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Lifetimes of machinery and equipment: Evidence from Dutch manufacturing
Abstract
This paper estimates service lifetimes for capital assets in Dutch manufacturing industries, using information on asset retirement patterns. A Weibull distribution function is estimated using a non-linear regression technique to derive service lifetimes for three selected asset types: transport equipment, machinery and computers. For this purpose, benchmark capital stock surveys for different two-digit industries are linked to annual discard surveys. On average the estimated lifetimes are 6, 9 and 26 years for transport equipment, computers and machinery, respectively. However, these estimates vary across industries. A comparison of our estimates with Canadian, U.S. and Japanese estimates shows notable differences in the lifetimes of all the asset types, with machinery showing the largest difference. Copyright 2008 The Author. Journal compilation International Association for Research in Income and Wealth 2008.
... Due to the relatively short time of demonstrator operation, it was impossible to assess the impact of maintenance on materials consumption based on historical data. Therefore, it was estimated based on the demonstrator s use [30] and maintenance manual or by relevant literature [38,39]. The following assumptions were made: (i) substitution of 5 m per year of underwater pipeline; (ii) 10 years of expected lifetime for each inverter; (iii) 10 years of expected lifetime for each pump; (iv) 10 years of expected lifetime for pipeline brackets (metallic). ...
... Due to the relatively short time of demonstrator operation, it was impossible to assess the impact of maintenance on materials consumption based on historical data. Therefore, it was estimated based on the demonstrator's use [30] and maintenance manual or by relevant literature [38,39]. The following assumptions were made: (i) substitution of 5 m per year of underwater pipeline; (ii) 10 years of expected lifetime for each inverter; (iii) 10 years of expected lifetime for each pump; (iv) 10 years of expected lifetime for pipeline brackets (metallic). ...
... The ejectors plant lifetime is supposed to be 20 years. This estimation is based on mean values for equipment, machinery, consumables and buildings found in the literature, and the ejectors plant is considered complex infrastructure [38,50]. Nevertheless, the lifetime of some components of the ejectors plant will be reasonably shorter than the ejectors plant lifetime. ...
Sedimentation is the natural process of sediment transportation and deposition in quiescent water conditions. Sedimentation can affect the functionality of ports, harbours and navigation channels by reducing water depth, making navigation difficult, if not impossible. Different solutions are available to guarantee infrastructure functionality against sedimentation, with maintenance dredging being the most widely adopted. Alternative technologies for dredging have been developed and tested to reduce the environmental concerns related to dredging operations. Among other solutions, applying a sediment by-pass system based on a jet pump emerged as one of the most promising. While the existing literature covers the techno-economic aspects of sediment by-pass systems, the environmental impacts must be better evaluated and assessed. This paper aims to resolve this gap by evaluating, through the ReCiPe2016 life cycle assessment (LCA) methodology, the environmental impact of an innovative sediment by-pass system called an “ejectors plant”. The LCA results are based on the demonstrator established in Cervia Harbour in Italy, which was extensively monitored for 15 months during its operation. This paper shows how energy consumption during the operation phase highly affects the considered midpoint and endpoint categories. For example, the GWP100 of the ejectors plant, considering the Italian electricity mix, equals 1.75 million tons of equivalent CO2 over 20 years, while under a low-carbon scenario, it is reduced to 0.17. In that case, material consumption in the construction phase becomes dominant, thus highlighting the importance of eco-innovation of ejectors plants to minimise oxidant formation. Finally, this paper compares the ejectors plant and traditional dredging through environmental LCA. The ejectors plant had a lower impact in all categories except for GWP-related categories. The sensitivity analysis showed how such a conclusion may be mitigated by considering different electricity mixes and maintenance dredging working cycles.
... The values of the degree index for various types of objects were calculated by a number of authors, including for the purposes of national accounting, and the recommended values for a number of engineering facilities are given in [6]. It should be noted that for some types of machines (freezers, refrigerators, vacuum cleaners, microwave ovens, video recorders, washing machines, electric heating appliances, small cars, equipment for car repair and maintenance, railway wagons), this indicator turns out to be close to one [8][9][10]. Later, as an example, we will consider exactly such objects. ...
... Since the integrand in (5) decreases with the growth of t, it is not difficult to make sure that the maximum in the left part of (5) is reached when S is the unique root of the equation: BQ (S ) C (S ) U (L + U ) p(S ) = 0. In this case, inequality (8) becomes equality, and S and B will be the solution of a system of equations: (9) The dependence of the cost of the technical system on its age now follows from inequality (6), which at optimal S becomes equality: (10) Substituting in (10) B from the first equality (9), we get: (11) This equality, in fact, is one of the modifications of the well-known Lvov formula [25], which was used in the USSR to evaluate the efficiency of new equipment and set prices for new technology, and is currently used in the machinery and equipment valuation (for the history of the Lvov formula and its modifications, see [3,26,27]). Unlike other modifications of the Lvov formula, (11) takes into account the scrap value of the system, as well as the risk of its failure and is applied to the used object valuation. ...
... The optimal assigned service life of the system (S) and market values of units of work performed by the system on the valuation date (B) were found by numerical solution of the system of equations (9). ...
A technical system is used by an enterprise that is a typical market participant to perform specific work. During operation, the operating characteristics of the system deteriorate. In case of a possible failure of the system, it is decommissioned and this causes losses for the enterprise. It turns out that it is beneficial to assign a certain service life to the system after which (if no failure has occurred) it is subject to decommissioning. We are solving the problem of optimizing this assigned service life. Usually, when solving it, inflation is not taken into account, and the optimality criteria are the average costs per unit of time and other indicators that do not fully reflect the commercial interests of the enterprise owning the system. Using the principles and methods of valuation, we build a mathematical model and propose formulas that allow us, taking into account inflation, to find the optimal assigned service life of the system and at the same time estimate the market value of the work performed by the system and calculate the change in the market value of the system with age. Moreover, in this problem, the optimality criterion is the ratio of the expected discounted costs to the expected discounted volume of work performed by the system. We show that such a criterion maximizes the market value of the enterprise owning the system. We give examples of using the constructed model. The results obtained can be used both for solving other optimization problems of the reliability theory and for practical valuation of some types of machinery and equipment.
... In this process, the survival functions for many capital assets are estimated with disposal asset data; the results have been discussed by Nomura and Momose (2008). A study by Erumban (2008) had the same purpose; however, the number of goods covered in the study was relatively small. ...
... International comparisons are also possible. According to Nomura and Momose (2008), the average service lifespan of machinery and equipment owned by Japanese businesses is 16.7 years, whereas Erumban (2008) estimated the average service lifespan of machinery and equipment in the Netherlands to be 26 years, which is significantly longer. Conversely, the two studies estimated the average service lifespan for transport equipment to be 12.9 and 6 years, respectively. ...
... 2 industrial machinery goods, outflows and stock could be analyzed more accurately than with only one class of " industrial machinery " goods. Type 1 literature often provides lifespan information on the goods in question for individual industries, because ownership information is essential for capital stock accounting and productivity measurement. Erumban (2008) The lifespan information for goods and owners (industry) might also be useful for MSA. Recently , MFA has used monetary I-O tables even for relatively small flows; an example is found in the work of Nakamura and colleagues (2007). In such cases, there is some possibility of accounting inflows not only according to the final goods but al ...
Lifespan is an essential parameter for the accounting and analysis of material stocks and flows, one of the main research topics in industrial ecology. Lifespan is also important as a parameter that portrays the current and historical situation of industrial metabolism, which is an area of interest to industrial ecologists.
In the present article, the available information from various reports on product lifespan was reviewed. Although we found a large number of data for many durables, the definition of lifespan in published articles varied, which limited our ability to compare reported values. We therefore first defined lifespan and then compared the international and historical data.
We compiled more than 1,300 data sets from various sources and identified some differences among the types of goods and among regions. With the reviewed data noted in this article, we established a database, named LiVES (Lifespan Database for Vehicles, Equipment, and Structures), and will disclose it on the Internet to share the information.
... The methodological framework to estimate age-price profile with survival rates based on the Weibull function is in section3. Section 4 reports the estimated results of asset service lives and geometric depreciation rates and Section 5 concludes consists of three kinds of questionnaires on capital and repair expenditures, financial leases, and 4 See comprehensive studies based on this micro database; Gellatly, Tanguay and Yan (2002) and Statistics Canada (2007) prepared by Marc Tanguay, Guy Gellatly and John R. Baldwin. 5 See Meinen, Verbiest and Wolf (1998), Bergen, Haan, Hij and Horsten (2005), and Erumban (2008). 6 Statistics Canada (2007) classifies non-zero prices near zero to discards assuming a lower bound of 0.06 below, since discarded assets are not exactly identified from disposal assets. ...
