AIChE Minutes
ChE 015
November 15, 2012
An AIChE meeting was held for assembly credit in DU 1107 at 1:30 p.m. Announcements were:
 There is a canned food drive competition going on this week between all engineering disciplines,
the competition will be based on food brought per person so every department has an equal
chance to win, canned food or non perishable items can be brought to the chemical engineering
office
 A volleyball game will be played Sunday November 25th at 6 p.m. following Thanksgiving break
 A pizza party will be held December 6th during assembly, anyone who has paid dues is welcome
to come and enjoy some pizza! Also, an iPod will be raffled off and anyone present who has paid
local dues will be eligible to win!
Ryan Frost (Ryan.Frost@FHR.com) from Flint Hills Resources (Koch Industries) gave a talk about
economic principles, some main points were:
 He is a ’99 chemical engineering graduate from Kansas State University
 He is Director of Innovation Analysis with Flint Hills Resources
 Koch was started in 1925 and obtained its first refinery in the 1940s
 Koch has acquired many businesses and works in many fields, some main acquisitions were
Invista and Georgia Pacific
 He talked about the CPV (cost price value) triangle
o It diagrams things that are required for a transaction or a trade to take place
o The manufacturers costs must be less than the selling cost
o For a product to be purchased, a consumer must value that product more than the price
that the consumer pays
o The total value created by a transaction is the difference between the price and the value
o In transactions, both party’s benefit
o There are two ways businesses can gain an advantage
 Decrease cost of production
 Product differentiation (increase value)
o Consumers are “voting” with their dollars
 He also talked about cost stacks
o The CPV triangle doesn’t show how competitive you are with other businesses
o The cost stacks (a graph of cost vs units) show how much capacity you have and what
production costs are
o You can rate your cost and capacity vs your competitors
o You can sort the stacks from lowest costs to highest costs and see where you rank vs your
competitors in terms of cost of production
o You can estimate the amount of value that a company produces
o The area above the cost stack and below the price setting mechanism is the value created by
a company
o When you create value, you have more money to expand
o Innovation and process improvements decrease costs for consumers, this is known as
creative destruction
 Recommended Reading
o What is refining? See Gary and Handwerk, “Petroleum Refining”
o
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How do we fix units that are broken? See Lieberman, “Working Guide to Process
Equipment”, “Troubleshooting Process Operations”
o How and why does the market work? See Gwartney, “What Everyone Should Know About
Economics and Prosperity” (free online)
o What can we do to become more effective at work? See Covey, “7 Habits of Highly Effective
People”
o What is Koch’s business philosophy? See Koch, “Science of Success”
Things to remember
o Humility: when you start working, everyone will know more than you, be open to challenge
and constructive feedback
o Professionalism: from educational monoculture to demographic “normal distribution”
o Operating facility 101: go into a operating facility with humility, knowing that you have a lot
to learn
o Clear and concise communication (written and verbal)
 “Make things as simple as possible, but not simpler”
 Know and respect your audience: know what level of detail to make things
o Find helpful individuals and mentors and treat them well
o Seek to develop realistic expectations
Questions he answered:
o He liked working at a refinery because that is where chemical engineering was developed
and he wanted to put into practice what he learned in school
o He went into the economics side of business because he wanted to get back to Wichita, KS
and because it made sense in his career
o There has to be an employee desire, employee capability, and a company need for you to
move around