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Importance of Engineering Economics for engineers

importance of engineering economics for engineers

Engineering economics is the branch of economics which deals with the study and evaluation for economics decisions in engineering projects. Also, engineering economics can be helpful in the formulation, estimation and evaluation of engineering projects when multiple alternatives are available involving engineering design and analysis. There may be multiple factors in many projects which we cannot analyze just by bare eyes. So, we need more robust and trustworthy methods to provide better decision making results. Engineering economics is very important for engineers.

Why is the study of Engineering Economics important to engineers?

During the planning phase of any product, project or services engineers play a major role in the investment and decision making. The decisions taken during these phases greatly impact the final costs. These kinds of topics should be kept in mind while choosing and planning. With this in mind we can say that it is important for engineers to study engineering economics. Some of the importance of engineering economics are explained as follows.

Value Analysis

The organization carries out the assessment to study about the actual costs required to implement new features or maintain existing systems. These costs shouldn’t be more than the importance they are providing. This process is called value analysis. Engineers and project managers are responsible for carrying out value analysis. It helps to choose the most efficient way for implementation in terms of both costs and time. Eventually, reducing the cost of the overall project. Correspondingly, value analysis is aided by many economics techniques.

Efficient use of limited resources

One of the major importance of engineering economics is the proper and efficient use of limited and scarce resources. Engineering economics requires the application of technical and economic analysis with the goal of deciding best meets technical performance criteria and uses scarce capital in a prudent manner. The study of engineering economics draws upon knowledge of engineering and economics to address problems of allocating limited resources.

Decision making

The techniques and models of engineering economics assists people in making decisions. There are many examples which exhibit amazing engineering works in different fields and processes but fail to provide any significant merit in terms of benefits. In fact, without consideration of economics issues will most probably stop you from reaching full potential as an engineer. Engineering economics involves the evaluation of costs of benefits of proposed projects. So, studying engineering economics provides a foundation for engineers to make good decisions in a business environment.

Comparative analysis of alternatives

There might be many alternatives for implementing a feature, product or simply for the operation processes. These might have different characteristics, benefits, operational costs and time requirements. Comparing different alternatives with complex features can be tricky and the final result might not be as expected. There are many comparative analysis methods like IRR (Internal Rate of Return), ERR (External Rate of return), BCR (Benefit-Cost Ratio) and so on which aids in the decision process in choosing from available alternatives. The best alternative will be provided with the highest benefit and optimal time requirements.

Conclusion

From decision making, minimizing operational costs, comparison of various alternatives and other various uses of engineering economics it has proved itself to be really important in engineering projects. As an engineer steps into a higher position in either managerial posts or other posts where decision making is a key prospect the use of engineering economics prevails. Also, it provides methods to manage time and costs equally so that work can be done more efficiently in less time and reduce costs. So, engineering economics is important for engineers and it has been added in most of the engineering courses around the world for better reasons.

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