... The cross-industry differences reflect the weights by 195 types of asset. 24 We added our new estimates in Table 9 in Erumban (2008). For comparison, we reclassified the assets (112-140) to transport (motor vehicles), (13-33, 46-107, 142-157, and 162-182) 12.1 11.2 11.6 13.5 (regrouped) Computers and copy machines (149,(158)(159)(160)(161) 7.6 7.7 7.6 (regrouped) Communications equipment (162-167) 9.3 9.4 9.4 Notes: The average service lives are based on the estimates by 195 assets using the samples in S(1,2,*) and weighted using the total acquisition costs of discarded assets. ...
... On transport equipment (motor vehicles), the Netherlands estimates by Bergen et al (2005) and Erumban (2008) 26 indicate the estimates show a lifetime of 5-6 years that are less than half of the Japan's estimates (13.9 years, as an average of 3 types of vehicles whose service lives range from10.2 to 20.3) in Nomura (2005b). Our estimates in this paper are based on a new database with much larger samples, but they still provide the similar estimates: 12.9 years (as an average of 29 25 Note that 10 years for computer in Canadian estimates in Erumban (2008) may be a simple average of Computers, associated hardware and word processors (4.4 years) and Computer-assisted process for production process (15.5 years). ...
This paper presents preliminary estimates of asset service lives and geometric depreciation rates for 195 assets based on the recently constructed ESRI Survey on Capital Expenditures and Disposables (CED). The disposal surveys in the 2005 and 2006 CED collected about 260,000 observations of disposal assets from business accounts of private corporations, of which about 26,000 transactions include sales of disposal assets with the observed sale price of the traded asset. Although further investigations of the disposal data are still required, our estimates of geometric depreciation rates for building and construction are much higher than those assumed in the current JSNA.
... The standard practice in the empirical literature is to assume a constant lifetime of capital across countries and over time. However, empirical evidence shows that the service lifetimes of capital assets vary across asset types, industries and countries (OECD, 2001a;Erumban, 2008). Furthermore, many previous studies have shown that when there are distinct capital vintages with embodied technologies, capital retirement decisions become endogenous, rather than a mere technical necessity (Goolsbee, 1998;Cooley et al, 1997;Caballero andHammour, 1994, 1996;Cooper and Haltiwanger, 1993;Feldstein and Rothschild, 1974;Feldstein and Foot, 1971). ...
... The survey provides asset wise information on investment variables for each enterprise. The data is available under 6 digit industry classification, for different asset types, which are strictly comparable with the capital stock surveys (see discussion in Erumban 2008). We use the investment series during the period 1994-2001 for three asset types, machinery, computers and transport equipment. ...
... Thus, predominantly age is both a measure of efficiency decline as well as obsolescence, induced by the fact that newer vintage assets embody newer technology, particularly for machinery and computers. For the discard of transport equipment, age may also be a measure of the lease effect, as the share of leased equipment is quite large in this asset type (see Erumban 2008). If the asset discards are defined as return to the lease company, the decision to discard will have hardly any influence by any variable other than the lease contract, which is perhaps defined in terms of a fixed number of years that may be captured by the age variable. ...
The recent theories of investment and growth have shown that when there are distinct capital vintages with embodied technologies, capital retirement decisions become endogenous. This raises important problems with existing measures of output, depreciation and productivity and requires a deeper understanding of the retirement process. However, the determinants of retirement are not well understood because of the lack of firm-level data. This paper uses a unique data base on retirements by manufacturing firms in the Netherlands, coupled with economic and innovation variables from other surveys by Statistics Netherlands, to examine the impact of innovation on capital retirement. Our results provide supporting evidence on the relationship between innovation and discard rates. We obtain significant positive effects of process-innovation in a firm on machinery discards and product innovation in a firm on computer discards. Average age of the asset is the most significant factor in driving discard decisions, which may be considered as an indicator of embodied technological change and obsolescence alongside efficiency loss.
... In the current literature, there are several methodologies for determining the optimal useful lives of equipment. To help in deciding which to choose, there exist meta-studies in the field of equipment replacement optimization (UoT, 2011), as well as country-specific studies of service lives for equipment items (Erumban, 2006) (U.S. Government's Office of Management and Budget, 2018) . Broadly defined, the existing methodologies can be divided into cost-based, such as EUAC, and benefit-based. ...
... The anticipated returns from such alternative investment opportunities enter as discount rates into the analysis, and most of the discussed techniques, including the proposed modified cost-benefit approach, are sensitive to the value of this parameter. Dodzo, 2020;Sánchez-García et al., 2021;Yates, 2017;Erumban, 2006 ...
... Achieving intermediate targets such as for 2030 might be possible by additional optimisation and new technologies to provide low-temperature head demand. However, intensifying optimisation efforts can also trigger a technology lock-in since the design life of renewed optimised equipment can exceed 20 or even 30 years (Erumban, 2008). With reference to Figure 2-3 in section 2.1.3, ...
... Installation costs are expressed in annuities for each different production step. Annuities have been calculated based on investment cost data published by the European Cement Research Academy (2017) and Gardarsdottir et al. (2019) and design life according to Erumban (2008) and Gardarsdottir et al. (2019) (Table 6 G). A discount rate of 0% has been assumed when calculating the NPV of investments. ...
The industrial processes we have used for producing basic materials over the last centuries are unsuitable for an economy with a net-zero carbon footprint. Basic materials like steel, cement, aluminium and (petro)chemicals are the building blocks of our industrialised societies, but today their production is highly energy and emission-intensive. There is no other alternative. These industries need to decarbonise over the next decades for keeping global warming below 2°C. However, the implications of this transition for the industry, our energy systems and society are little understood.
This thesis asks how this transition can take place by exploring the technical, economic, and regulatory dimensions of decarbonising the energy-intensive basic material sector. By following a multidisciplinary approach, the thesis looks upon these different dimensions separately, identifying propositions that characterise the industrial transition and help us understand its implications for our energy systems.
The first part of the thesis studies technology options for climate-friendly basic material production in different industries and evaluates their cross-sectorial significance. Findings highlight the challenge of reducing emissions linked to the high thermal energy demand required to produce most basic materials and process emissions originating from the chemical transformation of naturally occurring resources to basic materials. Decarbonisation across all industries requires breakthrough technologies that are not available on a commercial scale.
Today´s conventional production technologies are highly standardised. They rely primarily on fossil fuels, obtaining basic materials in high quantities while keeping energy costs low. However, climate-friendly breakthrough technologies mark a shift from fossil fuels to low-emission alternatives. Therefore, the second part of this thesis studies the functioning of future electricity markets and explores the implication of decarbonising energy systems for industrial consumers. Future energy markets should be designed to ensure the emission avoidance, affordability, and adequacy of energy for industrial consumers.
Higher costs for low-emission energy sources or potentially higher energy demand to avoid emissions make climate-friendly basic material production more expensive than conventional processes. Breakthrough technologies require a regulatory framework to support the transition. The third part of this thesis demonstrates how different policies are needed to kick-start the transition, create markets for climate-friendly materials and ensure long-term climate neutrality.
Finally, the last part of this thesis reflects upon the propositions that characterise the transition´s technological, economic, and regulatory dimensions and argues that models to study the transition need to incorporate the three dimensions sufficiently. Since energy-system models and bottom-up approaches are insufficient, a new sector-specific modelling approach is necessary. The thesis introduces the conceptual model TRANSid (Transition towards Industrial Decarbonisation) to address this modelling gap. It uses a simplified case study to demonstrate how the conceptual model could be translated into a mathematical formulation.
The thesis concludes with various recommendations about the future research needs to study industrial decarbonisation across the technological, economic and policy dimensions.
... РС. Однако в соответствующих публикациях (Erumban, 2008;Barth et al, 2016;Nomura, Suga, 2018) приводится информация о значениях T и v только для больших групп активов (например, для групп «Легковые автомобили» и «Автобусы и грузовики»). Оценивать ССС машин конкретной марки оценщикам приходится, применяя повышающие коэффициенты к амортизационному сроку их службы -некоторые рекомендации по установлению таких коэффициентов приведены в (Лейфер, 2023). ...
Machines undergoing degradation are widely studied in reliability theory. However, the constructed models of the degradation process cannot be applied to assess the market value of used equipment. We solve this problem using a new mathematical model of the degradation process. In this model, the condition of the machine is characterized by the intensity of variable benefits (the market value of the work performed in a small unit of time minus the variable part of the operating costs). The degradation of the machine is described by a complex Poisson process. During operation, the machine is subjected to hidden failures that occur with constant intensity. After failure, the operating characteristics of the machine are subjected to a deteriorating jump. In our model, it is assumed that in this case the intensity of the variable benefits is multiplied by a random decreasing coefficient having a power distribution. We specify the limit conditions of the machine in which it should be disposed of. We construct the dependence of the market value of the machine on its condition. It can be used if it is possible to measure the benefits of the machine, and the market value of the new machine and the scrap value of the machines are known. Much more often, the appraiser knows only about the age of used machine. In this case, he can use information about the average service life of the machines and the coefficient of variation of this service life. This information allows him to set the values of the main parameters of the model. However, machines of the same age may be in different states, and therefore it is only possible to offer formulas for estimating their average market value. The constructed model also makes it possible to take into account the impact of inflation by properly adjusting the discount rate.
