Вы находитесь на странице: 1из 42


"/I t ''")(')
"11#.- ••..•,


Definition of- Manag~ment
(80 Industrial Management I • To manage is to forecast andplan , to' organize, to
command , to coordinate and- control- Henry
Management Science Fayol( 19/6).
• Management is. concerned with the systematic
organization of economic resources and its 'task
is to make these resources productive- Peter F
Introduction to Management Drucker (1955).
UI • Management is a social, process- consisting of
GDP planning ' control, coordination , and motivation-
EFL Brech( 1957)

Comprehensive Definition Nature and Features" of Mgmt

LIt is a social process .
Management can be considered as. a 2.lt denotes a 'body of people' involved in decision making.
social process of planning. organizing. 3.1t is omnipresent and universal.
4.1t is an exact science.
commanding. coordinating and
S.lt is complex.
controlling for the purpose of 6.lt is situational in nature.
achieving organizational goals by using 7.lt is an art and science-Skills and Cause & Effect.
limited resources effectively and S.lt is a profession.
9.1t is inter-disciplinary.
efficiently and by working with and
IO.lt uses 4M's- Men, machine, money and materials.
through people.

Importance of Management Challenges to Management

I. It facilitates the achievement of goals I. Increasing opportunities due to lPG.
2. Changing values and lifestyles.
through limited resources.
J. Increasing fife expectancy.
2.1t ensures smooth sailing in case of
.•. Higher customer expectations
difficulties. S. Conflicting society interests,
3.1tensures continuity in the organization. 6. Eroding business ethics.

4.lt ensures economy and efficiency. 7. Depleting financial and non, fin resources.
8. Disruptive and changing technology.
5.1tfocuses Of} group' activities.
9. Infrastructure bottlenecks.
6. It is the key to economic growth. 10. Environmental and pollution problems.


Administration Concept of Organization

Administration is concerned with :
Organizations are:
I. Fonnulation of corpo rate policy
I. Intricate human strategies designed to achieve certain
2. Coordination of functional areas. objectives. C.Argyris (1960).
3. Placingthe organization under the control of CEO.
2 The framework of the management process -
~. Execution of policy within admin limits.
E F l Brech (1965).
S. Creating an organization to achieve the objectives.
3. Systems of behavior created for better results-
Administration is a ~ of Management. H . Simon (1976).
Administration is identified with the process of formulation 4. Systems of interdependent human beings-D; Pugh (1990)
of policies. implementation and ~ 5. Facmtators of cohesive performance directed towards
performance against plans. achievement of goals -R . Stewart( 199'1)
Administration is similar to '0'lanizine' in management

Significance of Organization Entrepreneurship

I. It facilitates administration.
2 It facilitates growth and diversification.
3. It ensures effective utilization of
4. It stimulates creativity.
5. It ensures optimum utilization of

Henri Fayol-'s contribution

• Henri Fayol was a French industrialist
(mining engineer) . He looked at
organization from top to bottom.
• He defined managerial functions as
forecasting and planning. organizing.
commanding and coordinating.
• He identified six types of activities to be
a accomplished in every organization-
• Technical. Commercial. Financial.
Security. accounting and managerial.

14 Principle's of Henri Fayol 14 Principle's of Henri FayoJ
~1. Division of work- As per skills and- talents 8.Centnlisation of authority-declsion making and
Authorlty- Right to give orders. authority t be centralized .
9.scalar chain- Flow of authority
J. Discipline.- Respect rules
IO.Order-right man at the right place
4. Unity: of command- Instructions from one boss. I I.EQuity-de.lings to be fair with·.H employees.
S. Unit)( of direction- One action plan 12.SGlbility of·tenure of personnel- "",oiding frequent
6. Subordination of individual interest to group transfers
interest- personal goals are not important I J.lnitiative -Employees should show initiative within the
limits of discipline.
7. Remu~er~tion- wages should be fair to achieve 14.Espirit de corps- Team work . unity in Strength .
Organisational goals

Taylor's Scientific Management Taylor's Scientific Management

• Fredrick Winslow Taylor ( 1856-1915)was an • Scientific Management was the process of
apprentice engineer. applying scientific principles to management
related issues, It contained :
• Later. rose to. shop superintendent.
I. Develop scientific method instead of rule of
• His focus was on oriented towards work. thumb.
• Is known as Father of Scientific Management 2 Determine accurately in scientific way. the
• Put efforts to achieve efficiency on shop floor. correct method and time for each job.
• He tried to increase efficiency; by ana lysing 3. Develop organization to make workers
systematically workers activities.
4. Select and train workers.
• He conducted experiments in improving labour
s, Convince management to use sdentific
productivity at Bethlehem Steel Company.
approach than arbitrary methods of controlling

