Overall profitability

Let us consider the effect of differential inflation on the overall profitability of the project of the last example. The effect of general inflation on this project showed that the apparent profitability rises sharply, to an (NPV) of 431,269 at a general inflation rate of 20 percent. However, when the cash flows of the (NPV) are properly corrected to their purchasing power in Year 0, the (NPV) instead becomes 208,733. 

Proeess integration was developed initially as a means of optimizing the design of ehemieal and petroehemieal proeess plants. Proeess optimization is still only a pre-eonstruetion or pre-produetion exereise. This is surprising beeause many proeess plants are designed for bateh manufaeture of a range of produets, eaeh of whieh will require eontinuously ehanging optimization parameters. Proeess optimization and re-optimization on the fly ean enable eompanies to meet variations in market demand and maximize produetion effieieney and overall profitability. 

A survey of 500 plants that have implemented predictive maintenance methods indicates substantial improvements in reliability, availability and operating costs. The successful programs included in the survey include a cross-section of industries and provide an overview of the types of improvements that can be expected. Based on the survey results, major improvements can be achieved in maintenance costs, unscheduled machine failures, repair downtime, spare parts inventory, and both direct and in-direct overtime premiums. In addition, the survey indicated a dramatic improvement in machine life, production, operator safety, product quality and overall profitability. 

The cat cracker plays a key role in the overall profitability of the refinery. It must operate reliably and efficiently. It must also operate safely and comply with federal, state, and local environmental requirements. A typical FCC unit circulates tons of catalyst per minute, processes various types of feedstock and uses hundreds of control loops, any of which can make operation difficult. Proper troubleshooting will ensure that the unit operates at maximum reliability and efficiency while complying with environmental concerns. 

Figure 8.2 illustrates the format of a typical absorption costing exercise. This exercise can easily be used to calculate the overall profit or loss of each enterprise and its profit margin. See for example Fig. 8.3. One of the difficulties of this exercise is allocating the fixed costs between the various enterprises. Take housing for example if the shed is shared between beef cattle and sheep, then the allocation of the cost could be made on a space and time basis. On a large-scale farm with several workers there will probably be a shepherd, a stockman, and a tractor driver for the arable crops. However, on a smaller farm where the farmer and his family do all the work then division of time between...

Process optimization. The settings of some process variables can have a major influence on the decision-making in developing the flowsheet and on the overall profitability of the process. Optimization of such variables is usually required. 

The present Spanish system of price control is inefficient, as it provides notable negative incentives for pharmaceutical consumption and expenditure it would be desirable to replace it with a more flexible system such as an overall profit control system, or a combination of price-cap regulation and rate of return regulation. 

A product-by-product profit control system does not allow the control of the company s overall profit, as the average cost depends on the size of the fixed costs and the volume of units sold over time. 

Comparing the two situations, we find that the social surplus is greater when the producers practise price discrimination than when they establish a uniform price for both markets. The same happens with the level of production and the total consumer surplus. Note that the overall profit is the same in both systems, so the producer should have no preference for one or another type of pricing (they recover the sunk cost of 500 monetary units in both... 

However, a focus shift from supply to demand would again not consider the overall profitability of the value chain leaving out supply volumes and values supply specifically in procurement. Concluding, a focus on either demand or supply is not sufficient and both have to be managed in an integrated way together with the resulting values. Therefore, the different... 

The penalties K0, Kp and k have to be set high enough to make relaxation unattractive compared to the overall profit in order to ensure constraints being only relaxed in the case with no feasible solution. As alternative to a manual setting, these parameters can also be determined dynamically in a preprocessing phase, e g. the total demand forecast turnover for k0, the maximum demand forecast price per ton for kp and the maximum demand forecast turnover for Kv. ... 

The experiments always compare the overall profit with the volume indices in sales, distribution, production and procurement in order to compare volume and value results and showing interdependencies... 

In each experiment, different scenarios for one parameter are executed to measure the impact on overall profit and the key volume indices... 

In consideration of total values across the entire value chain, the importance of the single value chain steps gets transparent. In proportion, management of sales and procurement values are much more important to the company s overall profitability than managing the distribution and production costs. In this case, production and distribution costs are relatively stable. Since related cost parameters are stable, consequently distribution and production volumes should remain on a relatively constant level. 

The case study demonstrated how the company can use the developed model in decision support. Having implementing the global value chain planning process and model the company could significantly improve overall profitability of the business. Specifically, the spot price mechanism used to better coordinate sales and supply decisions showed a significant impact for the company. 

Smelter Acid. If acid is produced involuntarily, as in a smelter operation, it is possible to estimate the cost of acid production in the same manner as that for an elemental sulfur acid plant. To the smelter, however, acid output is simply a mandated concomitant of the process required to produce the metal. Depending on the location of the smelter, the sources of demand, the size of the market, and competition from other producers, the acid sale price may or may not be sufficiently high even to yield a positive net-back, much less a desired rate of return on investment for the acid portion of the operation. This situation does not necessarily lead to closure. Positive or negative, the effect should be registered only in the overall profitability of the entire smelter operation. 

