1. Harishwaran ‘Hari’ Hariharan The University of Tennessee
Engineering Economics with a little history and project management thrown in for good measure!
Harishwaran ‘Hari’ Hariharan
ECE 400
The University of Tennessee
April 20,2009

2. Outline Economic Revolutions, a Bit of History Project Management
Cost of an Engineer
Value Added
January 16, Slide 2

3. History of Productivity
What is the first wave?
Took thousands of years to play out.
Move from hunter-gatherer to agrarian society.
Agricultural revolution: feed the masses.
The rise of specialization.
Family and work intermingle on the farm.
Economy and war based on land.
Epic cultures: Ancient Egypt, Greeks, Romans.
What is the second wave?
Took a mere three hundred years.
Move from agrarian to industrial society.
Industrial revolution: mass production , assembly lines.
Work and family fragment into two distinct entities
Home and factory.
Economy and war based on industrial strength
Culminated with the Nuclear Family.
Epic cultures: 18-19th England, 20th America, USSR.
January 16, Slide 3

4. What wave are we in? Third Wave
50k years of human history divided into lifetimes of 65 years
First 650 lifetimes spent in caves.
Last 70: communicate from one to next—writing.
Last 6: seen the printed word (Guttenberg Bible).
Last 4: measure time with any precision.
Last 2: use an electric motor.
Current 800th lifetime, most everything we see today. May only play out for a few decades?
Space age? Electronic age? Global Village?
Move from industrial to information economy.
1956, last year that blue collar workers > white collar.
Mass customization: Dell, Yahoo News, Nokia, iPod
Family and work?
Economy and war?
Third Wave
January 16, Slide 4

5. Outline Economic Revolutions, a Bit of History Project Management
Cost of an Engineer
Value Added
January 16, Slide 5

6. Sponsor should not specify more than three!
Project Management
J.P. Lewis, 2002.
What is project management?
Thousands of years
Recognized within the past 20 years.
Facilitation of planning to achieve a successful project.
Competition is time-based not just cost-based.
What is a project?
Multi-task job.
Performance, Cost, Time, and Scope (PCTS) reqs.
Definite start and end time.
If repetitive, it’s not a project. (Done only once.)
A project is a problem scheduled for a solution.
Sponsor should not specify more than three!
January 16, Slide 6

7. Steps in Managing a Project
J.P. Lewis, 2002.
Define Problem
Develop Solution Options
Plan the Project
Execute the Plan
Monitor and Control Progress
Close Project
(Postmortem)
January 16, Slide 7

8. Problem: I have no place to live.
Planning the Project
J.P. Lewis, 2002.
Problem statement
Objectives
Deliverables
Required resources
Work-breakdown
Schedules
Risk assessment
Control systems
Exit criteria
Project Pain
Poor Planning
Proper Planning
Time
Problem: I have no place to live.
Musts
Wants
Nice
3 bedroom
2500 sq.ft
garage
1 acre
basement
room for home office
fireplace
Mission: Find a place that meets all musts and as many others as possible.
January 16, Slide 8

9. Schedule? Work-breakdown structure
J.P. Lewis, 2002.
Work-breakdown structure
project, task, subtask, work package, program, level of effort.
Keep going until you reach a low enough level to an estimate of the desired accuracy.
Estimate by starting with an assumption that a certain resource will be assigned.
Hazard’s?
“But you told me…”
Specify applicable tolerance.
Tell how estimate was made and assumptions used.
Specify any factors that might affect the validity of the estimate.
Parkinson’s Law: Work expands to fill the time allowed.
January 16, Slide 9

10. Gantt Chart
stanford.edu
January 16, Slide 10

11. Project Control and Evaluation
J.P. Lewis, 2002.
Control: The use of information to compare progress to the plan so that action can be taken to correct for deviations.
Effort used to control a project should be worthwhile (spend $100 to buy $3 battery?)
If you take no action in response to a deviation, then you have a monitoring system, not a control system.
Project working times must be recorded daily.
Project evaluation is done to determine whether a project should continue or be cancelled.
Measure, measure, measure!
January 16, Slide 11

12. Outline Economic Revolutions, a Bit of History Project Management
Cost of an Engineer
Value Added
January 16, Slide 12

13. How much does an engineer cost?
What do y’all expect as starting salaries?
Civil Engineer $38,943
Computer Engineering Degree $46,739
Chemical Engineering Degree $44,638
Electrical Engineering Degree $47,692
Industrial Engineer $41,300
Mechanical Engineer $47,200
What do y’all expect to “cost” your company?
Direct Labor $50,000
Fringe Benefits (30%) $15,000
Overhead (40-100%) $25,000
Total $90,000
What’s your hourly charge rate?
From above, $45 per hour.
Typical, is $ per hour.
2000 Man hours in a year!
Typical engineer costs $ K per year.
You need to be productive enough to justify your existence to you employer!
January 16, Slide 13

14. Sample Budget Personnel costs Clerical support
Fringe benefits (UTK 28%)
Equipment
Travel
Other direct costs
Supplies
Computer
Consulting services
Publications
Shipping
Facilities and Administration (F&A) (UTK 45%)!
January 16, Slide 14

15. What will your project this semester cost?
Hardware costs?
Parts total $1630
Design costs?
Four (4) senior engineering students
Five (5) man-hours per week per engineer
15 weeks
Total 300 man-hours!
$50 per hour charge rate (great deal for an engineer’s time)
Design cost: $15K
Labor costs?
January 16, Slide 15

16. Outline Economic Revolutions, a Bit of History Project Management
Cost of an Engineer
Value Added
January 16, Slide 16

17. What is value added? The customer is willing to pay for this activity.
It must be done right the first time.
The action must somehow change the product or service in some manner.
Consider in-car computer development company.
January 16, Slide 17

18. Cost of a Widget Component Costs (15-33%)
Direct Costs (add 25-40%) Recurring Costs:
Labor, Purchasing, Scrap, Warranty…
Gross Margin (add %) Non-recurring Costs:
Research and Development, Marketing, Sales, Equipment Maintenance, Rental (temporary), Financing Costs, Pretax Profits, Taxes…
Average Discount => List Price (add 33-66%)
What does each company “sell” and value they add?
Dell
REI
List Price
Average Selling Price
Average Discount
25-40%
Gross Margin
34-39%
Direct Costs
6-8%
Component Costs
15-33%
January 16, Slide 18

19. Summary Economic Revolutions and a Bit of History were discussed
Project Management is an important aspect in project planning
An Engineer should justify his existence to a company
Value added by an engineer should add or change a product to a substantial amount
January 16, Slide 19

20. Homework
None
January 16, Slide 20