Taylor's experiment Taylor's contribution

• Taylor experimented. in Bethlehem • His work on systematic approach led to
Steelworks to show increase in development of Work Study.
productivity using scientific approach. • He proposed that ordinary worker
would perform better if definite task was
• Daily output increased with a load of 21
given.with clear cut standards.
pounds as against heavier loads. Salary
• He wanted management and workers to
increased by 60 % • handling costs
have mutual cooperation to reap the
reduced by 50% . Only 140 workers could benefits of scientific approach.
do the work as against 400'-600 .
• He regarded that there was one best way
of doing every thing.


Benefits of SM Criticism of SM
• Increases productivity and working methods. • It ignore the functional areas of Management
• It helped develop rational approach to • Individual creativity is ignored.
measure tasks.
• Worker is reduced to a cog in the machine.
• Wage system was introduced.
• It made the work more mechanical.
• Working conditions improved
• Mobility of worker gets restricted due to
• Laid foundation for work study and other
techniques. narrow specialization.
• It formed the basis of McGregor's Theory X • Workers were not part of pla.nning,.t~os, ; ..
some of the jobs w~re repetitivi;'and bOring:::' . .: ..
• Japanese companies used SM to improve
production system - Theory Z- W Ouchi's

Contributors to Scientific Management Contributors to Scientific Management

I. Henry Gantt: Was inspired by Taylor's work. His 3. Lyndal F Urwick: Worked to improve the
studies related to selection of workers , organizational mechanisms right. Identified
development of incentive system . Suggested numerous internal structure and operations of
worker - management harmonious relationship. organizations in his book, "Elements of
Famous for Gantt Chart used for planning and Administration"
control of work. 4. EFL Brech: He viewed management as a social
2. Frank and lillian Gilbreth: Wife- Husband team. process of planning and controlling activities of
Introduced Motion study to eliminate wasteful an organization to achieve given objectives. He
body movements and process chart , identified concentrated on defining managerial
'Therbligs' for fundamental job related body responsibilities, delegating authority, coordinating
motions. They developed best way of doing a and building morale, management training and
work and implemented the same. development etc.

Functions of Management Management - A systems approach

luther Gullick Coined the acronym POSDCORB
• A system is a collection of interrelated,
Planning -
intertwined and interdependent parts
Directing I Leading, motivating I communicating
"lied sub 'Y'7fJ .•
Coordinating IControlling
Henri Fayol- Planning, organizing. commanding
• •
.coordinating and controlling. •••

1I?Ri?01 S

Functions are Complex and

Functions are Interdependent
S. D .cr
...•. -'-'_. __ .::._"'----
._ ...• _- ...- --~-.-
p .0

o x
.\ . x .'
;:"'\., -:



Levels of Management -
Management Pyramid

Management is ubiquitous in nature. Performed at all levels

across the Com an

Evolution of Management Thought Period of management awakening

• Evolution was more pronounced from This was the period of Industrial Revolution.
the last 300 years. Features:
• Spread-over four periods. I. Intfo-ofautoma<icm
I. Period of management awakening. 2. Inventions increased, demand
2. Scientific management period. 3. New organizatibns were started.
3. Human Relations I Behavioral science. Contributors:
4. Modern Management period. Robert Owen: looked at personnel
management - Workers problems. Shop
floor conditions


Contributors to Awakening Peri()d Contributors of Human Relations Period

I. Robert Owen: Looked ~t personnel management - Focus was on human behavior at work place.
Workers problems. Shop floor conditions. Working motivation. group relationships & leadership.
hours. training. canteen etc.
George Elton Mayo: Famous for experiment at
2. Charles Babbage : He advocated the use of science and
Howthorne Plant of the Western Electric
maths for investigations and accur~cy of data.
Company. USA. It revealed that workers valued
He invented an~lytic~1engine( modern computer). Proposed
most the social relationships and viewed as
division of work. determining cost: of process. profit
sharing etc. important as incentives and good working
3.James Watt Jr and Robinson Boulton: Sons of James conditions in performance and productivity
Watt.(steam engine). They used for' the first time improvement .
management techniques like forecasting. market Thestudy demonstrated that the influenc~ <;If
research. planned machine layout . production planning. groups in determining behavior at work can be I·
standardization of parts . statistical records and others.