... Capital Equipment Flows: Capital equipment, including industrial machinery, transportation gear, electronics, and office machinery, is essential to firms and their supply chain networks, often customized to meet collective needs (Erumban, 2008). The flow of such equipment is highly sensitive to demand fluctuations, with even minor product changes significantly affecting its utilization (Angerhofer and Angelides, 2000). ...
Purpose
Despite being a fundamental concept, the field of supply chain management (SCM) exhibits a significant lack of consensus regarding the definition of supply chain flows (SCFLOWS). Additionally, there has been an over-reliance on three flows – material, information and finance – while various other flows crucial to SCM performance have been overlooked. Hence, the purpose of this study is twofold: (1) to explore the multi-dimensional nature of SCFLOWS and (2) to identify additional flows beyond the commonly acknowledged ones that are vital for SCM performance.
Design/methodology/approach
This study employs various qualitative methods as part of the abduction process. The methods include in-depth interviews with logistics professionals, a Delphi study involving SCM scholars and a focus group comprising airline industry practitioners.
Findings
Seven SCFLOWS dimensions are identified and presented as SCFLOWS framework. Also, two additional flows, i.e. human and capital equipment, are proposed as vital to SCM performance.
Originality/value
This is the first study to introduce SCFLOWS framework to achieve consensus in the field. By introducing two additional flows, it proposes extending the SCFLOWS boundary to include various flows overlooked previously but pertinent to SCM performance. The SCFLOWS framework serves as a systematic guide to validate additional flows and represents an important step towards building SCM theory.
... The impacts are annualized by dividing the inventory subsets by their respective lifetime l in yearsl OM,CSA = 30, l EI,CSA (Ingot) = 100, l EI,CSA (Wafer) = l EI,CSA (Cell) = l EI,CSA (Module) = 25, l OM,FE = 20, l OM,PE = l EI,PE = 10-to allow the models' comparison. The own models' lifetime l assumptions are based on the authors' PV sector expertise, financial depreciation tables [26] and machinery lifetime data [27]. ...
Life cycle inventories (LCIs) and life cycle assessments (LCAs) of photovoltaic (PV) modules and their components focus on the operations of PV factories, but the factories and industrial site product and construction stages are either not or only partially tackled. This work contributes through the bottom-up, model-based generation of LCIs and LCAs for setting up a vertically integrated 5 GWp/a PV industrial site, including the manufacturing of silicon ingots, wafers, solar cells, and PV modules, on a 50 ha greenfield location. Two comparative LCAs are performed. The first compares the annualized environmental impacts of the developed LCI sets with four existing inventories in the Ecoinvent v3.8 database. The second comparative LCA explores the environmental impact differences concerning the industrial site when using different building systems for the factories. Here, the reference system with a steel structure is compared with two alternative building systems: precast concrete and structural timber. The results show that the wafer, cell, and module factories’ annualized environmental impacts with the Ecoinvent LCIs are strongly overestimated. For the ingot factory, the opposite result is identified. The impacts of all four factories show reductions of between 11.7% and 94.3% for 14 of the 15 impact categories. High mean environmental impact shares of 79.0%, 78.2% and 79.2% for the steel, precast concrete and timber structural building systems, respectively, are generated at the product stage. The process and facilities equipment generates 54.2%, 54.4% and 58.2% of the total product and construction stages’ mean environmental impact shares. The proposed alternative timber building system reduces the environmental impacts in 14 of the 15 evaluated categories, with reductions ranging from 1.1% to 12.4%.
... The time span for the LCOH analysis is 20 years, which represents a common lifetime of equipment in chemical industries. 49 The assumed CAPEX and OPEX values for process heat technologies range from 1.59 to 3.24 MMUSD for boilers and heat pumps in the PVC case study, and from 1500 to 3000 MMUSD for steam crackers in the ethylene case study (Table S6). 36,50−58 Energy costs for each heat source are primarily based on industrial energy price data from EIA AEO 2023 (Table S7). ...
Electrification and clean hydrogen are promising low-carbon options for decarbonizing industrial process heat, which is an essential target for reducing sector-wide emissions. However, industrial processes with heat demand vary significantly across industries in terms of temperature requirements, capacities, and equipment, making it challenging to determine applications for low-carbon technologies that are technically and economically feasible. In this analysis, we develop a framework for evaluating life cycle emissions, water use, and cost impacts of electric and clean hydrogen process heat technologies and apply it in several case studies for plastics and petrochemical manufacturing industries in the United States. Our results show that industrial heat pumps could reduce emissions by 12–17% in a typical poly(vinyl chloride) (PVC) facility in certain locations currently, compared to conventional natural gas combustion, and that other electric technologies in PVC and ethylene production could reduce emissions by nearly 90% with a sufficiently decarbonized electric grid. Life cycle water use increases significantly in all low-carbon technology cases. The levelized cost of heat of viable low-carbon technologies ranges from 15 to 100% higher than conventional heating systems, primarily due to energy costs. We discuss results in the context of relevant policies that could be useful to manufacturing facilities and policymakers for aiding the transition to low-carbon process heat technologies.
... Capital Equipment Flows: Capital equipment, including industrial machinery, transportation gear, electronics, and office machinery, is essential to firms and their supply chain networks, often customized to meet collective needs (Erumban, 2008). The flow of such equipment is highly sensitive to demand fluctuations, with even minor product changes significantly affecting its utilization (Angerhofer and Angelides, 2000). ...
This chapter provides an overview of the concept of Supply Chain Flows (SCF). While the normative literature in Supply Chain Management (SCM) emphasizes the importance of three primary flows – material, information, and finance – recent challenges, notably the COVID-19 pandemic, have highlighted the prominence of likely additional flows. This chapter delves into four such flows – human, knowledge, equipment, and technology – that significantly impact supply chain performance. This exploration prompts a reevaluation of traditional SCF scope. Theoretical approaches for effectively managing the interactions among SCF are also proposed. The chapter concludes by suggesting future directions in establishing a consensus-based SCF framework. Overall, this chapter provides a foundation for ongoing efforts to enhance SCF understanding and develop additional theoretical insights for SCM researchers and practitioners.
... For this study, the change in demand will last for 20 years. This value was chosen as it is close to the maximum lifetime for transport equipment and computer appliances in industries and only slightly lower than the average lifetime for machinery [31]. Methods 17-19 split the time interval into small sections, calculating the time interval for each section and then calculating the average marginal mix. ...
Previous research efforts have focused on developing prospective life cycle inventory databases that build upon projections from integrated assessment models but were limited to attributional system models. A novel approach is required to construct consequential LCI databases that can be applied consistently on a large scale. To this end, the heuristic approach from Bo Weidema was selected as a basis for this study. This approach has been validated with historical data and was adapted in this study to identify the marginal suppliers in a prospective context. The different steps within the approach were analyzed, and alternative techniques for each step within the heuristic method were proposed. The techniques were tested on the future electricity sector using projections from two integrated assessment models (IMAGE and REMIND). Results show the sensitivity of results on the modelling technique selected in each step. The most sensitive step is the selection of the time interval, with even small changes resulting in a noticeable difference. In addition, the results also showed a substantial difference between the projections of the two models. The relevance and goals of the alternative techniques for each step were discussed to guide users in forming the heuristic method for their study.
... In particular, with reference to CNCs, in factories around the world there is a large stock of machines 51 manufactured more than 10 years ago, all of which have a productive life of more than 50 years [19]. 52 Consequently, these CNCs are not capable of communicating with modern protocols (OPC UA), hence 53 making it difficult to connect with analysis and traceability systems. ...
Interconnectivity and the standardization of communications promotes the growth of Industry 4.0. The most modern industrial machinery, devices and processes are equipped with communication systems that favor such connectivity throughout industrial standards such as OPC-UA (OPen Connectivity-Unified Architecture). On the other hand, older computer numerical control systems (CNCs), although generating large amounts of data, lack standardized communication interfaces. In this article, we present a connectivity framework called UNIFIK for older SIEMENS CNCs, namely the Siemens 840D powerline (pl) and solution line (sl), through their PC Unit systems (PCU) SINUMERIK MMC, SINUMERIK HMI Advanced and SIMUNERIK Operate 4.5. UNIFIK is based on web services technology and Open Platform Communications Unified Architecture (OPC UA) to facilitate its interconnection. This framework has been developed, tested and validated in DEUSER's Industry 4.0 laboratory. In the testing phase, the stability of the solution has been demonstrated, since there have been no errors or uncontrolled exceptions. The RAM memory usage has been set between 75MB and 100MB and the CPU usage has ranged from 5 to 30%, values that are within normality.
