Introduction

to
Industrial Management
 Introduction

Rapid Increase in Global Competition

Technological Changes

Dimensions for competitiveness of any company- Cost, Quality,

Delivery, Innovation, Flexibility to adapt in changing demand.

To improve organizational performance- effective use of production

capability and technology, Total Quality Management(TQM), Quality Function
Development (QFD), Six Sigma, Business Process Re-Engineering(BPR), Just in
Time(JIT), Benchmarking, Performance Measurement

Company have to satisfy internal & External Customers.

Industrial Management
 Industrial Engineering

The American Institute of Industrial Engineers (AIIE) has defined

the special field of Industrial Engineering as
Concerned with design, improvement and installation of
integrated system of people, materials, equipment and
energy.
 Industrial Management

IM involves guidance, co-ordination & control or

efforts of a group of individuals towards
optimum utilization of men, materials,
machinery & money through improved design,
analysis & implementation in order to achieve
common objectives of the industry.
 Concept of Industrial Engineering

It is engineering approach to the detailed analysis of the use

and cost of the resources of an organization. The main
resources are men, money, materials , equipment and
machinery. The industrial engineer carries out such analysis
in order to achieve the objectives (to increase productivity, or
profits etc.) and policies of the organization.

The industrial engineer is engaged in the design of a system

and his function is primarily that of management.

If the industrial engineer had to focus on only one concept to

describe his field of interest and objective, it would have to be
productivity improvement.
 Productivity Improvement implies

(i) a more efficient use of resources,

(ii) less waste per unit of input supplied,
(iii) higher level of output for fixed levels of input supplied
and so on.

The inputs may be

(i) human efforts,

(ii) energy,
(iii) materials,
(iv) invested capital etc.
 Role of Industrial Engineer
Decision-Maker Expert
Develops and uses Help in Decision-making
decision tools Helps in designing the system
Uses MIS and Expert in new technology like
computers TQM, MRP etc.

Trainer Advisor
Motivates Industrial
Helps in work study Engineer Review and interpret data
Train the workers in methods Advises for improvement
and motion study Suggests productivity tool
Applies new technologies Negotiator

Analyst of System

Identifies system faults

Analyses job at micro level
 Need of Engineers in Management
There are three basic management skills: technical, human
and conceptual.
(i) A technical skill is the ability to use tools, techniques, and
specialized knowledge to carry out a method, process, or
procedure.
(ii) Human skills are used to build positive interpersonal
relationships, solve human relations problems, build
acceptance of ones co-workers, and relate to them in a way
that their behavior is consistent with the needs of the
organization.
(iii) Conceptual skills involve the ability to see the organization as
a whole and to solve problems in a way that benefits the
entire organization.
Scope of Industrial Management

Management
Function

Productivity Production
Measurement Planning

Scope
of IM
Inventory Quality
Control Control

Supply Chain
Management
 Application of Industrial Management
Product Designing: which is commercially viable & can be accepted by customers

Devising efficient methods of production: Maximize output & reduce input

Exploring reliable suppliers: Uninterrupted & reliable supply of raw material

Fund Management: Lowest cost & higher return

Plant Designing: Considering certain factors like workers & material movement,
safety, efficient utilization of space etc.

Recruitment & Training: Best human resources

System Co-ordination: With other deptt. like marketing ,IT, HR, Finance, etc

Leadership & Motivation: To enhance their performance

System Control : Inventory , quality & environmental pollution control .

 Challenges in Managing Engineering & Technology

Changing Technology Tight & Date Driven Schedules

Limited Resources Competition for Resources

Complex in Task Creativity & Innovation

Multifunctional Team Building Rewards for Motivation

 Production
Productivity
&
Production System
 Production
It is a process of creating or enhancing utility
by transforming a set of inputs such as men
machinery, material & money into a specific
set of output such as finished goods or
services

It is a value addition process.

It is a process by which goods & services are

created
 Transformation Outputs:
Inputs:
Process:

Product Design Products

Men
Process Planning Services
Machinery
Production Control
Material
Maintenance
Money
 Productivity
It may be defined as the ratio between output &
input

Output means the amount or numbers of items

produced & inputs are the various resources
employed such as men machinery, material & money

It is the measure of the quantity of output per unit of

input

Productivity = Amount of Output/Amount of Input

 Productivity Index
Labor productivity = Raw material productivity =
No. of Units of Output Output value at standard price
No of Labour employed Cost of raw materials

Direct labor cost productivity = Direct cost productivity =

Output value at Standard Price Output Value at standard price
Amount of wages paid Sum of all direct costs

Capital productivity = Material productivity =

Value Added Output value at standard price
Capital Employed Cost of
(Raw Material+ Packaging material+ Supplies)

Energy productivity = Total Factor Productivity =

Amount of output produced Output (Value Added) at standard price
No. of Units of power used Labour+ Capital Invested
 Factors affecting Productivity
Factors affecting national productivity
1. Human resources
2. Technology and Capital Investment
3. Government Regulation

Factors Affecting Productivity in organization:-

1. Product( or system ) design
2. Machinery and Equipment
3. Skill and Effectiveness of the worker
4. Production Volume
Measures to Increase Productivity

Material
Labor
Plant, Equipment and Machinery
Land and Buildings
 Example 1
7040 Units Produced
Which productivity
Sold for $1.10/unit measures can be
calculated?
Cost of labor : $1,000
What is the
Cost of materials: $520 multifactor
productivity?
Cost of overhead: $2000
2-19
 Solution 1

MFP = Output
Labor + Materials + Overhead

MFP = (7040 units)*($1.10)

$1000 + $520 + $2000

MFP = 2.20

2-20
 Example 2
5,500 Units Produced
Sold for $35/unit
500 labor hours are used
Cost of labor: $25/hr
Cost of raw material: $5,000
Cost of overhead: 2 x labor cost
What is the labor productivity?

