DEFINITION OF INDUSTRIAL ENGINEERING Industrial Engineers integrate people, technology, and information to enhance a globally competing enterprise This

definition of Industrial Engineering has been recently developed to more accurately reflect the new global economy. Integration refers to the ability to understand the need for looking at broader system and scope and not focus on individual problems. Most engineering disciplines fail to do this. Globally competitive enterprise: Whether we like it or not one has to look at it. Foreign countries, many with lower labor costs, can manufacture many things at much lower cost than we can in USA. Shoes and clothing are few examples. One must consider all problems in a global context.

Where They Work?

Most in Manufacturing: Type of work/Title can be of wide variety. Few examples: Plant Engineer Manufacturing Engineer Quality Engineer Process Engineer Methods Improvement and many more Others may work for: Hospitals Banks Transportation/Logistics United Parcel Service Post Office Insurance Companies Most industrial and manufacturing engineers cannot differentiate between the two. Manufacturing engineers invariably work in manufacturing environment. On the other hand, industrial may work for both manufacturing as well as service environments. For example, such engineers working in a hospital or UPS will be called industrial engineers (and not manufacturing engineers). The academic training required for both, in general, is very similar

How can they work on a wide variety of jobs? Focus is on improving production systems (manufacturing, hospitals, airlines etc.) Analysis of all production systems require similar training, tools, and knowledge. All production systems must perform at highest possible efficiency, best quality and with least cost especially in a globally competitive enterprise.

Many IE and Manufacturing programs teach different aspects of a production system: Many classes relate to following topics: Quality Control Manufacturing Processes Plant Layout/Material Handling Engineering Economy/Cost Estimating Time Studies/ Labor Cost Human Factors/ Safety Simulation/ Statistics And many others........................ Few examples of work they might do: Make or buy a needed component Should this part be welded or brazed? Reduction of % of defective parts Schedule of patients in an operating room Where is the bottleneck and how to remove it? Automated or manual packaging Acceptable load for a warehouse operator How many airline counters?

ESSENTIALS OF A PRODUCTION SYSTEM

Inputs

Production System

Outputs

Production system: In general terms, a production system is used to make products or provide services. Generally, there is some of sort of input for example, an order for product, patient needs and Xray done and customer orders dinner. We consider production system to be set of activities which are needed for a desirable output; finished product, completed Xray and serving dinner to the customer. For a product, the system can be considered as the manufacturing plant, for Xray a clinic or an hospital and for dinner a restaurant. There are many subsystems in a production system. For example, shipping in a plant, radiology in a hospital and kitchen in a restaurant. All production systems must operate at highest possible efficiency, lowest cost and highest quality. All industrial and manufacturing engineers actually work in a production systems but they may be employed by a subsystem say quality control or warehousing. One example of a production system is our College of Engineering. Input can be considered as high school, B.S. or M. S. students. The output is obviously B.S., M.S., and Ph. D. degree. Some of the resources needed in this production system are professors, class rooms, labs, academic staff etc. and etc.

Industrial Revolution and The Factory System 18th Century: Making of woollen clothes: Spin wool on a spinning wheel to make yarn Weave yarn on a loom to make cloth Take it to fare and sell it Hargrove develops a spinning jenny which can make 8 threads (yarn) at a time Spinning jenny is powered by steam engine increasing production tremendously Industrial Revolution was started Needed workers to run the jennies and make cloth Workers needed supervisors to make sure they work Modern Factory System was born

The Advent of Scientific Management 1. Adam Smith (1776): Division of Labor Before: One operator all the operations After: 2. One operator one operation

Charles Babbage (1832): Not only divide operations but hire workers at lower wage rate for easy and simple operations (lower cost) Frederick Taylor (1878): Considered by many as Father of Scientific Management Worked for Midvale Steel Company in Pittsburgh

3.