... In particular, with reference to CNCs, in factories around the world there is a large stock of machines 51 manufactured more than 10 years ago, all of which have a productive life of more than 50 years [19]. 52 Consequently, these CNCs are not capable of communicating with modern protocols (OPC UA), hence 53 making it difficult to connect with analysis and traceability systems. ...
... Finally, the study [14] describes different scenarios and cases deployed through the OPC-UA 35 protocol. 36 In particular, with reference to CNCs, in factories around the world there is a large stock of machines 37 manufactured more than 10 years ago, all of which have a productive life of more than 50 years [15]. 38 Consequently, these CNCs are not capable of communicating with modern protocols (OPC UA), hence 39 making it difficult to connect with analysis and traceability systems. ...
... Cost analysis of a machine is very important in terms of its sustainability and successful dissemination (Erumban 2008). The internal rate of return IRR was used in this study to compare the returns on the machine with that of hand harvesting according to Vaidya (2018) in Equation 11. 0 (11) ) 1 ( ...
A locally developed autogenous single screw extruder was used to investigate the process for screw extrusion of the flour and starch of cassava, in a bid to find alternate uses for the commodity. The experiment was conducted with a factorial design and completely randomized. Analysis of Variance and Tukey Honestly Significant Difference methods were utilized as follow up test to check the result of extrusion variables: feed moisture (25, 30, 40%) and extruder temperature built up by varying the duration of sampling (2, 10, 18, 24, 30 minutes) on some product quality attributes and system parameters. The product quality attributes considered include water absorption index (WAI) and water solubility index (WSI), product moisture (PQ_MC), transverse expansion (ExR), cold and hot paste viscosities (CPV and HPV), Melt viscosity (MV) and strength properties of extrudates (CP) while the system parameters are product temperature (PT), mean residence time (MRT), and specific energy input (SME). All system parameters PT, MRT and SME varied directly with duration of operation. Also, PQ_MC, CP, WAI, WSI, MV, CPV and HPV varied reciprocally whereas ExR, and MV varied directly with duration of operation. The extrudates’ water loss is directly proportional with ExR. It was observed that extruded cassava starch was less stable than cassava flour extrudates. Moreover, the specific end uses to which the extruded products can be put were identified. All the treatments and their interactions are highly significant (P ≤ 0.001).
... The German machine tool builders' association (Schlechtendahl et al., 2015) revealed that quick replacement of all existing machines with I4.0 compatible machines would not be practically feasible. Erumban (2008) estimated that the average useful life of machinery varies from 15 to 34 years. Moreover, several household and nano-sized units use the machine tool beyond its specified useful life with or without some alterations/attachments. ...
Purpose
Evaluation of the extent of transformability of an existing system into an industry 4.0 (I4.0) compatible system is indispensable for both the technical and economic planning for implementing I4.0. This paper aims to propose a procedure to evaluate the transformability of an existing manufacturing system into an I4.0 system.
Design/methodology/approach
Six significant components of a manufacturing system and their five levels of modifications essential for the decision of transformation are identified. Based on expert opinion on facilitation and the impact of the transformation of one component on the transformation of others, a graph theory-based procedure for estimation of transformability index (TI) along with its relative and threshold values is proposed.
Findings
The paper introduced the concept of transformability into manufacturing systems. It proposed a simple procedure for calculating the ideal, relative and threshold value for TI to assess the suitability of the up-gradation of any manufacturing system into the I4.0 system.
Research limitations/implications
Though the proposed procedure is based on six system components and their five levels of facilitation, it is quite versatile and able to integrate new components and different facilitation levels according to system requirements for their impact analysis in the transformation process. It can be extended to other domains like services and health care. Further, it can be used to estimate and establish the transformability criteria of a factory/service unit/industry from its current state to any regime.
Practical implications
The proposed method for deducing the TI, relative transformability index (RTI) and their threshold values would be a handy tool for decision-makers to assess the upgrading suitability of the entire manufacturing system and its component for use in the new regime or scrapping. It would provide mathematical and scientific support to the transformability decisions by assessing the influence of transforming one component to others and the system. This study would pave the way for further explorations in the domain of transformability.
Originality/value
In the light of available literature and best of the author’s knowledge, this study is the first of its kind that has applied the concept of transformability of existing manufacturing systems toward I4.0 compatible systems and proposed a procedure to estimate TI, RTI and their threshold values.
... The emissions associated with the life cycle of factory machines were also not modelled. This was because installed equipment is assumed to have a long lifespan, 30 years on average [92]. The emissions and environmental impacts associated with the fabrication and decommission of equipment would be allocated proportionally over their lifespan, and was, therefore, assumed to be negligible. ...
During the coronavirus (COVID-19) pandemic, the UK government mandated the use of face masks in various public settings and recommended the use of reusable masks to combat shortages of medically graded single-use masks in healthcare. To assist decision-making on the choice of masks for future pandemics, where shortages may not be a contributing factor, the University College London (UCL) Plastic Waste Innovation Hub has carried out a multidisciplinary comparison between single-use and reusable masks based on their anatomy, standalone effectiveness, behavioural considerations, environmental impact and costs. Although current single-use masks have a higher standalone effectiveness against bacteria and viruses, studies show that reusable masks have adequate performance in slowing infection rates of respiratory viruses. Material flow analysis (MFA), life cycle assessment (LCA) and cost comparison show that reusable masks have a lower environmental and economic impact than single-use masks. If every person in the UK uses one single-use mask each day for a year, it will create a total of 124,000 tonnes of waste, 66,000 tonnes of which would be unrecyclable contaminated plastic waste (the masks), with the rest being the recyclable packaging typically used for transportation and distribution of masks. Using reusable masks creates >85% less waste, generates 3.5 times lower impact on climate change and incurs 3.7 times lower costs. Further behavioural research is necessary to understand the extent and current practices of mask use; and how these practices affect mask effectiveness in reducing infection rates. Wearing single-use masks may be preferred over reusable masks due to perceptions of increased hygiene and convenience. Understanding behaviour towards the regular machine-washing of reusable masks for their effective reuse is key to maximise their public health benefits and minimise environmental and economic costs.
... The stocks cannot change quickly and the retirements from the stock occurs stochastically rather that discretely. 414,415,416,417,418 George Backus (Material is free to use with attribution.) 78 ...
Feedback effects cause the mitigation dynamics and impacts of climate change to be far different from those portrayed in analyses that treat the elements independently.
... The emissions associated with the life cycle of factory machines were also not modelled. This was because installed equipment is assumed to have a long lifespan, 30 years on average (92). The emissions and environmental impacts associated with the fabrication and decommission of equipment would be allocated proportionally over their lifespan, and was, therefore, assumed to be negligible. ...
Due to the COVID-19 pandemic, the UK government has mandated the use of face masks in various public settings and recommends the use of reusable masks to combat shortages of medically graded single-use masks in healthcare. To assist decision-making on the choice of masks for future pandemics, where shortages may not be a contributing factor, the UCL Plastic Waste Innovation Hub has carried out a multidisciplinary comparison between single-use and reusable masks based on their anatomy, standalone effectiveness, behavioural considerations, environmental impacts and costs.
Although current single-use masks have a higher standalone effectiveness against bacteria and viruses, studies show that reusable masks have adequate performance in slowing infection rates of respiratory viruses. Material Flow Analysis, Life Cycle Assessment and cost comparison show that reusable masks have a lower environmental and economic impact than single-use masks. If every person in the UK uses one single-use mask each day for a year, it will create a total of 124,000 tonnes of waste, 66,000 tonnes of which would be unrecyclable contaminated plastic waste (the masks), with the rest being the recyclable packaging typically used for transportation and distribution of masks.Using reusable masks creates >85% less waste, generates 3.5 times lower impact on climate change and incurs 3.7 times lower costs.
Further behavioural research is necessary to understand the extent and current practices of mask use; and how these practices affect mask effectiveness in reducing infection rates. Wearing single-use masks may be preferred over reusable masks due to perceptions of increased hygiene and convenience. Understanding behaviour towards the regular machine-washing of reusable masks for their effective reuse is key to maximise their public health benefits and minimise environmental and economic costs.
... However, collecting the data necessary for such approaches is facing several challenges, among which is the longevity of industrial machinery: Even official service lifetime estimates for depreciation run from (rarely) 6 to over 30 years depending on country, type of machinery and industrial sector [9]. Furthermore, experience shows that especially in small and medium sized enterprises resilient equipment might be in daily use even longer. ...
A multitude of high quality, high-resolution data is a cornerstone of the digital services associated with Industry 4.0. However, a great fraction of industrial machinery in use today features only a bare minimum of sensors and retrofitting new ones is expensive if possible at all. Instead, already existing sensors’ data streams could be utilized to virtually ‘measure’ new parameters. In this paper, a deep learning based virtual sensor for estimating a combustion parameter on a large gas engine using only the rotational speed as input is developed and evaluated. The evaluation focusses on the influence of data preprocessing compared to network type and structure regarding the estimation quality.
