The Hashemite University

Industrial Engineering Department

Engineering Economy
Chapter 1: Engineering and
Engineering Economy
Dr. Souma Alhaj Ali
Dr. Souma Alhaj Ali
Engineering and Science
l Engineering: is the profession in which a
knowledge of the mathematical and natural
sciences gained by study, experience, and practice
is applied with judgment to develop ways to
utilize economically the materials and forces of
nature for the benefit of mankind
[ABET_Accreditation Board for Engineering and
Technology]
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Engineering and Science
l Engineering is an application of science to the
uses of humanity in producing products,
structures, systems, or services.
l To the ScientistKnowledge is an end in itself.
The role is to add accumulated body of systematic
knowledge and to discover universal laws of
behaviour.
Dr. Souma Alhaj Ali "
Physical and Economic environments of
Engineering
l Engineers manipulate elements of the physical
environment to create value in the economic
environment.
l The worth of products or services lies in their
economic utility.
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Physical and Economic Efficiency
l Resources are limited, therefore, engineers search for the
best opportunity for investment
l The objective of engineering is to get the greatest end
result per unit of resource expenditure.
l Physical efficiency= output/ input
l Economic efficiency= worth/ cost
l Physical efficiency does not exceed 100%
l Economic efficiency can exceed 100%.
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The Engineering Process
l Determination of objectives
l Identification of strategic factors
l Determination of means
l Evaluation of engineering proposals
l Assistance in decision making
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Steps to problem solving
l Understand the problem and goal
l Collect relevant information
l Define the alternative solution
l Evaluate each alternative
l Select the best alternative using some criteria
l Implement the solution and monitor the results.
l EE is related to steps 2,3, and 5. Steps 2 and 3 set up the alternatives.
Additionally, EE is the primary technique used in step 4 in
performing the economic analysis of each alternative.
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Engineering for Economic Competitiveness
l The product life cycle
l Designing for the life cycle
Conceptual/
Preliminary
design
Product use
/ Support
/ phaseout
Production-
construction
Detail
design/
development
Acquisition phase Utilization
phase
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Definition of Engineering Economy
l Engineering Economy: it is the body of
knowledge which is useful in evaluating
engineering proposals in terms of their worth and
cost.
Dr. Souma Alhaj Ali ()
Why is Engineering Economy Important to
You?
l Analysis
% Since the technical things that engineers do must be successful
economically, it is obviously important to consider both the
technical aspects of engineering practice and the economic aspects
of engineering practice.
l Communication
% Without exception, economic is the &language of management'.
% The wise engineer learns how to communicate with decision
makers.
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Key Points
l Engineering activities are not an end in themselves, but
are a means for satisfying human wants
l The essential prerequisite of successful engineering
application is economic feasibility
l Engineering is not a science, it is an art composed of skill
and ingenuity in adapting knowledge to the uses of
humanity
l Engineering is concerned with two interconnected
environments, the physical and economic
Dr. Souma Alhaj Ali (
Key Points
l In the evaluation of most ventures, economic efficiency
must take precedence over physical efficiency
l Phases in the engineering process include the
determination of objectives, the identification of strategic
factors, the determination of means, the evaluation of
engineering proposals, and assistance in decision making
l Economic competitiveness is desired by both procedures
and nations as a means for economic advancement
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Key Points
l Fundamental to the application of engineering for
economic competitiveness is an understanding of the
product life cycle
l Beneficial design decisions can be made during the
acquisition phase of the product life cycle that will
minimize cost during the utilization phase
l Economy in the attainment of an objective in terms of
resource input has always been a characteristic of
engineering
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