This document discusses engineering economic analysis and its relationship to the engineering design process. It describes the seven steps of engineering economic analysis, which includes problem definition, development of alternatives, evaluation of alternatives, and recommendation. It then provides more details on two key steps: developing investment alternatives through techniques like classical brainstorming and the Nominal Group Technique, and evaluating alternatives through discounted cash flow analysis. The overall purpose is to outline the engineering economic analysis procedure and how it assists decision making within the engineering design process.

1. Engineering Economy and the
Design Process

2.  A sound engineering economic analysis procedure
incorporates the basic principles discussed In the
previous lectures and involves several steps.
 The seven-step procedure is also used to assist
decision making within the engineering design
process.
 The general relationship between the activities in
the design process and the steps of the economic
analysis procedure is indicated in the Table .

4. Problem Definition
• The first step of the engineering economic analysis
procedure (problem definition )is particularly important,
since it provides the basis for the rest of the analysis.
• A problem must be well understood and stated in an
explicit form before the project team proceeds with the
rest of the analysis.
 Recognition of the problem is normally stimulated by
internal or external organizational needs or requirements.
 An operating problem within a company (internal need) or
a customer expectation about a product or service
(external requirement) are examples.

5. Development of Alternatives
• The two primary actions in Step 2 of the
procedure are :
• (1) searching for potential alternatives
(2) screening them to select a smaller group of
feasible alternatives for detailed analysis.

6. Searching for Superior Alternatives
• creativity and resourcefulness were
emphasized as being absolutely essential to
the development of potential alternatives.
• The difference between good alternatives and
great alternatives depends largely on an
individual’s or group’s problem-solving
efficiency.

7. Developing Investment Alternatives
• “It takes money to make money,” as the old
saying goes.
• to make money, each firm must invest capital
to support its important human resources—
butin what else should an individual firm
invest?
• There are usually hundreds of opportunities
for a company to make money.

8. • Engineers are at the very heart of creating
value for a firm by turning innovative and
creative ideas into new or re engineered
commercial products and services.
• Most of these ideas require investment of
money, and only a few of all feasible ideas can
be developed, due to lack of time, knowledge,
or resources.

9. Approaches for Investment
Alternatives
two approaches that have found wide
acceptance in industry for developing sound
investment alternatives
• (1) Classical brainstorming
• (2) Nominal Group Technique (NGT).

10. Classical Brainstorming
• Classical brainstorming is the most well-known
and often-used technique for idea generation.
 There are four rules for successful brainstorming:
1. Focus on quantity
2. Reserve Criticism.
3. Welcome unusual idea.
4. Combine and improve ideas

11. Brainstorming Session
• A classical brainstorming session has the following
basic steps:
1. Preparation. The participants are selected, and a
preliminary statement of the problem is circulated.
2. Brainstorming. A warm-up session with simple
unrelated problems is conducted, the relevant problem
and the four rules of brainstorming are
presented, and ideas are generated and recorded using
checklists and other techniques if necessary.
3. Evaluation. The ideas are evaluated relative to the
problem.

12. Nominal Group Technique(NGT)
 The NGT involves a structured group meeting
designed to incorporate individual ideas and
judgments into a group consensus.
• By correctly applying the NGT, it is possible for
groups of people (preferably, 5 to 10) to generate
investment alternatives or other ideas for
improving the competitiveness of the
firm/Company.
• The technique, when properly applied, draws on
the creativity of the individual participant.

14. NGT Format
• The basic format of an NGT session is as follows:
• 1. Individual silent generation of ideas
• 2. Individual round-robin feedback and recording
of ideas
• 3. Group clarification of each idea
• 4. Individual voting and ranking to prioritize ideas
• 5. Discussion of group consensus results

15. The NGT session begins with an explanation of
the procedure and a statement of question(s),
preferably written by the facilitator.
• The group members are then asked to
prepare individual listings of alternatives,
such as investment ideas or issues that they
feel are crucial for the survival and health of
the organization. This is known as the silent-
generation phase.
• After this phase has been completed, the
facilitator calls on each participant, in round-
robin fashion, to present one idea from his
or her list.

16. • Each idea (or opportunity) is then identified in
turn and recorded on a flip chart or board by the
NGT facilitator, leaving ample space between
ideas for comments or clarification.
• This process continues until all the opportunities
have been recorded, clarified, and displayed for all
to see.
• At this point, a voting procedure is used to
prioritize the ideas or opportunities.
• Finally, voting results lead to the development of
group consensus on the topic being addressed.