... The emissions associated with the life cycle of factory machines were also not modelled. This was because installed equipment is assumed to have a long lifespan, thirty years on average (88). The emissions and environmental impacts associated with the fabrication and decommission of equipment would be allocated proportionally over their lifespan, and was, therefore, assumed to be negligible. ...
Due to the COVID-19 pandemic, the UK government has mandated the use of face masks in various public settings and recommends the use of reusable masks to combat shortages of medically graded single-use masks in healthcare. To assist decision-making on the choice of masks for future pandemics, where shortages may not be a contributing factor, the UCL Plastic Waste Innovation Hub has carried out a multidisciplinary comparison between single-use and reusable masks based on their anatomy, standalone effectiveness, behavioural considerations, environmental impacts and costs.
Although current single-use masks have a higher standalone effectiveness against bacteria and viruses, studies show that reusable masks have adequate performance in slowing infection rates of respiratory viruses. Material Flow Analysis, Life Cycle Assessment and cost comparison show that reusable masks have a lower environmental and economic impact than single-use masks. If every person in the UK uses one single-use mask each day for a year, it will create a total waste of 124,000 tonnes, 66,000 tonnes of which would be unrecyclable contaminated plastic waste. Using reusable masks creates >85% less waste, generates 3.5 times lower impact on climate change and incurs 3.7 times lower costs.
Further behavioural research is necessary to understand the extent and current practices of mask use, and its effectiveness in reducing infection rates. Wearing single-use masks may be preferred over reusable masks due to perceptions of increased hygiene and convenience. Understanding behaviour towards the regular machine-washing of reusable masks for their effective reuse is key to maximise their public health benefits and minimise environmental and economic costs.
... However, collecting the data necessary for such approaches is facing several challenges, among which is the longevity of industrial machinery: Even official service lifetime estimates for depreciation run from (rarely) 6 to over 30 years depending on country, type of machinery and industrial sector [9]. Furthermore, experience shows that especially in small and medium sized enterprises resilient equipment might be in daily use even longer. ...
A multitude of high quality, high-resolution data is a cornerstone of the digital services associated with Industry 4.0. However, a great fraction of industrial machinery in use today features only a bare minimum of sensors and retrofitting new ones is expensive if possible at all. Instead, already existing sensors' data streams could be utilized to virtually 'measure' new parameters. In this paper, a deep learning based virtual sensor for estimating a combustion parameter on a large gas engine using only the rotational speed as input is developed and evaluated. The evaluation focusses on the influence of data preprocessing compared to network type and structure regarding the estimation quality.
... A device may be secure at provisioning, but its continuous state with regards to security is dependent on its possibility to adapt to emerging threats and technologies. Considering that the average lifetime for machine equipment is expressed in decades [33], it will be impossible to equip devices with hardware capabilities that will match requirements for state of the art in security lasting the whole expected lifetime. It is however essential that the software for the device is kept up to date with current threats and adapts to emerging technologies as long as possible. ...
To achieve efficient and flexible systems when
running production processes at affordable prices an industrial
automation is pushed towards digital transformation. Such a
transformation assumes an enhancement of current Industrial
Automated Control Systems (IACS) with a large amount of IoTdevices
in order to form an Industrial Internet of Things (IIoT).
The aim is to enable a shift from an automatic towards an
autonomous control in such systems. This paper discusses some
of the main challenges such IIoT system is facing with respect to
cybersecurity. We discuss our findings in an example of a flowcontrol
loop, where we apply a simple threat model based on the
STRIDE method to and deduce cybersecurity requirements in an
IIoT context. Moreover, the identified requirements are assessed
in the light of current state of the art solutions, and a number of
challenges are discussed with respect to a large-scale IIoT system,
together with some suggestions for future work.
... ALP growth measures economic development within a country in terms of growth, competitiveness and living standards (OECD, 2001). MFP growth captures improvements in technology due to organizational and institutional changes, changes in returns to scale, the impact of unmeasured inputs such as research and development, other intangible factors and measurement errors, and disembodied technological change (see Erumban, 2008;Inklaar et al., 2008;van Ark et al., 2008). ...
This paper presents panel data estimates of the relationship between governance, aggregate labor productivity (ALP) growth and total factor productivity (TFP) growth for 12 Asian economies between 1996 and 2013. Our results show that government effectiveness has a positive and significant effect on ALP in both levels and first differences. Regulatory quality has a positive impact on ALP only in first difference. Although both government effectiveness and regulatory quality have a positive effect on TFP growth in first difference, only political stability is significant and positive in the levels specification. Other findings indicate that physical capital and human capital have a positive effect on ALP growth. We also find evidence of positive spillover effects with respect to human capital. The positive association between governance, economic growth and productivity provide a better understanding of the role of governance in enhancing economic performance. Our findings have policy implications for ways to achieve good governance to enhance economic growth and productivity.
... Considering these facts, in the proposed work the parameters that can be obtained via a combination of the aforementioned data capturing practices are modelled. In addition, it is a fact that in factories throughout the world, up to 70% of the machines are more than 15 years old [3], while the lifecycle of industrial equipment may reach 50 years [23]. Therefore, the development of a data acquisition device for the integration of legacy resources in the Machine Shop 4.0 is used in the context of this paper. ...
... As mentioned before, the proposed system is designed as an add-on for the commercial machine-tools, rather than communicating with the machine controller. This decision is mainly driven by the fact that the lifespan of the industrial equipment can reach the 30 years [40]; hence, old machinery often do not have the required capabilities for connectivity. Therefore, special effort should be made to transform each legacy controller into an IoT device. ...
With the advent of the fourth industrial revolution (Industry 4.0), manufacturing systems are transformed into digital ecosystems. In this transformation, the internet of things (IoT) and other emerging technologies pose a major role. To shift manufacturing companies toward IoT, smart sensor systems are required to connect their resources into the digital world. To address this issue, the proposed work presents a monitoring system for shop-floor control following the IoT paradigm. The proposed monitoring system consists of a data acquisition device (DAQ) capable of capturing quickly and efficiently the data from the machine tools, and transmits these data to a cloud gateway via a wireless sensor topology. The monitored data are transferred to a cloud server for further processing and visualization. The data transmission is performed in two levels, i.e., locally in the shop-floor using a star wireless sensor network (WSN) topology with a microcomputer gateway and from the microcomputer to Cloud using Internet protocols. The developed system follows the loT paradigm in terms of connecting the physical with the cyber world and offering integration capabilities with existing industrial systems. In addition, the open platform communication-unified architecture (OPC-UA) standard is employed to support the connectivity of the proposed monitoring system with other IT tools in an enterprise. The proposed monitoring system is validated in a laboratory as well as in machining and mold-making small and medium-sized enterprises (SMEs).
... The termination rate of the generalized NBW resembles an SAW in the first S steps and an NBW afterwards. Interestingly, the life expectancies of humans can be described by the Gompertz distribution [29][30][31][32], while the service lives of machines can be fitted to a Weibull distribution, of which the Rayleigh distribution is a special case [49]. In general, the distribution of human life expectancies and the distribution of machine service lives are determined by a combination of different causes of death or failure mechanisms. ...
We present analytical results for the distribution of first hitting times of non-backtracking random walks on finite Erd\H{o}s-R\'enyi networks of N nodes.The walkers hop randomly between adjacent nodes on the network, without stepping back to the previous node, until they hit a node which they have already visited before or get trapped in a dead-end node. At this point, the path is terminated. The length, d, of the resulting path, is called the first hitting time. Using recursion equations, we obtain analytical results for the tail distribution of first hitting times, , , of non-backtracking random walks starting from a random initial node. It turns out that the distribution is given by a product of a discrete Rayleigh distribution and an exponential distribution. We obtain analytical expressions for central measures and a dispersion measure of this distribution. It is found that the paths of non-backtracking random walks, up to their termination at the first hitting time, are longer, on average, than those of the corresponding simple random walks. However, they are shorter than those of self avoiding walks on the same network, which terminate at the last hitting time. We obtain analytical results for the probabilities, and , that a path will terminate by retracing, namely stepping into an already visited node, or by trapping, namely entering a node of degree k=1, which has no exit link, respectively. It is shown that in dilute networks the dominant termination scenario is trapping while in dense networks most paths terminate by retracing. We also study a class of generalized non-backtracking random walk models which not only avoid the backtracking step into the previous node but avoid stepping into the last S visited nodes, where .
... 7.5 tonnes) was considered for the equipment transportation and installation, while vans (b2.5 tonnes, light vehicles) were selected for the transportation of the chemicals and the personnel who support the maintenance of the MBR pilot unit. The average lifetime of these vehicles was assumed to be equal to 8.3 years, according to the study of Erumban (2008). • The construction data (i.e. ...