Research Findings at Howthorne Maslow's Hierarchy of Human Needs

I. Individual workers should be seen as a
members of a group.
2. Workers enjoyed more the sense of
3. Effective management improved productivity .
4. Need for status and belongingness to a group
were more valued than monetary incentives or
working conditions.
5. Informal or personal groups influenced the
behavior of workers on the job.
6. To seek workers co-operation Management
should understand the social needs.

Douglas McGregor -Theory 'X' and 'Y' Douglas McGregor -Theory 'X' and 'Y'

Two sets of assumptions are made by Theory Y: assumes that employees 'are
managers regarding employees '- Consider work as natural as play or rest.
1. They can direct and control performance on their
Theory X: assumes that employees are
r. Inherently lazy.
J. Committed to the organizations objective.
L require constant guidance and support.
-4_ Rewards make them more committed.
3. sometimes require coercion and control,
5. Given an opportunity they not only accept
•. Given the opportunity would like to avoid responsibility but also look for opportunities to
responsibility. outperform others.
5. They do not have ambitions and always seek security. 6. Most of them are highly imaginative.creative. and
display ingenuity in handling organizational issues.

Fredrick Herzberg- Victor H Vroom-
Two Factor Theory of Motivation Expectancy theory of motivation
Hygiene factors (Dissatisfier's]. and, Motivators. This disapproves the need based-theory of
I. Hygiene factors: basic requirements such as motivation proposed by Maslow and focuses on
policies and procedures. salary. security. the relationship between efforts and rewards.
working conditions. social and personal life. It suggests that individuals are motivated to act in a
These provide happiness but do not motivate .If certain way because they strongly expect that a
absent there would be dissatisfaction. particular action will lead to a desirable result.
2. Motivators: recognition on the job. awards and Force = Valence x Expectancy.
'rewards. challenging assignments. Force = the strength of a persons motivation.
Built around the job. Any few may give satisfaction Valence = It is the strength of arrindividuals desire
but absence of them does.not give for a particular outcome.
dissatisfaction. Expectancy= Probability that a particular action will
lead to a desired-result . ' . .'~


Chester Barnard
• He stressed the cooperation within the
organization depends on three factors -
Physical,environmental and social.
• He suggested that formal organization
structure can supplemented by an
informal organization for the vitality.
• Stressed the importance of upward


I. It is a prominent function of the management.

2. Leaders influence people to perform better: Subontin;;lte..l

3. Is identified with his behavior and traits.

Dt •.•.
en by bsIu. ;and schedules
4. Is characterized by his vision. ability to inspire -;-~-
people. communication skills. personality traits •
charisma. adaptability. self confidence.
5. A manager has to be a mini-leader and a leader
a mega-manager.

E;lrns respect through ;authority and



Assignment -I Mechanical Department

Social Responsi?,i,lity of Management Deadline -29.01.15
Looks at an organizations responsibiliry towards I. What are the functions of management
sociery and stakeholders in terms of safe and and discuss systems approach of
reliable products an-d sharing part of the profits
for philanthropic activities .
I. Responsibility towarcji shareholders 2. Discuss" Henri Fayol's 14 Principles of
20 Responsibility towards consumers. Ma~agement .
J. Responsibility toward~ .employees. 3. What ls Scientific: Management ? Discuss
4. Social responsibility towards creditors. the contribution of F. W Taylor to
S. Responsibility towards Government. Management Science?
6. Responsibility towards competitors.
4. Explai~ Maslow's McGregor's arid' !.'.
7. Responsibility towards general public.
HerZberg's theories in brief,

(J Assignment -I Civil Department

Deadline -03.02.15
.. ~ I. What are the functions of management
and discuss systems approach of
management ?
2. Write briefly how management concepts
have evolved over the decades.
3. Explain Maslow's McGregor's and
Herzberg's theories in brief.
4. How do you differentiate between a
leader and a manager ? Discuss
Leadership Styles.


• It is a traditional principle of organizing
people based on expertise or the skills they
Management Science • This is also known as division of labour.
Designing Organizational Structures
• It is the process of grouping together people
Unit II and jobs into work units.
• These groups or departments are linked
together in a coordinated way.
• Out of this attempt in departmentalization,
organizational structures are born.
~-- ..
~- .. --.- ..

