BAHIRDAR INSTITUTE OF TECHNOLOGY

SCHOOL OF MECHANICAL AND INDUSTRIAL ENGINEERING

INDUSTRIAL MANAGEMENT AND
ENGINEERING ECONOMICS

Instructor : Meseret A.
OBJECTIVES OF THE COURSE

1.To know the principles and applications of
I ndustrial management.
2.Understand the basic concept of engineering
economics to make various decisions in
industrial environment.
3.To know how to estimate cost of various
resource utilizations of industrial operations.
CHAPTER 1
NATURE AND SCOPE OF INDUSTRIAL
MANAGEMENT
DEFINITION OF MANAGEMENT
All organizations establish a variety of goals and direct their
energies and resources to achieving them.
A profit oriented business firm, for example, might have return on
investment goal; a hospital would have goals centred around
patient care; and an educational institution would establish goals
for teaching research, and community service.
All organizations also have resources that can be used to meet
these objectives.
Such resources can be classified into two categories: human and
non-human resources. Nonhuman resources include plants and
equipment, land, and financial resources. Human resources are
employees skills and knowledge
Therefore management is the force that unifies these resources
How Do You Understand Management?
Management as a Unifying Force
Management
Financial
Resources
Plant
&
Equipment
Employees
Land
Management is the process of
bringing human and nonhuman
resources together and
coordinating them to
accomplish organizational
goals.
Resources
Human
Skills
Knowledge
Non-Human
Capital
Land
Plant and Equipment
Technology
Time



Management in all business and organizational activities
is the act of getting people together to accomplish desired
goals and objectives using available resources efficiently
and effectively.
Management comprises planning, organizing, staffing,
leading or directing, and controlling an organization.
Resourcing encompasses the deployment and manipulation
of human resources, financial resources, technological
resources, and natural resources.
How Do You Understand Management?
Management is both science and art.
Management is a science in the sense, that it adopts a
systematic approach through knowledge acquired by
continuous and vigorous efforts.
Management is an art, as it is an application of some
skills to achieve the desired results. It is an art because it
utilize the talent of the people and also because it
manages the human beings.
Management Science is concerned with developing and
applying models and concepts that help to illuminate
management issues and solve managerial problems.
Management science is the application of statistical or
mathematical methods and principles to business
decision-making and problem-solving processes.
Management science is also a branch of traditional
operations research used in business management.
Operations research applies mathematical or
quantitative techniques to the decision-making process.
Eg simulation, queuing model, linear programming, etc.
What is industrial management?
Industrial management deals with the creation and management
of systems that integrate people, materials , and energy in
productive ways for the production of an economic good or
service.
Industries can be classified on the basis of raw materials,
size and ownership.
Raw Materials: Industries may be agriculture based, Marine based, Mineral
based, Forest based, etc.
Size: It refers to the amount of capital invested, number of people employed and
the volume of production.
Ownership: Industries can be classified into private sector, state owned or
public sector, joint sector and co-operative sector.
Industry is also often classified into three sectors:
primary or extractive, secondary or manufacturing,
and tertiary or services.
What are the managerial abilities?
Ability to plan
Integrity
Technical skill
Intelligence
Initiative
Resourcefulness
Judgment
Ability to organize
Tactfulness
Reliability (consistency)
Management, Resources and Organization
Managers use resources to attain organizational goals.
Management is the use of people and other resources to
accomplish objectives.
The objective is to:
Maximize the potential of their people and coordinate
their efforts to attain some predetermined goal.
Organization
An organization is a stable, formal social structure that
takes resources from the environment and processes them
to produce outputs.



Organizational Goals
Profit-oriented organization
Return on investment
Non-Profit-oriented organization
Hospitals
Patient Care
Educational Institutions
Teaching providing quality education
Research
Community Services


15
Management applies to:

Importance of Manager
Manager
Puts together the factors of production to
produce goods and services
Make business decisions
Takes risks for which the reward is profit
Acts as an innovator by introducing new
products, new technology and new ways of
organizing business

Managers Interactions with Other Groups of People
Creditors &
Suppliers
Superiors
Customers
Peers
co-workers
Manager
Government
Agencies
subordinates
Community
Functions of Management

Functions of
Management

Planning is the process of specific setting objectives for
the future and developing courses of action to accomplish
them.
Top-level managers set plans for the entire company
Lower level managers prepare plans for their
immediate areas of responsibility.
Planning doesnt occur in a vacuum. It is done in light
of budgetary constraints, personnel requirements,
competition and other factors


Planning involves:
the predetermining of the course of action to be taken in
relation to the known event. (Plan A)
It also includes anticipating the possibilities of future
problems that might appear (Plan B or Contingency Plan)
It is a systematic activity which determines when, how
and who is going to perform a specific job.
It is rightly said :-
Well plan is half done
Failing to plan means planning to fail



Organizing is the process of arranging people and physical
resources to carry out plans and accomplish
organizational objectives.
When goals have been established, a manager must
create a way to accomplish them.
In other words, through organizing, managers must
develop a system in which people can perform tasks that
lead to the desired results.