This study includes an environmental analysis of a membrane bioreactor (MBR), the objective being to quantitatively define the inventory of the resources consumed and estimate the emissions produced during its construction, operation and end-of-life deconstruction. The environmental analysis was done by the life cycle assessment (LCA) methodology, in order to establish with a broad perspective and in a rigorous and objective way the environmental footprint and the main environmental hotspots of the examined technology. Raw materials, equipment, transportation, energy use, as well as air- and waterborne emissions were quantified using as a functional unit, 1 m3 of urban wastewater. SimaPro 8.0.3.14 was used as the LCA analysis tool, and two impact assessment methods, i.e. IPCC 2013 version 1.00 and ReCiPe version 1.10, were employed. The main environmental hotspots of the MBR pilot unit were identified to be the following: (i) the energy demand, which is by far the most crucial parameter that affects the sustainability of the whole process, and (ii) the material of the membrane units. Overall, the MBR technology was found to be a sustainable solution for urban wastewater treatment, with the construction phase having a minimal environmental impact, compared to the operational phase. Moreover, several alternative scenarios and areas of potential improvement, such as the diversification of the electricity mix and the material of the membrane units, were examined, in order to minimize as much as possible the overall environmental footprint of this MBR system. It was shown that the energy mix can significantly affect the overall sustainability of the MBR pilot unit (i.e. up to 95% reduction of the total greenhouse gas emissions was achieved with the use of an environmentally friendly energy mix), and the contribution of the construction and operational phase to the overall environmental footprint of the system.
... While these studies emphasize the importance of innovation in the capital goods sector as a driver of asset scrapping, they do not address the heterogeneous response of firms using the assets, which is the topic of this study. As shown in the next section, we typically find a large variation in scrapping behavior across firms, reflecting a high degree of lumpiness that also characterizes investment behavior (Fennema et al., 2006; Erumban, 2008). We will try to capture the firm-level responses to innovation in various ways by inclusion of firm-level innovation indicators. ...
The process of creative destruction, while propelling the economy, also leads to obsolescence and discarding of capital. To
date, there is limited empirical evidence on actual discard behavior by firms and its determinants. Building on insights from
the theoretical literature on economic growth and obsolescence, this article makes an attempt to understand the determinants
of scrapping, with a special focus on the role of innovation. The article uses a unique database on asset retirements by manufacturing
firms in the Netherlands and relates it to a range of economic and innovation variables. We find that innovation plays a significant
role in determining the discard of capital assets. Process innovation by a firm is important in the case of machinery scrapping,
while the introduction of a new product in a firm increases discards of computers. We also find evidence for an obsolescence
effect: the average age has a significant role in discarding, in particular, computers. We find no evidence for a significant
role of output and wage rates in driving capital discard.
Machinery and equipment, integral as technology-specific capital goods, play a dual role in climate change: it acts as both a mitigator and an exacerbator due to its carbon-intensive life cycle. Despite their importance, current climate mitigation analyses often overlook these items, leaving a gap in comprehensive analyses of their material stock and environmental impacts. To address this, our research integrates input–output analysis (IOA) with dynamic material flow analysis (d-MFA) to assess the carbon and material footprints of machinery. It finds that in 2019, machinery production required 30% of global metal production and 8% of global carbon emissions. Between 2000 and 2019, the metal footprint of the stock of machinery grew twice as fast as the economy. To illustrate the global implications and scale, we spotlight key countries. China’s rise in machinery material stock is noteworthy, surpassing the United States in 2008 in total amount and achieving half of the US per capita level by 2019. Our study also contrasts economic depreciation─a value-centric metric─with the tangible lifespan of machinery, revealing how much the physical size of the capital stock exceeds its book values. As physical machinery stocks saturate, new machinery can increasingly be built from metals recycled from retired machinery.
One of the important directions of the digital trends defining our everyday life is the integration of smart devices into our systems, so that thanks to this we can collect more and more detailed data and control certain units remotely or automatically. As a result, our systems, which until now only operated in an isolated environment, are now connected to external services, or even establish a network connection to the Internet. However, this can have serious and dangerous consequences, pronounced in the case of systems that are considered critical infrastructure, because the wider the network range achieved, the more vulnerabilities and security gap can appear in the systems. In this article, we will present some options for network-based data collection methods, as well as highlight their most important properties and their parameters, which are useful to consider when planning a network system.
This study proposes a system dynamics simulation model that characterizes the dynamics post-earthquake performance of a business considering its dependency on lifelines (i.e., utilities and road networks) and the state of the market. The model characterizes the relationships between the business’s profitability and the resources it needs to operate (e.g., staff, raw materials, and equipment). It also considers the supply and demand dynamics that govern the prices of goods or services the business produces. It can be used to holistically investigate a business’s post-earthquake performance and recovery. It helps administrators acquire an insight into how to reduce the vulnerability of their businesses against probable future earthquakes. The model application is showcased by applying it to simulate the post-earthquake performance and recovery of a manufacturing business. The results indicate that, unlike retrofits, post-earthquake measures like increasing prices or changing shipping policies do not adequately mitigate earthquake-induced business losses.
Cost-effective techniques are usually recommended in the dissemination and adoption of postharvest processing technologies of food products. Due to limited value addition practices for cowpea leaf, the Fruits and Vegetables for All Seasons Project undertook a study to bridge the gap in the seasonal availability of the vegetable in the arid and semi-arid lands (ASALs) of Kenya through the production of cowpea leaf soup mix. However, the adoption of these techniques has an economic perspective that guides decision-making. This
study utilized a two-stage linear programming methodology using NutriSurvey and the analytic hierarchy process in a seven-step hierarchy for the production of a cowpea leaf soup mix of an optimal nutrition and sensory quality. The optimal inclusion level of cowpea leaves into the soup mix was 49%. With an R2 of 61.36%, consistency, taste, and mouthfeel were the greatest determinants of the acceptability of cowpea leaf soup mixes. The incorporation of blanching in solar drying and sun drying were the least costly options with priority vectors of 0.08 and 0.09 (CR < 0.1) respectively, whereas, in the use of mechanized processing techniques such as oven drying, priority vectors of 0.10–0.19 had higher maximum benefits than the local processing technique of sun-drying that had a priority vector of 0.08 (CR < 0.1). The benefit-cost ratio was maximal without extrusion, with the solar-drying pathway having the highest benefit-cost ratio of 1.5. The study found that resource-intensive pathways yielded maximum benefits in the retention of quality. However, with the exclusion of extrusion, the benefit-cost ratio of the processes improved.
Unlike labour productivity change, the measurement of total factor productivity change (or difference) crucially depends on the measurement and decomposition of capital input cost. This chapter discusses in detail the basics of its measurement and shows that one can dispense with the usual neo-classical assumptions. Various models are reviewed, as well as the role played by the ‘rate of return’.KeywordsCapital servicesCapital stockUser costDepreciationRevaluationRate of returnDecompositionAggregation
When companies in process industries take radical leaps in product innovation, these new products often fall outside the “process window” of existing production processes and hence require extensive production line modifications and radical process change. Consequently, firms need to deal with high degrees of uncertainty, complexity, equivocality and ambiguity in the front-end. These four knowledge problems constitute important challenges to managers and engineers when a new process definition is created. Prior research into the front end of process innovation is limited, and for radical projects close to non-existent. We analyse six radical process innovation projects situated in the food processing industry in the United Kingdom and provide three key contributions. First, we uncover the underlying sources of knowledge problems, and the specific coping mechanisms used to address them. Second, we offer a framework that delineates the relationships between the sources of knowledge problems, the knowledge problems per se, and the coping mechanisms which enable more effective decision-making regarding the creation of process concepts and definitions. Finally, we extend prior studies of the front end by revealing the challenges faced with respect to ambiguity, thus providing a more granular understanding of fuzziness. Altogether, these findings provide important theoretical and practical implications.
Multi-criteria decision-making methods are commonly used to rank manufacturing processes based on weighted economic and environmental criteria. The weighting process can be challenging, especially at early design stages where costs and environmental data are not precisely defined. In addition, for weights resulting in equivalent alternatives, no conclusion can be drawn when costs and environmental impact data are scarce and heterogeneous. Therefore, new methodology and tools are needed to find trade-offs between economy and environment in selecting manufacturing processes. In this work, a new systematic methodology for manufacturing process selection using fuzzy logic is developed. Applied to neutral, environmentalist and economist modes of thinking, manufacturing process selection charts were generated for all cost and environmental impact values. These tools were used to compare machining and selective laser melting for the production of aluminum structural components of aircraft. Results show that selective laser melting is the best trade-off in the mindset of neutrals and environmentalists, while machining is preferred by economists. Moreover, the proposed methodology can be used in situations where costs and environmental impacts are defined as ranges rather than determined numerical values. This methodology ranks manufacturing processes when weighted-criteria methodologies are limited.
