Value Creation Model for Industrial Engineering - Productivity Engineering
Job specification for Sr. Industrial Engineer (December 2020)
Quality/Cost Improvements (Create value of $500k of savings per year)
CLEMENS FOOD GROUP
2700 CLEMENS ROAD
P.O. BOX 902
HATFIELD, PA 19440-0902
Industrial Engineering is Prosperity Engineering for consumers, employees, producers and society. (18.12.2020)
Lesson 13 of Industrial Engineering ONLINE Course - Introduction to Industrial Engineering Module
Lesson 12. IE Measurements - Productivity, Process Time (Machine time, Operator time), Cost and Waste
Industrial engineering learners have to understand the potential for value creation by them in the companies. The compensation or income received is always related to the value created by a professional. Hence for industrial engineering students as well as professionals, understanding value creation potential is extremely important. A model is presented in this essay on value creation (2020).
Trying to document IE practice in Top Global Engineering Companies. #AtoZChallenge April Writing
Industrial Engineering Practice in Top Global Manufacturing Companies - Top 100
https://nraoiekc.blogspot.com/2020/03/industrial-engineering-in-top-global.html
How many industrial engineers in a company for cost reduction?
For $100 million cost, there can be one MS IE and 6 BSIEs.
Value Creation Model for Industrial Engineering
For $100 million cost, there can be one MS IE and 6 BSIEs. Value created: $3,600,000 per year on $100,000,000 cost of production per year.
Explanation
We start with a MS Industrial Engineer earning $12,000 per month. He is expected to have 6 BS industrial engineers under him. Each BS industrial engineer is earning a salary of $6000 per month.
Explanation
We start with a MS Industrial Engineer earning $12,000 per month. He is expected to have 6 BS industrial engineers under him. Each BS industrial engineer is earning a salary of $6000 per month.
Let us take a team of one BS industrial engineer + Supervision by MSIE + staff support totaling $10,000 per month. which is equal to $120,000 per year.
This team is expected to generate a saving of $600,000 per year in 50 IE projects. That means each project has to save 12,000 dollars on average.
Let us assume each project is on an operator earning $3000 per month. The total cost of the work center can be taken as $30,000 per month. Which means $360,000 per year. Industrial engineers have to find $12,000 savings out of that expenditure every year assuming that a BSIE is responsible for work of 50 operators . Operation Analysis is used on One Machine + Operator combination. It is possible that multiple machines are operated by one operator in which case we may think of one machine + part operator. Maynard and Stegemerten authored a full book on operation analysis and Niebel explained it well in a chapter in his book on Motion and Time Study.
The IE department's expenditure per month is $60,000 ((1 MSIE + 5 BSIEs + Staff)). They have to find savings of $300,000 per month. $3,600,000 per year on $100,000,000 cost of production per year.
Are they able to find such cost savings year after year and justify their compensation?
Breakup of Productivity Benefit - Sharing Scheme
Savings of $300,000 per month
Benefit break up:
IE department staff: $60,000
Investment in projects: $60,000
Increase in benefits to other employees:$60,000
Benefit to customers: $60,000
Increase in profits of the company: $60,000
In the second year, the share of IE department staff and Investment in projects may get reduced to $30,000 and $90,000 may be given customers thus increasing the demand for the product to absorb the increased productivity.
Look forward to comments from Industrial Engineers on the feasibility of achieving productivity savings year after year and sharing them with other employees, shareholders and consumers apart from taking their compensation.
Let us say one BSIE IE team will have per annum $120,000 department expenses (personal sal + department office expenses)
Per annum investment in productivity projects is $120,000. So total investment in productivity improvement can be taken as $240,000.
While it gives savings of $600,000, from 2nd year onwards, $360,000 is shared with consumers. $120,000 is shared with employess. $120,000 is the return to capital invested.
Hence we can as investment: $240,000
From 2 year end every year there is cash inflow of $120,000. This will give payback period of 3 years because in the first year we are assuming that there is no cash inflow.
The NPV at the end of four years at a discount rate of 10% is $52,680.
You can use the numbers in the model to calculate payback period and NPV
Let us say one BSIE IE team will have per annum $120,000 department expenses (personal sal + department office expenses)
Per annum investment in productivity projects is $120,000. So total investment in productivity improvement can be taken as $240,000.
While it gives savings of $600,000, from 2nd year onwards, $360,000 is shared with consumers. $120,000 is shared with employess. $120,000 is the return to capital invested.
Hence we can as investment: $240,000
From 2 year end every year there is cash inflow of $120,000. This will give payback period of 3 years because in the first year we are assuming that there is no cash inflow.
