month, it is considering manufacturing the raw material , which would require the purchase of an extrusion machine and a cutoff saw. Raw material for the extruder can be purchased in 4 inch × 4 inch × 57 inch long cast aluminum ingots for $ 0.50/pound. The company’s process engineer estimates the extruding operation would cost $0.30/pound, and the subsequent cutoff operation would cost $0.05/pound. The engineer also estimates there would be a 10% scrap loss of material at the extrusion stage and a 5.7% loss of material at the cutoff operations.

28. If the company manufactures the extruded rod, what are the estimated annual saving? 2. If the company manufactures the extruded rod, what is the production cost for each rod? (aluminum density = 0.1 pound/cubic inch)

29. Answer:

32. Example 1.7