Ammonia gas exposure to the environment that mainly caused by certain factors has the potential to bring negative impacts, particularly to workers and the community in terms of health issues. This study aims to analyse the factors that cause ammonia gas release and its negative effects on the workers and the community that lives near the factory. This study will use Hazard Identification Methods i.e Likelihood and severity scale to strengthened that findings in field observation, key informant interviews, and questionnaire. Based on the study, it was found that certain conditions that often caused ammonia gas release are located in ammonia storage tanks, cooling water reservoirs, and pumps and valves with an incidence rate of at least once per day. Meanwhile, certain conditions such as clogging, negligence, maintenance, and start-ups are scarce where the incidence rate is once in a year or even more. The impacts of ammonia occur in humans through inhalation and directly cause irritation, and respiratory problems that differ in each depends on the exposure duration and concentration level.
By 2030, 71.3% of South Africans will live in urban areas; up from 64.8% in 2015. The City of Johannesburg will face increasing pressure to create sustainable employment, build competitive businesses, and provide social and economic infrastructure for a rapidly rising urban population. At the same time, it is imperative that the City reverses the legacy of the Apartheid-era’s spatial planning that places black workers far from places of work and reproduces divided communities. As the City plans for the ‘Johannesburg of the future’, it is important to understand the economic structure of the City, how it has changed, and the implications of this for growth, job creation, and the competitiveness of the City. This requires a deeper understanding of Johannesburg’s manufacturing base and the challenges faced by firms that drive productive activity within the City.
This paper presents results from a survey of Norwegian firms on their perception of expected economic service life of various fixed capital assets as well as their assessment of depreciation profiles. An econometric analysis for two types of capital assets, where second hand markets and prices are available, shows that expected service life for Machinery and equipment for mining and manufacturing is estimated to be between 9 and 10 years. For Tools, instruments, furnishings etc. the expected service life is estimated to be 8 years. These results are in line with a descriptive analysis of the survey and they are also quite similar to those found in the existing literature. Results from this study have been used in a revision of the Norwegian national accounts.
In a model of monopolistic competition with heterogeneous firms, distortions in prices drive a wedge between the marginal revenue products of factor inputs across firms. We use census data for Brazil's retail sector to study implications for aggregate productivity and relate distortions to regional variation in regulation using a differences-in-differences approach. Taxes, entry regulation, and access to credit may create distortions to output and capital that varies by firm size. Potential gains from reallocation have not diminished despite the process of services liberalization in the 1990s.
This paper presents new estimates of capital inputs in the Chinese economy. Estimates are made for the total economy (1953–2007), for the industrial sector (1953–2007) and for manufacturing (1985–2007). The capital input estimates for industry and manufacturing are also broken down by thirty regions. The paper makes a systematic attempt to apply SNA (System of National Accounts) concepts to the estimation of capital inputs, according to the Perpetual Inventory Method. It makes a clear distinction between capital services from a productivity perspective and wealth capital stocks. The paper provides a detailed analysis of the relevant Chinese statistical concepts and data. It provides an explanation of the procedures followed in constructing the new national and regional capital input series.
This empirical analysis assesses the determinants of firms’ capital retirement. Particular attention is paid to the impact of the business cycle and the capital usage intensity. Compared to previous studies, we directly control for the capital utilization and disentangle the short-run mechanisms from the long-run ones. The analysis is carried out with an original and large firm-level dataset. The main results of the analysis may be summarized as follows: (i) the retirement rate increases during slowdowns and decreases during booms. This corresponds to a countercyclical capital retirement; (ii) the capital retirement rate increases with the capital usage intensity in the long run. This corresponds to a wear and tear effect, which is small compared to the countercyclical one; (iii) the
capital retirement rate increases with the average age of capital; (iv) the profit rate and the wage cost per capita do not have a significant impact on the retirement rate.
Lifespan of commodities is essential information for material flow analysis and material stock accounting. Lifespan data is available in the literature; however, it varies in definition and in methodology employed. This article reviews and categorizes different types of lifespan distribution and distribution estimation methodologies, and investigates the relationship and differences between lifespan definitions and estimation methodologies. Lifespan distribution of commodities can be classified into five types from two perspectives: base year for which the distribution is drawn, and vertical axis of the distribution. The methodologies for estimating lifespan distribution were classified into four types and the details of each methodology and the relationship to the definition of lifespan were also clarified. This article also examines differences in actual lifespan data — between the types of distribution, the definitions, and the employed methodologies — by comparing reported data in literature. Any of the four methodologies are theoretically applicable and provide the same value of a lifespan; however unless accurate data such as census statistics are available, lifespan data can vary, and therefore we must be very cautious about the representativeness of sample data.
Cross-country studies of economic growth have been hampered by the scarcity of reliable data on productivity at the sector level, see Bernard and Jones (AER, 2001) and Rogerson (JPE, 2008). We bring together literature on industry prices, human capital and capital assets to construct industry-level productivity measures that are well-grounded in neo-classical production theory. These theory-based measures differ widely from the crude measures commonly used in the literature. We use these to confirm and strengthen the finding of Bernard and Jones (AER, 1996) that for advanced OECD countries, patterns of convergence across sectors have differed since 1970: while productivity in market services converged, there is no convergence in manufacturing. More detailed analysis confirms that patterns of convergence are highly industry-specific. There is no dominant convergence trend in sectoral productivity growth across advanced countries.
The measurement of total factor productivity change (or difference) vis-à-vis labor productivity change crucially depends on the measurement and decomposition of capital input cost. This paper discusses the basics of its measurement and shows that one can dispense with the usual neoclassical assumptions. By virtue of its structural features, the measurement model is applicable to individual establishments and aggregates such as industries, sectors, or economies. © 2011 The Author. Review of Income and Wealth © International Association for Research in Income and Wealth 2011.
In the 1990s, Brazil opened up its retail sector to foreign direct investment. It was expected that the entry and market expansion of retail chains would spur the development of a sector long characterized by small family-run stores. However, the effects on growth have been disappointing. Our results suggest that liberalization failed to deliver high growth because reallocation dynamics did not contribute to growth. For the period 1996-2004, we find little evidence that more-productive new establishments from retail chains replaced less-productive independent stores.
Maurice Scott has argued that the neoclassical production function and growth accounting are fundamentally flawed as tools for understanding the growth process. If the role of capital were correctly evaluated, then (he argues) the famous ‘residual’ of growth accounting would disappear. Contrary to these claims, this paper seeks to show that growth accounting gives correct answers to interesting questions, even when all technical progress is embodied in new capital goods and even when depreciation is entirely due to obsolescence.
Models of Autoregressive Conditional Heteroscedasticity (ARCH) and their generalizations are widely used in applied econometric research, especially for analysis of financial markets. We bring to our reader’s attention a consul-tation on this topic prepared from the book of Marno Verbeek “A Guide to Modern Econometrics” appearing soon in the Publishing House “Nauchnaya Kniga”
Note: this is not the textbook "A Guide to Modern Econometrics", which is copyright owned by John Wiley and Sons.
With the increasing importance of investment in information and communication technology, methods for measuring the contribution of capital to growth have re-assumed centre-stage in recent growth accounting literature. The importance of using capital service growth rates rather than capital stock growth rates has long been advocated, and has become mainstream practice. However, the choice for a particular rate of return in the derivation of capital service prices is not straightforward and has barely been researched. Using four alternative rental price models —based on both external and internal rates of return models—this article quantifies the differences in total factor productivity growth rates (TFPG) under different model assumptions. The differences in TFPG are also examined in terms of the inclusion of taxes and subsidies in the calculation of rental prices. Empirical analysis carried out for four EU countries and the US in 26 industries during 1979-2003 shows that the use of capital stock overestimates TFPG in most industries. Incorporation of taxes seems to have only modest effect. The magnitude of divergence generated by alternative rental price models-particularly between internal models- is quite low. The difference is seen to be relatively high between external rate of return models and internal rate of return models. (JEL codes: E01,O47) Copyright , Oxford University Press.
This is a text for a one-quarter or one-semester course in probability, aimed at students who have done a year of calculus. The book is organised so a student can learn the fundamental ideas of probability from the first three chapters without reliance on calculus. Later chapters develop these ideas further using calculus tools. The book contains more than the usual number of examples worked out in detail.
The most valuable thing for students to learn from a course like this is how to pick up a probability problem in a new setting and relate it to the standard body of theory. The more they see this happen in class, and the more they do it themselves in exercises, the better. The style of the text is deliberately informal. My experience is that students learn more from intuitive explanations, diagrams, and examples than they do from theorems and proofs. So the emphasis is on problem solving rather than theory.
The Weibull distribution, which is frequently used for modeling survival data, is embedded in a larger family obtained by introducing an additional shape parameter. This generalized family not only contains distributions with unimodal and bathtub hazard shapes, but also allows for a broader class of monotone hazard rates. Furthermore, the distributions in this family are analytically tractable and computationally manageable. The modeling and analysis of survival data using this family is discussed and illustrated in terms of a lifetime dataset and the results of a two-arm clinical trial.