Decentralisation Types of Organization Structures

I. line Org~nization- WiliQry I Sc.abr
• Delegation: It is the process of transferring T~itional ~ olde.sl: type . Mangers in thrs organization ~
d,rKl re:sponsibi6ty for results,
authority from the top to the lower levels in 2. Lj.,.,
;and Scaff O<gonization-
the organization. A mix of line md staff, St.••ff managers support the functions of
• The organization is said to be centralized the line mana~rs. Staff man~ gM ~e .suggest M asSist
me line managen; in dav to day matters,
when the authority to take decisions is held 3. Funa.ional Organiution-
by the corporate office. F W Tayfor suggested Functional Organisationin in his th~'Y of
scicntifK lNInagf!~n( •
• If the authority is delegated to regional 4. Co~ Org.an~Twro Of more persons are appointed to
offices or to other levels in the 'WOrkas a team (0 u.kt .a descisKm.
organization ,it is called a decentralized S. MatTi. Organintion-Also ulJf!d Proj«t OrganiZOItion. n is ••
combination of vertiul • honlont~ and dQ,gonaI rebtionshrps .

~~- ..---
-----------..:.: '-~--

line Organization line Organization

_.- • Merits
l. It clearly sets the
lines of authority
and responsibility.
• Demerits
• Une manger could
be over burdened
• No scope for
I z.lt is simple to specialisation

[d::..J [~.J [~
understand • More scope for
3. Easy to control favoritism and
4.Flexible nepotism
s.Facilitates. quick • May lead to low
decision and actions morale


line and Satff Organization line and Satff Organization

(Service Organization) (Manufacturing Organization)

(Ad~=~}- (,--_':er_nts )
Draughtman 2
(Specificallons) (~J((=)J

line &Staff Organization Functional Organization

• Merits • Demerit
LIt enhances the I.It may create
quality of decisions
2.Thereis a greater conflicts between
scope. for line and staff
advancement managers
3.lt relieves the line z.Staff suggestions
are seldom
4. Beneficial where
there is line implemented.
command within 3.1t is an expensive
staff departments. structure.

~--:.~ ---- --.. ._.


FunctionaJ Organization Committee Organisation

• Merits
r. PbnnedSpecwiZiltion
• Ineffective controls
• A committee is formed when two or more
persons are appointed to work as a team to
2. Seperate actiYitie:s re.loated to aswortcers have more
arrive at a decision on the matters referred

pbnning.nd control than one boss.
:l.fxiliCltH large s.c:illie
• Very Costly structure, to it.
production through
surmrdiSOltion • Requires more • It intends to use the skills ,knowledge and
•.."1l'tediK~convoisillr~ coordination . experience of all .he concerned parties.
_W""fined. • less suitable when • It is supposed to gain cooperation ,coordinate
•. SuiUd when • single p«><I••cr products are many. :--
ee seresce is il1YO~ and utilize the resources of all members.
• No dear line of
6. Offers de~ career path for authority. • The commitee is supportive in nature and is
formed to obtain a consensus outcome,
~ ....

~ .:::.:- ~.~- ...

":;;:.=t~~ct.¥.?i?.&~~~M~~~~~~5 ..S~?Z::~'::..~""!=~",,~_'?.Y"~S!%";"~~~~.:z,.#~~~~~~~~~~t?&:~~:':.:.::;~~~~~;jj:).:§-:'?:"':~ j


Committee Form
* • Merits > Demerits.
1. It pooIsskiUs. 1. ResponsibilityfoFa
knowledge and decision cannot be
experience of members. ftxed on a particular
2. All interest groups are person.
represented. 2. It calls for high degree .
3. Yields results as it is ofcoordtnanon,
aded •.••Ch 3. It invoNes high"cost in
he uy airman 't~~ 'bf"tlme and
4. It.motivatesall tile .._" . - .~n:aoney. _. ,.-" •
members' to pankip;ile..

Matrix Organization Matrix System

LIt is also called a project organization. (-('on-:" !II"):;" •."t':.)

2.1tis combination of vertical • horizontal and .~'.~¥ W-,."Fi'lli\-.-,.lI l:trtSt-; ••;:; rr1H.f'.t.

diagonal relationships in an organization.