If we now introduce the notion of a balanced budget, the concept of average cost pricing will serve the purpose. By imposing a balanced budget the firm must demonstrate its viability. However, this is not the problem we face. There is typically no doubt about the company s overall profitability, so the budget constraint should not be introduced to demonstrate profitability, but to constrain tariffs. 

In a deterministic planning environment the most likely scenario, here scenario 2, would be considered the base case and the optimization model would be solved based on this scenario. The optimal decision would be to open facility 1 in period 1 and facility 3 in period 2 leading to a total profit of 2,590. To assess the robustness of this network to alternative demand scenarios the profit achievable with this configuration in case of the alternative demand scenarios can be assessed. In the example, for scenario 1 the overall profit would be 1,640 and for scenario 3, 2,765 respectively. Considered individually, the optimal decision for scenario 1 would be to open only facility 1 with a total profit of 1,880 and for scenario 3 to open both facilities 1 and 2 in period 1 with a total profit of 2,931. In order to explicitly incorporate the uncertainties caused by the different realization probabilities of the three demand scenarios, the optimization model can be extended into a two-stage decision with recourse ... 

Each element of the go-to-market value delivery system is likely to require the development of new tools and techniques that enable enhanced transparency and faster and improved fact-based decision making. This starts with enhancing the transparency of customer profitability, to gain an understanding that goes deeper than annual overall profitability by customer and provides transparency by customer, by product, and by transaction. Averages quite often disguise improvement opportunities - 50 percent of transactions are below the annual customer profitability. 

Because electric utilities use so much primary fuel, they obtain the best prices for the fuel and transportation. As a result, the differential savings, per million Btu s, are less than other industries. On the other hand, the benefits of using tires or TDF on creating stable operating conditions in the boiler may be more important than the differential cost savings for the overall profitability. 

Based upon the process flow diagram and the investment costs, the product manufacturing costs or the necessary yield in the micro structured reactor plant to reach an overall profit of, for example at least 20%, will be calculated. 

From this table a number of key discoveries can be made. Firstly, the total net cash flow of 156 millions is close to twice the total investment, so there is a reasonable overall profit. However, the undiscounted payback time is about 5 years and 8 months (the total revenues for years 1-5 are still 10 millions short of covering the total costs). This is a long time before payback - 2 to 3 years would be preferable - so this project is beginning to look a little unexciting. 

Thus with given B0m and V, specification of the set of operations decision variables D°m = d°j, i = 1, NTm] (a total of 2 NTm decision variables) and control variables Um = t-, i = 1,NTm for all distillation tasks in operation m, it will be possible to calculate the overall performance measures for the batch (total distillation time, overall separation, products and intermediates amounts, recoveries, energy, etc.)- The same decision variables may be optimised to achieve some overall objective for the operation, (e.g. overall profit) subject to overall constraints (e.g. overall time, energy, etc.). 

Therefore only two time periods are involved in the optimisation problem formulation, one for each mixture. Instantaneous switching occurs between batches and therefore set up time between the batches is ignored. The profit function does not include the allocation of time to each separation. For each mixture (m) individual profits (Pm) were maximised to maximise the overall profit. 

Mujtaba (1999) considered the conventional configuration of BED processes for the separation of binary close boiling and azeotropic mixtures. Dynamic optimisation technique was used for quantitative assessment of the effectiveness of BED processes. Two distinct solvent feeding modes were considered and their implications on the optimisation problem formulation, solution and on the performance of BED processes were discussed. A general Multiperiod Dynamic Optimisation (MDO) problem formulation was presented to obtain optimal separation of all the components in the feed mixture and the recovery of solvent while maximising the overall profitability of the operation. 

For Tasks 1 and 3 two time intervals are used. For Task 2 only one time interval is used. Within each interval the reflux ratio, the solvent feed rate and the length of the interval are optimised. Vapour liquid equilibrium is calculated using UNIQUAC model. A number of cases were studied for different amount of initial feed charge (Bo) to the reboiler. For each case, the optimal reflux and solvent feed profiles for each Task, percentage of Acetone and solvent recovered and the overall profit of the operation are shown in Table 10.10. 

There are three basic elements to entrepreneurship in chemical production (Fig. 12.6). The first - estabhshing entrepreneurial focus - means that performance targets have to be set which are driven by the capital markets in a participative process starting from the top - that is, at the business unit or divisional level -and which follow through a transparent value-driver tree in order to determine targets for the front line (see Section 12.2.1). The desired end product is a balanced scorecard for each operational unit with a clear Hnk to the overall profitability of the business unit... 

Customer portfolio strategy. This has to be focused on the externally and internally most attractive customers. Selecting a customer portfolio which is in tune with the compan/s own internal strengths reduces complexity and increases overall profitability. 

Clearly, the simultaneous formulation leads to a significant improvement in the overall profit and conversion due to the correct anticipation of the energy costs in the reactor design. Even though the shape of the temperature profiles is not markedly different, the temperatures in the simultaneous case are lower. 

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