Organizing
Initially , organizing by top-level executives includes the
following activities:
A. Creating job position with defined duties,
responsibilities, requirements and salary ranges based
on job requirements
B. Arranging positions into a hierarchy by establishing
authority-reporting relationships.
C. Determining the number of subordinates each
managers should have reporting( span of control or
span of management), the number of hierarchical levels
in the organization, and the most appropriate way to set
up departments.


Each position in the organization is accountable for identified
tasks that contribute to its overall purpose
Organizing is ongoing process. Because jobs may be enlarged,
diminished or eliminated; additional positions may be
created; new production methods may be instituted; new
management skills may be required; reporting relationships
may be altered.
Staffing is the process of matching jobs and people.
Involves the recruitment, selection, development, and retention of
employees with appropriate qualifications for positions created by
the manager.
Staffing is one of the managers most important duties because the
success of any organization depends on the quality of its
employees. Most managers therefore choose their new employees
very carefully.
Staffing usually is systematic and includes many of the following
activities: human resource planning, announcing and advertising
vacant positions, receiving applications, preliminary and final
interviewing, testing, medical examination, and final selection and
orientation.


Leading is the act of motivating or causing people to perform
certain tasks intended to achieve specific objectives. It is the act
of making things happen.
To be effective leaders, managers need to understand individual
and group behaviour, techniques of motivation, and effective
styles of leadership.
Managers must develop relationships that ensure adequate
communication with their subordinates.
Leading also includes managing personal conflict, helping
employees deal with changing conditions, and disciplining
employees.
Leading involves developing a climate of individual integrity,
corporate honesty, and high productivity.


Manager to be effective leader:
Making certain that everyone in the unit knows exactly
what is expected in terms of performance
Objectives must be identifiable, measurable and
individually attainable
Must recognize and reward outstanding performance
Must surround themselves with competent employees
and ask their advice when making decisions that affect
them. In other words, a manager should use all the
organizational resources available-especially people.

Controlling is the process by which managers determine whether
organizational objectives are achieved and whether actual operations
are consistent with plans.
In controlling, a manager continually compares the performance of
organization with its goals and takes corrective action, if needed.
Actual results may differ from the desired results in any area, but
the three that require the most attention are product quality, worker
performance, and cost control.
The quality of the companys product may not measure up for a
number of reasons: poor quality of raw materials used in the
manufacturing, improper blending/mix of raw materials,
malfunctions of manufacturing process/machine breakdown.
Control also is required when employees fail to meet desired
performance standards and can be achieved by establishing
standards, measuring worker output and comparing it with standards
and taking corrective action when necessary.




Employee performance standards are formulated through
experience, judgment and observation.
In appraisal interview, the employee is told which area need
improvement and how to bring it about.
In some cases, additional training and instruction are
needed, in other cases, disciplinary action is required.
Cost control involves comparing expenditures with budgeted
funds.
Variation from the standards helps managers find problems
areas and can lead to cost-reduction programs.
Management Roles
Carrying out management functions requires a manager to
behave in a certain way- to fill certain management roles.

1. Interpersonal Roles

1.1. Figurehead: All social, inspiration, legal and ceremonial
obligations. In this light, the manager is seen as a symbol
of status and authority.

Management Roles
1.2. Leader: Duties are at the heart of the manager-
subordinate relationship and
include structuring and motivating subordinates,
overseeing their progress, promoting and encouraging
their development, and balancing effectiveness.
As a leader, the manager hires, trains, evaluate,
motivate and promotes subordinates.

1.3. Liaison: Describes the role of managers in representing
their organization in different occasions.
Maintain information links both inside and outside
organization; use mail , phone calls , meetings.

2. Informational Roles
A second set of managerial activities relates to receiving
and transmitting information.
These informational roles require managers to serve as
monitor, disseminator and spokespersons.
2.1. Monitor: Duties include assessing internal operations, a
departments success and the problems and opportunities
which may arise. All the information gained in this
capacity must be stored and maintained.
As a monitor, the managers tries to keep informed about
what is happening in the organization or group by
gathering information.
2.2. Disseminator: Highlights factual or value based external
views into the organization and to subordinates. This
requires both filtering and delegation skills.
As a disseminator, a manger sends outside information
into the organization and internal information from
subordinate to another.
2.3. Spokesman: Serves in a public relations capacity by
informing and lobbying others to keep key stakeholders
updated about the operations of the organization.
represents the company or its position to other groups,
including the press government agencies, customers,
and trade organizations.