The NPV at the end of four years at a discount rate of 10% is $52,680.
As an Industrial Engineer, and IE manager are you following value addition and value allocation?
Taylor rubric: "an increase in productivity was allocated (1) one-third to the worker in the form of increased wages, (2) one-third to the owners in the form of stock dividends and capital investment, and (3) one-third to consumers in the form of lower prices for the products the company produced."
Interesting. What’s in a Name? The Trials and Tribulations of IIE!
Bill Biles, Professor of IE, Retired at University of Louisville
https://www.linkedin.com/pulse/whats-name-trials-tribulations-iie-william-e-biles-phd-bill-biles/
Productivity Engineering Online Course Lessons
Process Industrial Engineering Module for Value Creation
The objective of process industrial engineering is value addition to the organization through cost reduction by productivity engineering. Week after week, measurable value addition can be done by industrial engineers through creative redesign based on new technical developments, special IE studies of processes and operations, involvement all employees of the organization, and through the consulting inputs.
Process Industrial Engineering - Methods and Techniques - Part 1 - Part 2 - Part 3 - Part 4 - Part 5
What Drives Productivity Improvement Year after Year?
Developments in engineering and technology.
The main driver for productivity improvement is the progress in engineering and technology. In the area of machining, there is progress in cutting tools, work holding, coolants, heat treatment, and equipment power and rigidity. All are contributing to productivity improvement. Sensors, actuators, data storage and analysis are increasing productivity. All the engineering improvements are adopted in engineering processes on a continuous basis through operation analysis which is done in forward direction and backward direction.
The main focus of industrial engineering is productivity engineering by identifying new technologies that have applications in the processes of their organization. Creative engineering is to be done in implementing new technologies. Industrial engineering is engineering first.
Say YES to Knowledge Based Industrial Engineering.
Use recent developments in engineering & technologies in process improvement for productivity.
No IGNORANCE Industrial Engineering.
Developments in Manufacturing Processes for Operation Analysis - Value Engineering - Product/Process Industrial Engineering
https://nraoiekc.blogspot.com/2019/12/manufacturing-processes-for-value.html
Technical Magazines and Trade Literature
Industrial engineers have to receive and collect the technical magazines, catalogues and other trade literature and use the relevant productivity improving tools, accessories and equipment. Industrial engineering institutes must have special wings in their libraries to collect and preserve technical literature in all branches of engineering.
Development in IE Methods and Techniques
The recording techniques of IE have changed. Video recording has become popular. There are many ideas on mathematically optimizing the engineering systems improved by redesigning the engineering elements. Six sigma method can be used to determine the best combination of factor levels.
Creativity
Industrial engineering is based on creativity. Both improving products and processes requires creativity. IEs have to go to training programs in improving creativity and have to organize training programs for their organization personnel to increase creative application of the knowledge base available with them at any instant of time.
Consultants
IE departments have to maintain contacts with consultants to utilize their services in productivity development. They can be invited to participate in product industrial engineering and process industrial engineering workshops to offer their suggestions in brain storming sessions.
Each Industrial engineer team has to find $12,000 savings out of the annual expenditure of an operation (average expenditure assumed as $360,000) every year assuming that a BSIE is responsible for work of 50 operations. Operation Analysis is used on One Machine + Operator combination. It is possible that multiple machines are operated by one operator in which case we may think of one machine + part operator. Maynard and Stegemerten authored a full book on operation analysis and Niebel explained it well in a chapter in his book on Motion and Time Study.
The complete operation analysis and design of new SOP has to be completed in 5 days to facilitate study of 50 operations in year by the IE team. All IE techniques and methods are to be applied on the operation as well as on the full system required within these 5 days allotted to an operation.
An interesting illustration of continuous improvement of a machining process is:
IE Continuous Improvement - 3 Years - 50% Cost Reduction - Diplexer Line
Productivity Science: Science developed for each element of machine operation and each element of human tasks in industry.
Productivity Science - Determinants of Productivity
Product Industrial Engineering: Redesign of products to reduce cost and increase value keeping the quality intact.
Product Industrial Engineering
Process Industrial Engineering: Redesign of processes to reduce cost and increase value keeping the quality intact.
Process Industrial Engineering
Industrial Engineering Statistics: Using statistical tools like data description, sampling and design of experiments in industrial engineering activity.
Statistics and Industrial Engineering
Industrial Engineering Economics: Economic analysis of industrial engineering projects.
Engineering Economics is an Efficiency Improvement Tool for Industrial Engineers
Human Effort Industrial Engineering: Redesign of products and processes to increase satisfaction and reduce discomfort and other negative consequence to operators.
