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Session 3251 MODELING THE ECONOMICS OF ENVIRONMENTALLY RESPONSIBLE MANUFACTURING

Dr. Wayne E. Wells University of Texas-Pan American

ABSTRACT

Traditional economic analysis methods for manufacturing decisions include only the clearly identified immediate cost and revenue streams. Environmental issues have generally been seen as costs, in the form of wastes, material losses, compliance tests and pre-discharge treatments. The components of the waste strea~ often purchased as raw materials, become liabilities at the “end of the pipe” and none of their intrinsic material value is recognized.

Anew mathematical treatment of manufacturing economics is proposed in which the costs of separation are compared with the intrinsic value of the waste materials to show how their recovery can provide an economic advantage to the manufacturer. The model is based on the application of thermodynamic analysis to economic modeling. This paper describes the proposed model, and examines case studies in which the changed decision rules have yielded significant savings while protecting the environment. The premise proposed is that by including the value of the waste materials in the profit objective of the firm and applying the appropriate technological solution, mantiacturing processes can approach closed systems in which losses converge to zero and environmental problems are converted into economic savings.

INTRODUCTION

Traditional engineering cost analysis procedures have been implicitly if not explicitly based on a model which calls for minhizhg the traditional production fimction:

That is, the goal is to minimize the total of the costs from inputs in the form of Labor (L), Materials (M) and Capital (K).

In recent years, under the “command and control” philosophy of the Environmental Protection Agency (EPA) and its state counterparts, manufacturers have been required to incur and recognize an additional cost, that of compliance and disposal. Thus, the production fimction became: MIN C = X (L J4,K~)

$!iii’1996 ASEE Annual Conference Proceedings } ‘.qlll’$’ .

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Wells, W. E. (1996, June), Modeling The Economics Of Environmentally Responsible Manufacturing Paper presented at 1996 Annual Conference, Washington, District of Columbia. 10.18260/1-2--6195