This paper introduces a method for performing large-scale studies of forms and rates of economic and physical depreciation by type of assets in Canadian industries. A fractional function representation for the form of economic depreciation is introduced where the numerator represents the form of economic depreciation without adjustment, and the denominator represents the form of either the gross or the net physical depreciation. This representation provides a clear picture of the relationship in both form and rate between economic and physical depreciation. The forms of economic and physical depreciation (except the gross physical depreciation) are all convex, while the exceptional one is concave. This is one of the research papers studied at Statistics Canada in the evolving search for a better methodology for estimating depreciation patterns. Based on the findings of this paper, with more survey data available, and following a more conventional approach, a project is currently underway at Statistics Canada. Gross physical depreciation will be considered as one of the adjustment factors for the price-age-date profile.
The application of the Perpetual Inventory Method (PIM) requires estimates and assumptions on three
parameters: service life, discard pattern and depreciation method.
In this paper these parameters are discussed and choices are made in order to present an applicable
approach.
Service lives are an important parameter in the Perpetual Inventory Method (PIM). However estimates of service lives, based on statistical information, are scarce. Mostly fiscal data and/or bookkeeping practices are the main sources of information. In this paper estimates of service lives based on directly observed data on capital stock and discards are presented. In addition fiscal sources, annual business reports and international data are explored. Analysis and combination of all sources resulted in a table containing “best-practice” service lives by type of asset and by industry.
It is often said that in PIM service lives are the only relevant parameter and that the influence of discard patterns is negligible. As a consequence a simple step function is most widely used in the PIM. However this paper shows that discard patterns seriously influence the results of PIM-calculations. Different discard patterns result in significant differences in the levels of capital stock.
From this point it is hard to say which discard pattern is the “best” choice. A different way of evaluation is considering a subdivision of the capital stock in vintage classes. It turns out that the traditional PIM does not reproduce the older vintage classes sufficiently enough, compared with actual measurement of capital stock. Survival functions with a longer tail, like the Weibull and the delayed linear perform much better in this respect.
Based on these experiences, the application of the Delayed linear distribution in the PIM is recommended. The Delayed Linear survival function provides an approximation to any of the other survival functions used in this report and performs quite well when considering the subdivision of the capital stock into vintage-classes. Another advantage of the delayed linear method is that calculations are less troublesome.
The paper by Blades on depreciation methods shows that in most cases a straight-line depreciation
provides the best approximation of the “actual depreciation”.
The Weibull distribution, which is frequently used for modeling survival data, is embedded in a larger family obtained by introducing an additional shape parameter. This generalized family not only contains distributions with unimodal and bathtub hazard shapes, but also allows for a broader class of monotone hazard rates. Furthermore, the distributions in this family are analytically tractable and computationally manageable. The modeling and analysis of survival data using this family is discussed and illustrated in terms of a lifetime dataset and the results of a two-arm clinical trial.
“... it is not reasonable for us to expect the government to produce statistics in areas where concepts are mushy and where there is little professional agreement on what is to be measured and how (Griliches (1994), page 14).” National income accounting would be a relatively simple matter were it not for “capital.” All flows of output would then be for immediate consumption, and labor would be the sole factor of production (and relatively undifferentiated labor at that, since there would be no investments in health and education to complicate matters). How to define the boundary between market and non-market activity would be one of the main issues of contention, how to measure the real output associated with intangible services would be another. However, both problems are largely issues of implementation rather than of basic theory, since there is no conceptual reason to exclude the non-market use of economic resources from a complete set of national accounts, nor is there any controversy about the need to express inputs and output in both current and constant prices. When it comes to capital, however, it is more a question of “what ” to do rather than “how ” to do it. No issue has given economic theory more trouble, from Karl Marx and the
How should productivity and welfare be measured when the composition of the capital stock is shifting towards assets with shorter lives? What sort of adjustment, if any, should be made for depreciation? While GDP is still appropriate as a measure of output, in this paper it is argued that NDP (WNDP)—nominal net domestic product deflated by the price index for consumption—is the appropriate measure of welfare. The rate at which the WNDP frontier is shifting out over time is analogous to the rate of growth of aggregate total factor productivity (TFP). Like the latter, it may be decomposed into the contributions made by TFP growth in individual industries, though with a different pattern of weights. The argument is illustrated by the experience of the United States in the 1990s. Here net investment increased more rapidly than gross investment and both grew faster than GDP, while the aggregate depreciation rate rose. Nevertheless the aggregate capital stock grew more slowly than GDP, and depreciation as a proportion of GDP was flat. Both official NDP and WNDP have been growing a little more slowly than GDP. But the acceleration of WNDP post 1995 was as great as that of GDP. Also, the rise in the growth rate of the WNDP frontier was equal to that of aggregate TFP.
This paper generates depreciation profiles for a diverse set of assets based on patterns of resale prices and retirements. In doing so, it explores the sensitivity of estimates of the growth in capital stock and capital services to alternate estimates of depreciation. In the first instance, survival analysis techniques are used to estimate changes in valuation of assets over the course of their service life. In the second instance, a two-step procedure is utilized that first estimates the discard function for used assets (assets discarded at zero prices) and then uses the resulting estimates to correct for selection bias that arises when just positive used-asset prices are employed to estimate age-price profiles to produce depreciation rates. For the third method, a discard function and an asset efficiency function are jointly specified and estimated. These three different methods produce depreciation profiles that follow convex patterns. Accelerated profiles are apparent for many individual assets in the machinery and equipment and structures classes. We also compare the ex post estimates of length of life that are based on outcomes to ex ante expected lives and find they are much the same. We therefore choose ex ante lives along with information from the ex post rates on the rate of decline in an asset's value to generate a set of depreciation rates for use in the productivity accounts. We then use our depreciation model to produce estimates of the growth in capital stock and capital services over the 1961 to 1996 period. We find that the resulting estimates of capital stock and capital services are quite similar to those previously produced.
While GDP is the appropriate measure of output, I argue that Weitzman's NDP (WNDP)-nominal net domestic product deflated by the price of consumption-is the appropriate measure of welfare. Total factor productivity (TFP) growth measures the shift in the GDP frontier, and there is an analogous concept for WNDP, which I call total factor welfare (TFW) growth. I calculate and compare WNDP and GDP, and TFP and TFW, for the United States in the 1990s. I find that the acceleration of WNDP post 1995 was as great as that of GDP, even though the aggregate depreciation rate was rising. Copyright 2004 Blackwell Publishing Ltd.
In this paper we discuss the empirical measurement of capital stocks derived from data on gross investment. Two capital concepts are involved: gross capital-representing the capital's capacity dimension-and net capital–representing its wealth dimension. A brief summary of their components is presented.
The data base consists of long series of Norwegian national accounts data for gross investment at a disaggregated level of sector classification and for 1–3 capital categories within each sector. Survival functions, representing the process of retirement and decline in efficiency of capital units over time, with different curvature (concave, convex) and non-zero interest rates for the discounting of future capital service flows are considered. The effects of these parameters on the calculated gross and net capital stocks in the years 1956–82 as well as on the implied replacement and depreciation rates and rates of return are discussed.
In the Netherlands the Central Bureau of Statistics (C.B.S.) carried out two experimental investigations into the possibility of observing the actual value of the capital stock by means of enquiries at enterprises.
This article reports on the investigation into the cigar-industry. The intention is to carry out enquiries in one branch of industry after another. In due course (for instance after 10 years) it will again be the turn of the first branch of industry and so on. There are also branches of industry which have a fair amount of information regarding capital assets available at their disposal, so that enquiries are not necessary. In the long run the method described will supply statistical data on the value of the capital stock for all branches of industry together.
The gross actual value at current and constant prices is calculated for the cigar-industry, broken down by type and vintage. The enquiry was carried out in two steps. Questionnaires were not sent to the enterprises but they were visited in order that C.B.S. staff could derive the data required from the accounts available. Within the C.B.S. this information was processed, C.B.S. staff making estimates for lacking data. It may be concluded that this method of enquiry for the capital stock is difficult but useful. The results of the enquiry are comparable throughout, the valuation having been carried out in the same way for all enterprises and care having been taken that in each enterprise all means of production were asked for.
In the future this new technique of enquiry will provide good detailed information on the capital stock in the Netherlands.
Obsolescence and the Role of Capital in Growth AccountingProductivity versus Welfare; or GDP versus Weitzman’s NDP
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- H H Smeets
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The Explanation of Productivity Change Issues in Growth Accounting: A reply to Edward F. Denison Measuring the Value of the Capital Stock by Direct Observation
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Paper presented at the 2nd meeting of the Canberra Group on Capital Stock Statistics
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Std/Naes, 8, OECD, 2005.
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- Tanguay
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- D M Bergen
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- G Meinen
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- A A Erumban