Motion Study - Human Effort Industrial Engineering
Productivity Measurement: Various measurements done by industrial engineers in industrial setting to collect data, analyze data and use the insights in redesign: Product Industrial Engineering and Process Industrial Engineering.
Industrial Engineering Data and Measurements
Productivity Management: Management undertaken by industrial engineers to implement Product Industrial Engineering and Process Industrial Engineering. Management processes industrial engineering is also part of productivity management.
Productivity Management
Operation Analysis - Time Duration
Each Industrial engineer team has to find $12,000 savings out of the annual expenditure of an operation (average expenditure assumed as $360,000) every year assuming that a BSIE is responsible for work of 50 operations. Operation Analysis is used on One Machine + Operator combination. It is possible that multiple machines are operated by one operator in which case we may think of one machine + part operator. Maynard and Stegemerten authored a full book on operation analysis and Niebel explained it well in a chapter in his book on Motion and Time Study.
The complete operation analysis and design of new SOP has to be completed in 5 days to facilitate study of 50 operations in year by the IE team. All IE techniques and methods are to be applied on the operation as well as on the full system required within these 5 days allotted to an operation.
An interesting illustration of continuous improvement of a machining process is:
IE Continuous Improvement - 3 Years - 50% Cost Reduction - Diplexer Line
About Industrial Engineering
Industrial Engineering - Productivity Improvement - Process Improvement - Product Redesign - Continuous Improvement
Industrial engineering is improvement in various elements of engineering operations to increase productivity. Along with engineering elements, industrial engineers evaluate and improve many other elements also as they are responsible for productivity and cost of items produced in a process. Through assignments of improving productivity and efficiency of information technology and software engineering processes, industrial engineers specializing in IT were given responsibility for business processes also. Thus industrial engineers with focus on various branches of engineering provide their services to companies and society to improve various elements of the products and processes on a continuous basis over the product life cycle. They are active in engineering or production-maintenance-service-logistic processes and business processes.
Productivity improvement always focuses on quality and flexibility issues as productivity improvement should not lead to any deterioration in quality or flexibility. Delivery and cost are always at the core of industrial engineering. Thus when QFCD paradigm came, that is attention to quality, flexibility, cost and delivery became prominent, many industrial engineers were given the responsibility of managing this function of continuous improvement.
Focus Areas of Industrial Engineering - Brief Explanation
Productivity Science: Science developed for each element of machine operation and each element of human tasks in industry.
Productivity Science - Determinants of Productivity
Product Industrial Engineering: Redesign of products to reduce cost and increase value keeping the quality intact.
Product Industrial Engineering
Process Industrial Engineering: Redesign of processes to reduce cost and increase value keeping the quality intact.
Process Industrial Engineering
Industrial Engineering Optimization: Optimizing industrial engineering solutions created in Product Industrial Engineering and Process Industrial Engineering.
Operations Research - An Efficiency Improvement Tool for Industrial Engineers
Operations Research - An Efficiency Improvement Tool for Industrial Engineers
Industrial Engineering Statistics: Using statistical tools like data description, sampling and design of experiments in industrial engineering activity.
Statistics and Industrial Engineering
Industrial Engineering Economics: Economic analysis of industrial engineering projects.
Engineering Economics is an Efficiency Improvement Tool for Industrial Engineers
Human Effort Industrial Engineering: Redesign of products and processes to increase satisfaction and reduce discomfort and other negative consequence to operators.
Motion Study - Human Effort Industrial Engineering
Productivity Measurement: Various measurements done by industrial engineers in industrial setting to collect data, analyze data and use the insights in redesign: Product Industrial Engineering and Process Industrial Engineering.
Industrial Engineering Data and Measurements
Productivity Management: Management undertaken by industrial engineers to implement Product Industrial Engineering and Process Industrial Engineering. Management processes industrial engineering is also part of productivity management.
Productivity Management
Applied Industrial Engineering: Application of industrial engineering in new technologies, existing technologies, engineering business and industrial processes and other areas.
Related
Industrial Engineering in Top Global Manufacturing Companies - Top 100
https://nraoiekc.blogspot.com/2020/03/industrial-engineering-in-top-global.html
Industrial Engineering Jobs - Top Global Manufacturing Companies - 2020
https://nraoiekc.blogspot.com/2020/03/industrial-engineering-jobs-top-global.html
Look forward to success stories from industrial engineers in comments. Inform fellow industrial engineers, productivity savings achieved by you in various years. Share the information to other employees of your organization.
Updated on 9.2.2024, 26 August 2021, 25 May 2020, 27 March 2020
First posted on 16 March 2020