To determine the performance of the industrial plants and factories, commonly each plant is regarded as an economic unit.  At the end of each fiscal year the total value of the plant produced and sold products minus its total expenses determines the industrial units performance in dollars.  The owner corporation then determines the industrial unit performance by comparing the profit of the plant to a percentage of the unit total value and the performances of other similar industrial units as the guide for the necessary actions.  This method is the most important economic advantage of the capitalism over the communism system.    Communism system run of the industrial units is based on quota i.e. a production goal is set and an expense budget is given.    The performance is determined acceptable if the production meets the goal.  For example in a shoe factory if the quota is to produce 10000 pair of shoes, the accepted performance is when the factory makes or exceeds the quota.   The performance based on quota as well as the lack of competition in a quota based system causes the expenses to be high even with low wages and the product quality to be stagnant or even to move downward.

In an industrial plant there are several departments such as the production department, maintenance department and other service departments such as engineering, human resource, accounting, purchasing, stores and marketing & sale departments.  The performance of an industrial plant is the result of the combine efforts and the performances of those various departments.  The most important department is usually the production department but how the other parts of the plant perform are obviously important and even determining factors.  At the present system the service departments to the production department are run like the communism quota system.   For example the maintenance dept. quota is to maintain the machineries and equipments and repair them when they break down within a given budget without any competition.    The engineering quota is to complete and submit projects that the production dept. requests and keep their expenses within their budget also without competition, exactly like a communist  run system.  I know as a fact that near the end of each year departments that have not spent close to their given budgets rush to spend, often unnecessary expenses in order to avoid budget reduction for the next fiscal year, again like a quota system!  Decades ago I explained the following idea to a friend.  He liked the idea so much that with his suggestion and encouragement we formed a consultant engineering company to sell and install the following system for industries.  We were not successful in that business since we had to sell the idea only to the headquarters of the large corporations. We not only couldn’t contact any large corporation C.E.O. we could not even contact any large corporation director!

This suggested idea is to consider each department of an industrial plant as an independent economic unit with its own income and expenses.  Here I start with the maintenance departments of industrial plants since I mostly worked as the machinery and equipment reliability engineer for both engineering and maintenance departments.  By this system the maintenance dept. on paper owns the equipments and machineries in the plant.  The production dept. has full control over the operations of all those equipments and machineries which here I call them “outfits”.  For each of the plant outfits depending on its original price, natural wear and tear, complication of its design and parts and components, expected use hours between two required overhauls, … an hourly rent is considered.  For example a large high pressure compressor with large number of moving and wearing parts and components in a process plant, the hourly rent would be higher than a water centrifugal pump with less parts and components while an outfit without moving parts will be with even less hourly rent.  I had made a preliminary method to determine the hourly rentals for the industrial outfits and a method to review, adjust and make corrections to the industrial outfit rentals periodically in order to reach to a more realistic hourly rental.  The maintenance dpt. annual income would be the total rentals of the plant outfits whenever the production dpt. using them.  The maintenance dept. expenses as usual are; its employment costs, parts and materials use costs, a fee per employee charged by the humane resource/accounting dept., outside contracts costs and other costs.  The maintenance accounts would not receive rental when an outfit is not in use or it is down.  This means that when an outfit breaks down not only maintenance dept’s income suffers, its expense at the same time increases for the new parts and components use. A computerized accounting system keeps each and every outfit unit rentals as well as its expenses, i.e.  the manpower & material use plus an overhead cost.  At the end of the fiscal year not only the maintenance dept. performance is clear with a profit or loss in dollars, the system shows the performance of each plant outfit.  Therefore those trouble machineries that show loses are clearly identified to study the source and cause of the breakdowns such as maintenance and repair procedures, required modifications, change of sources for replacement parts etc.  Most probably company headquarters like to keep the expense budget limit for each department and that would not be in any conflict with this suggested system.  Indeed to start, the previous years budgets would be one of the original bases to determine the total annual and consequently individual outfit hourly rentals for the first year.

To apply this system to the other departments requires that some departments to be considered or amalgamated to one department; for example production/ engineering or human resources/ accounting and purchasing/ stores each as one department.  As an example: to the regular expenses of the production/engineering dept. the total annual outfit rentals to the maintenance dep. and the fees per employee to the personnel/ accounting dept. would be added.

I think this system would help each department; to recognize clearly its weak and strong points.  It encourages them to become more efficient, to increase their incomes for example in the maintenance dept. by working to increase the outfits reliabilities and reduce their costs i.e. to prevent and stop unnecessary overtimes, minimize outfits breakdowns and as a result show profit at the end of the year instead of quota. 

This system would also be a new tool for the corporate headquarters to be able to analyze in a more detail the performance of their industrial plants department by department and make informed decisions and actions.

Originally I applied for a patent for this idea but I did not pursue the application therefore, this idea is open for all to use.