When Taylor started working with this company, many workers were loading a charge for blast furnaces which include ore, coke, etc. These materials were piled up in big yard and workers with

their own shovels (different sizes and weights) will pick up the material and take the blast furnaces. Taylor observed that this work was being done in a haphazard fashion and workers doing whatever they liked. He immediately recognized that there has to be a better way by which each worker should take the material. He was responsible and implemented the following idea:

Focus for productivity : Identify different elements of a job; find best way to do it in least time. He determined load that can be carried for different distances, redesigned shovel and its weight. Costs down by 55% and worker wages up by 60% He was criticized later for ignoring human element(pace at which workers can work) 4. Gilbreths (1880): One best way of doing a job Utilized Taylors idea of measuring work (time study) but carried it further by analyzing each motion for finding the best way to do a job THERBLIGS: set of motions developed Bricklaying: Improved output from 120/hr to 350/hr by orienting bricks correctly, bricks and mortar at same place and using adjustable scaffolding. A major difference between the work of Taylor and Gilbreth is the division of jobs into elements. Gilbreths division of work (motion study) is relatively smaller than Taylors (time study).

5.

The Hawthorne Studies (1924-50): There was strong criticism of Taylor (and Gilbreths) For ignoring the human aspect. For example, can an operator work at the specified level for 8 hours each day?

Studies conducted by Hawthorne examined different factors which affected a worker. For the first time he looked into factors (fatigue, shorter work day, worker attitude, and work place factors such as lighting etc.etc.) 6. McGregor(1957-67) : He set out to formulate his view of existing management practices. (known as Theory X). The following is a summary: (a) Management is responsible for production system (capital, equipment, people etc.).

(b)

People: He hypothesized that people will try to direct their efforts for meeting the goals of organization. Management is supposed to control and reward the workers. If (ii) is not done, workers will become passive (even resistant).

(c)

7.

McGregor argued that motivation of workers is satisfaction of needs and developed his own theory of good management practices and pushed for adoption of his new theory called Theory Y. The following is a summary: (a) (b) (c) Same as in X If workers are passive, they have become so because of work experience It is the responsibility of management to make it possible for workers to recognize this and develop better work habits. This is best achieved by arranging working conditions so that workers can achieve their own goals best by directing their own efforts towards organization objectives. To support his theory he developed the following pyramid of worker motivation.

(d)

1 Egoistic Social Safety Physiological

1=Self Fulfillment

Hierarchy of Worker Motivation (Mc Gregor)

According to his theory of worker motivation, first level of satisfaction is physiological. Here, the employees are seeking basic needs; good housing food etc. Once this level is accomplished, they seek the next level which is safety. At this level they focus their attention on working conditions such as lighting and other safety measures. The next level is social and here they worry about acceptance by others. The next level is egoistic which means rewards and recognition. The final level is self satisfaction is basically self fulfillment (self evaluation etc.) It is managements job to make sure that each work can operate at the highest possible level.

8. Ouchi and Johnson(1974-81): Worked in Japan for improving management practices (Theory Z). The following is a summary: (a) (b) (c) (d) Lifetime employment for employees. Promotions based on length of service (not on job performance). No specialization and should move through all aspects of job. Decisions should be made through consensus.

9.

Year 2,000: There is still a raging debate about what constitute good management practices. Very recently, Japanese have decided that all aspects of Ouchi and Johnson are no longer applicable in a global economy and are moving away from it.

