Question

Completely and thoroughly explain how the concepts of Engineering Economy could be used to help a company that makes paper products make a decision on whether or not they should invest in new equipment. You will need to include more information that what is presented in the lecture transcript for Engineering Economy.

Answer 1

WHAT IS ENGINEERING ECONOMY:

• It is the collection of techniques that simplifies comparision of alternatives on an economic basis.
• it tell various methods and process that gives same results but in most economical way.
• It basically deals with justification and selection of projects at industry level.
• The principles of engineering economy is on the basis of profit maximization from limited amount of resources .

for example let us consider a Manufacturing company X, which hires labours on contract basis say for 2 months, because they planned a project in such a way that for that 2 months they require labour of that particular skill that the company is in search of and for rest of the year they hire normal labour for other work in such process man power is minimized and their wages also.

Now according to question, a paper product manufacturing company has wide ability to apply concepts of engineering economy. In paper making process there are minimum 6 types of process is employed for which 5 machines are used.

1. Forming section machine: commonly called the wet end, is a continuous rotating wire mesh which removes water from the paper by sucking it out of suspension.
2. Press section (power press machines) :where the wet fibre web passes between large rolls loaded under high pressure to squeeze out as much water as possible.
3. Drying section: where the pressed sheet passes partly around, in a serpentine manner, a series of steam heated drying cylinders. Drying removes the water content down to a level of about 6%, where it will remain at typical indoor atmospheric conditions. Infra-red driers are also used to supplement cylinder drying where required.
4. Calender section :where the dried paper is smoothened under high loading and pressure. Only one nip (where the sheet is pressed between two rolls) is necessary in order to hold the sheet, which shrinks through the drying section and is held in tension between the press section (or breaker stack if used) and the calender. Extra nips give more smoothing but at some expense to paper strength.
5. Reel section :where paper coming out of the machine is wound onto individual spools for further processing.

6. Winder section: Reels of paper wound up at the end of the drying process are the full trimmed width, minus shrinkage from drying, of the web leaving the wire. In the winder section reels of paper are slit into smaller rolls of a width and roll diameter range specified by a customer order. To accomplish this the reel is placed on an unwind stand and the distances between the slitters (sharp cutting wheels), are adjusted to the specified widths for the orders. The wider is run until the desired roll diameter is reached and the rolls are labeled according to size and order before being sent to shipping or the warehouse. A reel usually has sufficient diameter to make two or more sets of rolls.

Now if we analyse the process of paper product manufacturing, the machines cost is not that high, but the other cost like running cost, electricity, mantainence charges, part replacement charges and miscllenous chrages adds up and make a product costly. so by calculating all cost the profit margin is calculated. Now a days high end machines are coming in market which has maximum production capacity with in a very less amount of time, which also has grater flexibility that it can perform more than single operation in a time. In this scenario the company should purchase new machines which is automated which reduces labour cost and provides a quality and quantity of a products which could increase profit margins since the customer finds better products which is cheap and of good quality.

Now all cost of all the above mentioned process are calculated, and equated with all the cost of new Advanced machine. there are two possibilities

1. I profit outcomes of existing machines< that for new machines, then the company should buy, and ensures that it meet all target of production with in given time period.
2. If profits of existing machines> for New machines, then it should not purchase it, rather for increasing productivity it can hire and contract other industries, provided that manufacturing should be cheap and meet all its standard.