2-21
What is the multifactor
 Solution 2: Labor Productivity

5,500 units/500 hours = 11 units/hour

Or we can arrive at a unitless figure:

(5,500 units*$35/unit)/(500 hours * $25/hr) =15.4

2-22
 Solution 2: Multifactor Productivity
MFP = Output
Labor + Materials + Overhead

MFP = (5,500 units)*($35)

(500hrs.)*$25/hr. + ($5000) + 2*(500hrs.)*$

MFP = 4.52

2-23
 Types of Production Methods / Systems

1. Continuous
Mass production
Process or continue flow type

2. One time Large Projects

3. Intermittent
Batch production
Job Production
 Types of Production Methods / Systems

Job Production One-off production - each item

might have particular specifications

Flow Production suitable for mass market products

that are identical

Batch Production each stage of the production

process has an operation completed on it before
moving on to the next stage allows modifications to
be made to products that otherwise are the same
Industrial Ownership
 Sole Proprietorships
The vast majority of small businesses start out
as sole proprietorships. These firms are owned
by one person, usually the individual who has
day-to-day responsibilities for running the
business. Sole proprietors own all the assets
of the business and the profits generated by
it. They also assume complete responsibility
for any of its liabilities or debts.
 Advantages of a Sole Proprietorship

Easiest and least expensive form of ownership to organize.

Sole proprietors are in complete control, and within the parameters of the law,
may make decisions as they see fit.
Sole proprietors receive all income generated by the business to keep or
reinvest.
Profits from the business flow directly to the owner's personal tax return.
The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship

Sole proprietors have unlimited liability and are legally responsible for all debts
against the business.
Their business and personal assets are at risk.
May be at a disadvantage in raising funds and are often limited to using funds from
personal savings or consumer loans.
May have a hard time attracting high-caliber employees or those that are
motivated by the opportunity to own a part of the business.
Some employee benefits such as owner's medical insurance premiums are not
directly deductible from Business income (only partially deductible as an
adjustment to income).
 Partnerships
In a Partnership, two or more people share ownership
of a single business. Like proprietorships, the law
does not distinguish between the business and its
owners.
The partners should have a legal agreement that sets
forth how decisions will be made, profits will be
shared, disputes will be resolved, how future
partners will be admitted to the partnership, how
partners can be bought out, and what steps will be
taken to dissolve the partnership when needed.
 Advantages of a Partnership

Partnerships are relatively easy to establish; however time should be

invested in developing the partnership agreement.
With more than one owner, the ability to raise funds may be increased.
The profits from the business flow directly through to the partners' personal
tax returns.
Prospective employees may be attracted to the business if given the
incentive to become a partner.
The business usually will benefit from partners who have complementary
skills.

Disadvantages of a Partnership

Partners are jointly and individually liable for the actions of the other
partners.
Profits must be shared with others.
Since decisions are shared, disagreements can occur.
Some employee benefits are not deductible from business income on tax
returns.
The partnership may have a limited life; it may end upon the withdrawal or
death of a partner.
 Types of Partnerships that should be considered

1. General Partnership
Partners divide responsibility for management and liability as well as the shares
of profit or loss according to their internal agreement. Equal shares are
assumed unless there is a written agreement that states differently.

2. Limited Partnership and Partnership with limited liability

Limited means that most of the partners have limited liability (to the extent of
their investment) as well as limited input regarding management decisions,
which generally encourages investors for short-term projects or for investing in
capital assets. This form of ownership is not often used for operating retail or
service businesses. Forming a limited partnership is more complex and formal
than that of a general partnership.
 Joint Venture
Acts like a general partnership, but is clearly
for a period of time or a single project. If the
partners in a joint venture repeat the activity,
they will be recognized as an ongoing
partnership and will have to file as such as
well as distribute accumulated partnership
assets upon dissolution of the entity.
 Corporations
A corporation chartered by the state in which
it is headquartered is considered by law to be
a unique entity, separate and apart from those
who own it. A corporation can be taxed, it can
be sued, and it can enter into contractual
agreements. The owners of a corporation are
its shareholders. The shareholders elect a
board of directors to oversee the major
policies and decisions. The corporation has a
life of its own and does not dissolve when
ownership changes.
 Advantages of a Corporation

Shareholders have limited liability for the corporation's debts or judgments

against the corporations.
Generally, shareholders can only be held accountable for their investment in
stock of the company. (Note however, that officers can be held personally
liable for their actions, such as the failure to withhold and pay employment
taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and
employees.

Disadvantages of a Corporation

The process of incorporation requires more time and money than other forms
of organization.
Corporations are monitored by federal, state and some local agencies, and as
a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to
shareholders are not deductible from business income; thus it can be taxed
twice.
Limited Liability Company (LLC)
The LLC is a relatively new type of hybrid business structure
that is now permissible in most states. It is designed to
provide the limited liability features of a corporation and the
tax efficiencies and operational flexibility of a partnership.
Formation is more complex and formal than that of a general
partnership. The owners are members, and the duration of
the LLC is usually determined when the organization papers
are filed. The time limit can be continued, if desired, by a
vote of the members at the time of expiration. LLCs must not
have more than two of the four characteristics that define
corporations: Limited liability to the extent of assets,
continuity of life, centralization of management, and free
transferability of ownership interests.