TYPES OF BUSINESS ORGANIZATIONS

There are many different types of business organizations. In this section a few different ways in which a business may be organized are discussed. Individuals: This is the simplest type of organization. An individual sets up a business, provides capital, and basically runs the business. Examples of these businesses are small one person coffee shops and grocery stores, etc. In these businesses other employees may or may not work. The important point is that all capital (portion of capital may be borrowed) is provided by the owner and all profits (if any) are kept by the owner. The advantages of this type of organization are (i) complete control of business and all business related decisions, and (ii) owner keeps all profit. The main disadvantage of this type of business is the liability. The owner is responsible for all liabilities against the business. If a business fails, the owner will have to pay all amounts owed by the business. Another disadvantage is limited capability to raise or borrow capital for the business. Partnerships: In partnerships, one or more people jointly own and run a business. Capital is provided by the partners and all business related decisions are made jointly by the partners. A good example of such a business is an engineer and a marketing graduate forming a partnership. The engineer can design products while the marketing graduate can help sell it. The advantages of partnerships are more capital and expertise for running a business. The disadvantages are the loss of control over decision making and sharing of profits from the business with partners. The major disadvantage, however, remains the liability against the business, but now instead of one person all the partners are liable for losses against the business.

Corporations: Corporations are organized by filing a charter with an appropriate body (State where corporation is being organized). A charter is a broad statement of the types of activities a business is planning to conduct. An example of a charter is to " manufacture and sell machinery parts". Capital for corporations is provided by the stock holders who own it. Capital is raised by selling stocks. Stocks are traded in open market and anyone can buy stocks at the "going" price. Generally, there are a multitude of stock holders and therefore the control of corporations is given to the board of directors who are responsible for running the corporation. For many corporations, a full management team is needed to supervise the day to day operations. This may include, President/Chief Executive Officer, Vice Presidents, Treasurer, Secretary, and several department managers. Profit earned by a corporation is used for two purposes. A portion of the profit earned is used within the corporations for new and existing ventures. This portion of the profit is called the "retained earnings". Remainder of the profit is divided among the stockholders. This portion of profit distributed to the stock holders is referred to as the "dividends." A major advantage of this form of organization is that liabilities for individual stockholders are limited to the value of the stock held in the corporation. It should be pointed out that the main goal of corporations is to maximize profit for the

stockholders. There are many ways in which this can be measured but one obvious way is to use the dividends for the stockholders. Few other ways to measure this total profit are (i) increase in value of the stock and (ii) the ease of selling the stock. These measures cannot be quantified easily. Note that if a corporation fails to produce profit over an extended period of time it will cease to exist.

Summary:

We have discussed some important types of business organizations. However, It

should be pointed out that there are many variations of the three ways discussed here to organize a business and it is beyond the scope of this class to describe all different forms of organizations. Also, only a few

important characteristics of each type of organization are discussed. For a more complete review the reader is referred to many good references available on this topic. But one thing stands out, businesses are organized to produce profit for the owners.

Two main statements which provide status of a business

I II

Balance Sheet: Snapshot at a point in time (As of March 31, 1998) Income or Profit and Loss Statement: Profit or loss over a period of time (For 1st quarter) Development of both is based on the fundamental accounting equation. ASSETS = LIABILITIES + NET WORTH Assets: Things of value a business owns (cash, equipment, buildings etc.etc.)

Liabilities: Business owes for things(loans, notes, accts payable etc.) Net Worth: Value of company (difference between assets and liabilities)

Example:

1. Organize a firm (XYZ) using $3,000(cash) 2 Buy equipment for $2,000 using cash 3. Borrow $1,500 (note) from a bank 4. In one year manufacture 1,000 units of a product using $1,200 for labor 400 for material (accounts payable) 500 charged for depreciation of equipment 5. Sell 1,000 units (Accounts receivable) @ $3/unit 6. Collect $2,200 of $3,000 receivable in cash 7. Pay $300 of accounts payable for material and $1,000 for bank note ****************************************

XYZ Company Balance Sheet as of December 31, 19XX

Assets Cash Accts. Rec. Inventory Equipment $2,200 800 0 1,500 Note

Liabilities and Net worth $500 Accts. Pay Net worth 100 3,900

______________________________________________________________ $4,500 $4,500 _______________________________________________________________

XYZ Company Income Statement for Year Ending on Dec 31, 19XX Operating revenue Operating Costs Labor 1,200 Material 400 Equipment 500 _________________ 2,100 _________________________ Profit (Net income) 900 _________________________ $3,000