3.1tprovides high degree of operational
freedom. flexibility and adaptability to both
line and staff managers. ...~",>.~



lean. Flat & Tall Organizations

Matrix Organization ( Vibrant and Modem - current
> Merits ,~ • to.n & r~to.q;oninlion • Tall Orqanization
LIt offers operational 1. It calls for greater
freedom and
degree of coordination.
It voilates Unityof
Command principle.
2.lt seeks to. optimize 1. It may be difficult to
utilisation of define authority and
resources. responsibility
3.lt focuses on end accurately.
4. Employees may find it
difficultto work under
two bosses.


lean & Flat Organizations Tall Organizations

• Merits • Demerits • Merits • Demerits
r.Fewer levels of I.Makes it difficult to i.Allows for tight r.Sub-ordlnates may
control and feel left out.
Management and supervise sub-
supervision. 2. Costs tend to
decision making. ordinates. increase.
2.Communication with
2.Lower Supervision 2.Flat structures may 3.Coordinating
sub-ordinates is different level
costs. not work as easier.
business expands. becomes difficult.
3.The subordinates 4.Too much
feel comfortable supervision may
with the decision hamper initiatives
making authority. and motivation.

Boundryless Organization Boundryless Organization .

• There are no boundaries that seperares departments • Work is accomplished by empowered people who
internally come together to focus on a task till completion.
• Externally, organizational needs are met by temporary • The assumption is that empowered people working
outsourcing arod shifting alliances depending on the together without bureaucratic restrictions can
situation. accomplish greater things.
• It eliminates internal boundries. among sub subsytems • It encouraqes creativity. quality, timeliness and
an d external boundries with external environment. flexibility increasing speed and efficiencies .
• They are a combination of the team and network • It is dynamic organization structure characterised by
structures that supports 'temporariness' knowledge sharing • absence of hierarchy and
• It shows absence of hierarchy. But , empowerment of tempor.uiness.
employees , use of technology and acceptance of • Sometimes they are ineffective because of
impermanance is ensured. ~~ionproblems.

--- --...-.- .. ~ - --
..-.-.. ..

Boundryless Organization Boundryless Organization .

• Internal boundries are eliminated • External boundries vary as alliances change
with shifting needs I opportunities.



Boundryless Organization Virtual Organizations

• External boundrles vary as alliances change • This is an organization that operates in a
with needs I opportunities shifting network of external. alliances that are
engaged as. needed using IT and the internet.
• They come into being as and when needed
and are called into action to meet specific
operating needs and objectives. '.
• The boundiies.:thilt tiaQitlonaJ~ ..seiH:rate a
firm.;ftoiJI i~suppliers'; cusfumers~"aOdewen
corri~titors.¥e)o ~'Iarg~ ext,~nt eliminatejt;'~., .
• They~are temp6ral"linetwOrlt. of..cQ.m~nie5M';
fOrm~ifto-explOit: ct@riging.opJX?!tvnities.:-. .
• Each company has a core competence 'to

• Upside-Down Pyramid
Upside-down Pyramid
• It offers an alternative and suggestive way of viewing
organizations and the role played by managers.
within them.
r,The operating workers are at the top of the Upside-
down pyramid.
2. They are supported in their work by managers who
mobilize and deliver support required to serve
l. Eachmember of this UDpyramid is a value added
4. Instead of managers 'directing' and 'order -giving' ,it
looks at 'helping' and 'supporting'the workers.
r--..:It ~ms at worker involvement and empowerment ..
I ~==::.::
.. ~
-- .-....- ----

Team Stucture Cellular Organization

• It is made up-of work groups or teams. ) • In this type the ofganizatioll> is structured
around units./cells to complete the entire
• They are both permanent and temporary in
nature depending on the situation. assembly process.
• They are horizantal in structure rather tahn • In some firms, cellular organizations are
vertical. replacing continuous I linear production
• They consist of Cross Functional Teams systems.
(CFl's)meant for improving lateral relations, • It is both a lean and Hat organization.
solving problems, completing special projects. • Each cell manufactures a product I
and accomplishing routine tasks. component with high efficiency and quality.

• Here employees are more involved and • Each cell is self-managed and organised to
empowered because of reduced barriers.


Cellular Manufacturing Example Cellular Manufacturing

Dividing the manufacture of products into semi-
Functional Layout Cellular layout
autonomous and multi-skilled teams known as
work cells


Unit II



, "


Principles of Plant Layout

Plant location deals with the issues of
establishing a plant
', Plant Layout refers to the method in which the
workshops and machinery is laid out in a plant
Operations Management area to minimize production bottlenecks.
Plant layout is a strategic decision . Several
factors influence the decision.
The main objective of plant location and layout
is to minimize costs and maximize returns,
Government subsidies , tax concessions,
infrastructure facilities , skilled workforce,
continuous water and uninterrupted power are
some factors that decide the plant location.

