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UNIT 1

Introduction and Overview

Welcome to Automation and Control Systems Economics, 2nd Edition.Thefirst unit of this self-study program provides the information needed toproceed through the course.

Learning Objectives When you have completed this unit, you should:

A. Understand the general organization of this course.

B. Know the course objectives.

C. Know how to proceed through this course.

1-1. Course Coverage

This book covers the economic aspects of process control. It shows howthe tools of economic and financial analysis can be applied to process con-trol projects. Techniques are presented for making reasonable cost and benefit estimates and project evaluations.

The focus of this course is directed toward the multiple steps that areneeded to convert a control idea into a realistic project proposal. Benefitsmust be identified and estimated, costs must be estimated, and the worthof the project must be tested to see whether it has a chance for approval.Where necessary, risks must be factored into the estimates.

This is neither an engineering economy textbook nor a calculation manual.Some calculation procedures are described, but the overall emphasis is onreasonability rather than precision.

1-2. Purpose

The purpose of this book is to provide an understanding of the economicsof control. The basic tools of economic analysis are presented, then appliedto realistic process control projects and proposals. From these applicationsa student can see how to use the tools and what factors are likely to havethe greatest influence on profitability. A framework is provided for consis-tent estimation of costs and benefits, including the incorporation of risk

into calculations.

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UNIT 1: Introduction and Overview 5

Readers with dissimilar levels of experience may approach the book dif-ferently. A thorough knowledge of the material presented in Part 1 is anecessary condition for understanding Part 2. Those without much pro-posal experience should go through Part 1 in detail before going on to Part2. Those who have already been exposed to cost and benefit calculationcan review Part 1 more quickly and then concentrate on the effects of riskand uncertainty discussed in Part 2.

Part 3, Units 13 and 14, applies the concepts developed in Parts 1 and 2 todiscontinuous processes. These include batch processing and discrete partmanufacturing.

Each unit contains example problems to illustrate specific concepts, andexercises to test the readers understanding of the material. These exer-cises are an integral part of the presentation and should be reviewed bythe reader. Appendix B includes solutions to all exercises.

1-6. Course Objectives

When you have completed this entire book, you should:

A. Be able to identify the significant benefits that are likely to result froma control improvement.

B. Be able to quantify the benefits and present them as a cash flow table.

C. Be able to estimate project costs and present them as a cash flow table.

D. Know how to evaluate a proposed project, using any of severalevaluation procedures.

E. Understand the importance of risk factors and know how toincorporate them into calculations.

F. Appreciate the strategies used to minimize risk.