3. Decision Roles
The third set of managerial activities involves decision
making, or decisional roles.
As decision maker, the manager becomes an
entrepreneur, disturbance handler, resource allocator and
negotiator.
3.1. Entrepreneur: Roles encourage managers to create
improvement projects and work to delegate, empower
and supervise teams in the development process.
The manager as entrepreneur may create new projects,
change organizational structure, and institute other
important programs for improving the companys
performance.

3.2. Disturbance handler: A role that takes charge when an
organization is unexpectedly upset or transformed and
requires calming and support.
As a disturbance handler, the manager deals with
situations over which he or she has little control.
These may involve conflict between people or groups, or
unexpected events outside the company may affect the
firms operations.
In either case, immediate attention usually is needed and
the managers must rearrange schedule to take care of
the emergency.

3.3. Resource Allocator: Describes the responsibility of
allocating and overseeing financial, material and
personnel resources.
As a resource allocator, the manager must divide the
companys resources as well as personal time among
the various demands on them.
This involves assigning work to subordinates, scheduling
meetings, approving budgets, deciding on pay
increases, making purchasing decisions, and other
matters related to firms human, financial and material
resources.


3.4. Negotiator: Is a specific task which is integral for the
spokesman, figurehead and resource allocator roles.
The manager acting as negotiator represents the firms in
financial matters. For example, the manager is a
negotiator when the company tries to buy another firms.



Management Hierarchy

Although all managers may perform the same basic duties
and play similar roles, the nature and scope of their
activities differ.
Hence, three distinct levels of management are available.

Top Management
Middle Management
Supervisory Management
1. Top Management
Made up of individuals who have the possibility of
making the decisions and formulating policies that
affect all aspect of the firms operations.
President
Vice President
Chief Executive Officers
Executive Vice President
A managers assigned job duties and the authority
needed to fulfill those duties are what determine
management level.
2. Middle Management

Includes all managers above the supervisory
level but below the level where overall
company policy is determined.
Middle managers manage supervisors.


Regional Sales Manager
Academic Deans (Universities)
Production Manager( in an Industry)
3. Supervisory Management
At the base of the pyramid is supervisory management
Supervisors manage workers who perform the most basic
job duties required in the business.
Supervisors manage workers who perform the most basic
job duties required in the business.
Technically, supervisors are managers. As such, they must
reflect the companys view to their subordinates.
Because of the expectations placed on supervisors from
above and below, many people contend that the person on
the firing line-the supervisor-has the toughest job in
management.
Eg. Sales Manager, Academic Department Chairperson
(Universities)
Management and productivity
Management is concerned with productivity i.e. the
effectiveness and efficiency.
Productivity can be measured as the Output to Input ratios
within a time period with due consideration for quality.
Productivity = O P/I P(within time period & considering
quality)

Productivity can be improved by:
a. By increasing O/P with same I/P.
b. By decreasing I/P but maintaining same O/P.
c. By Increasing O/P and decreasing I/P to change the ratio
favorably.
The I/P can be labour, material capital etc.
In the past productivity improvement program were mostly
aimed at workers level but now it is for the management also.

Management Skills
Management success depends both on a fundamental
understanding of the principles of management and on the
application of technical, human and conceptual skills.
Modern business organizations are dynamics and complex,
and competition in the market place is fierce.
Consequently, managers must be highly skilled to succeed.
The skills managers need can be classified as technical,
human relations and conceptual
Management Skills
1. Technical Skills
Are the specialized knowledge and abilities that can be
applied to specific tasks.
Most important at lower level of management.
In most cases, technical skills are important at this level
because supervisory managers should train their
subordinates in the proper use of work-related tools,
machines , equipment and Standard Operation
Procedure(SOP).




Management Skills
2. Human relations skills

Human relations skills are the abilities needed to resolve
conflict, motivate, lead, and communicate effectively with
other workers.
Because all work is done when people work together, human
relations skills equally important at all levels of
management.
it is cooperative effort; it is teamwork; it is the creation of
an environment in which people feel secure and free to
express their opinions.







3. Conceptual Skills

Conceptual skills are the abilities needed to view the
organization from a broad perspective and to see the
interrelations among its components.
Conceptual skills are most important in strategic (long-
range) planning, therefore they are more important at
top level executives.





Management Skills
Top
management
Middle
management
Supervisory
management
Management Styles

Description Advantages Disadvantages
Autocratic
Senior managers
take all the
important
decisions with no
involvement from
workers
Quick decision making
Effective when
employing many low
skilled workers
No two-way
communication so can
be de-motivating
Creates them and us
attitude between
managers and workers
Paternalistic
Managers make
decisions in best
interests of
workers after
consultation
More two-way
communication so
motivating
Workers feel their social
needs are being met
-Slows down decision
making
Still quite a
dictatorial or
autocratic style of
management
Democratic
Workers allowed
to make own
decisions.
Some businesses
run on the basis of
majority decisions
Authority is delegated
to workers which is
motivating
Useful when complex
decisions are required
that need specialist skills
Mistakes or errors can
be made if workers are
not skilled or
experienced enough