Estimating Manufacturing Costs A.K.A. Operating Costs

Basic Steps in the Feasibility Evaluation of a Process Design Develop the conceptual design and flowsheet for the process. Calculate the capital investment needed to build the plant. Calculate the operational investment needed to run the plant. Perform an economic analysis and calculate the break even point and internal return on investment Compare the investment with other investment options

Cost of Manufacturing is in addition to capital costs 3 Types of Manufacturing Costs Direct Manufacturing Costs Fixed Manufacturing Costs General Expenses

Direct Costs Costs are dependent on production rate Raw materials Utilities Labor Waste treatment Supplies Maintenance Lab Charges Patents & Royalties

Fixed Manufacturing Costs Costs are independent of or very loosely tied to production rate Taxes and insurance Depreciation Plant overhead

General Expenses Costs loosely tied to the production rate Sales and marketing R&D costs Administrative costs

Data Needed to Estimate Operating Costs Fixed Capital Investment (FCI) (Total Module Cost or Grass Roots Cost) Cost of Operating Labor (COL) Cost of Utilities (CUT) Cost of Waste Treatment (CWT) Cost of Raw Materials (CRM)

Estimation of Direct Manufacturing Costs (DMC)

Estimation of Fixed Manufacturing Costs (FMC)

Estimation of General Manufacturing Expenses

Estimation of Cost of Manufacturing (COM)

Estimation of Cost of Manufacturing (COM) NOTE: Use COM without depreciation and deal with the depreciation in Economics

Raw Material Costs Can be difficult to find Try to find recent data! Sources: ICIS (Formerly Chemical Market Reporter) Prices from August 2006 given Internet search (e.g. toluene price 2015) Spot Metal Prices can help with catalyst prices

Estimation of Cost of Operating Labor (COL) Determine Labor Requirements (NOL = # of Operators per shift) Determine Labor wages ~$50,000 / yr http://www.bls.gov/oes/current/oes519011.htm Estimate COL

Working Hours of Labor Number of weeks in a year = 52 Number of weeks for vacation = 3 Number of shifts = 5/week Hours in each shift = 8 Total hours/year = 8x5x49=1960 Total hours of operation = 24x365 The Bottom Line: Number of operators hired for each operator needed in a plant = 24x365/1960=4.47~4.5

Estimating Utility Costs Can be Difficult to Estimate Price Fluctuations in fuel Geographical variations Various Choices (coal, natural gas, oil) Try to find recent utility cost data US Energy Information Administration is a good source Natural Gas: http://www.eia.gov/dnav/ng/NG_PRI_SUM_DCU_NUS_M.htm Electricity: http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_03

Estimating Utility Costs Table 8.3 in text should be used as a last resort since it is old data. (If used the prices need to be updated to current prices)

Estimating Utility Costs

Source of Utility Streams Purchase from Local Utility No capital cost Use as default for a base case Supplied by the company utility rates may be lower than local utility Generate and use within the process capital and operating costs are part of the process

Optimum Return Temperature of Cooling Water Trade Offs on Cooling Water Return Temperature Less cooling water is required for larger return temperature however: Area of heat exchanger is larger because of smaller driving force Penalty may have to be paid if a maximum temperature constraint is violated (T > 40 oC) Significant fouling of heat exchangers may occur at temperatures larger than 45 oC The Bottom Line: Optimum temperature increase of cooling water is around 15 oC.

Cost of Treating Wastes Cost of treating waste streams economically driven by environmental regulations Ethics are also a consideration If possible design the plant with minimum waste generation From Table 8.3