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Comment Business & Economics

Capital And Production Costs: Improving the Bottom Line

By Thane R. Brown, Universities of Dayton and Cincinnati (Retired from Procter & Gamble) |

The chemical process industries (CPI) invest large amounts of capital each year and spend even more to produce the goods they sell. In 2007, CPI companies large enough to be in the Fortune 500 list invested more than $100 billion of capital and spent more than $1.2 trillion making their products. Most of this money is committed by decisions made in the early stages of process development and plant design. This article presents a disciplined method, called Economic Design, for decision making, early on in a project, that can lead to significant savings for many years. To demonstrate the size of investments being discussed, the CPI companies referred to above are listed in Table 1 along with their 2007 capital investment and cost of the products made (see the “Cost of Products” box for further explanation). While this list does not include smaller companies, it does capture the majority of capital and production costs spent in these industries. As mentioned, most of this money is committed as soon as engineers make key decisions during product development, process development and the feasibility and conceptual phases of plant design. Often, their decisions have longterm, lasting impact as shown in these examples: • Deciding…
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