Sunday, April 8, 2012

Engineering Economics and Industrial Engineering

Engineering economics is economic analysis of engineering alternatives to select the most economic technical solution to the problem at hand. It is a subject of relevance to all engineering streams and all engineers have to use this subject to come out with economic technical solutions. Industrial engineering is also an engineering discipline and hence one can imagine that they are also taught engineering economics like other engineers. But industrial engineering has a special responsibility among engineering disciplines. Industrial engineering consists of human effort engineering and system efficiency engineering. It is the responsibility of industrial engineering department to champion efficiency in organizations.

Hence, industrial engineers have to ensure that proper engineering economic analysis is being carried out in various departments of their organization. This activity can be carried out by IE departments under the name "Engineering Economic Appraisal". Engineering economic appraisal is both engineering appraisal and economic appraisal. Engineering appraisal has to ensure that various engineering alternatives were developed as possibles solutions to the problem and economic appraisal has to ensure that appropriate economic analysis was carried and the right decision is taken.

Economic efficiency and engineering efficiency or technical efficiency may not go together. Advanced or automatic equipment and economic efficiency may not go together. Hence there is a need to evaluate alternative processes and equipment to arrive at optimal selections to individual equipment decisions as well as system decision. Industrial engineering departments have to take that responsibility. Engineering economics courses taught in industrial engineering programs have to bring out this role of IEs in organizations. The engineering economic appraisal can be done by the engineering department managers themselves for individual items or small systems. But for complex systems, the formal involvement of IE department is required as a formal appraisal process. For very complex systems, there can be concurrent appraisal also.
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