.--- - -- - -
Pfinciples of Plant Layout Factors affecting-Plant Layout
Integration of production centers in a logical and Closeness to raw material
balanced manner. Nearness to Markets
Availability of Fuel and Power
Minimum movement of men and material to
Availability of transport facilities
reduce costs
Availability of Labour
Smooth and continuous flow of material Agglomeration of economies - subsidies
Cubic space utilization-Using the vertical space Naturaland Climatic factors
efficiently. Government influence-Incentives for balanced
regional growth
Safe and improved environment to improve worker
Political interference- Ministers constituency.
efficiency and satisfaction levels.
Other Considerations- Pollution , Environmental
Flexibility to meet the changing demand( as in auto Effluents
sector. )

Factors affecting Plant Layout Fatfors affecting Plant Layout ....
Closeness to raw material- Arou~d 35-70 % of the 5. Availability of Labour- Skilled and qualified labour
cost of a product is due to RM cost . Cost of makes it easy. Hyderabadl Bengalurul Pune are good
procurement, Transportation , Imported items , for software professionals . Pune/ Gurgaon/Chennail
financial strength of the buyer are other factors.
are best for automobile sector. Currently mobility helps
Nearness to Markets- Less transportation cost , in starting a company keeping other factors in mind.
understanding demographics easily and providing the
right product becomes easy.
6.Agglomeration of economies-Industrial areas can
Availability of Fuel and Pcq,ver- Depending on the fuel
provide some benefits due to concentration of firms
the factory is located(water , coal ). Cost of power,
providing economies.
subsidies are other considerations.
Availability of transport facilities- Road water,
pipeline ,air and rail are the modes. Cost of reducing 7.Natural and Climatic factors-Ports for EXlM ( Mumbai ,
transportation is the objective. Use the best mode. Kolkatta, Chennai) , Wine ( Nasik) Apples U&K), Ores
(Orissa), Pharma( Himachal Pradesh)

~ % /0n~ A
I L./ U/L.U 1-'

Factors affecting Plant Layout Plant Layout studies

8.Government influence- Starting industries in Are required when there is
underdeveloped and backward areas by offering
incentives to entrepreneurs to enable balanced regional Change in product design
development. Introduction of new product
9.Political interference- Political factors influence
Increase in production
establishing companies in areas overriding economic
considerations. More so in Public Sector Undertakings. Reduce production costs
lO.Otber Considerations- Pollution and safety factors Present machinery becomes out dated
decide tbe location - Nuclear , Leatber , Pharma,
Chemical factories are allowed far away from popualted Congestion of machinery and equipment
areas. Shifting of machinery to new location.


Role of Plant layout Plant Layout Model

It affects hotb productivity and profitability of a
The cost of tbe product and tbe supply of products to
market are affected hy plant layout.
Reduces material handling and enables smootb flow
of materials and components.
It has to use efficiently and effectively all tbe 4M's of
resources- Men ,material, machinery and money.

Plant Layout - Example Jaguar Land Rover Plant

•....~ "-


-,--- ---- ----- .•


"Svsterns of Plant layout

Kawasaki Plant - Motorcycle assembly The plant layout design is determined by the number
of products, its quantity and the production prooess.
The major systems of plant layout are:
Product Layout - A large ratio of Quantity / No of
Products justifies a mass production - M/cycles
Process or Functional Layout-In case of small ratio
of Quantity / No of products jobbing or small lot
production is adopted. All machines of similar type
are situated in one place
Fixed layout- The machines are fixed . Cannot be
shifted . Used in Shipp building, Boilers, Aircraft
manufacturing etc

Process Layout
Product Layout
Milling WddinS
~on ~on

Ma tttial

Product A Product 8

Production - Job Type Production
Production Vs Productivity In this type products are manufactured to meet
Production is also called as 'manufacturing' . Now a specific order - Ganesh Idols, Ferrari, Yacht
days 'Operations' is also used in place of them.
Every job is different from others in terms of cost,
Production refers to the actual amount of goods and type , specs, volumes and machinery used
services produced.
The quantity involved is small, costliest and time
Productivity- It is defined as the rate at which goods consuming. Economies of scale cannot be realised.
and services are produced . The job is produced only once, at irregular intervals or
It is the ratio of amount produced against resources periodically at regular intervals.
If the volume of the order is considerably large and
have large customers, the job production system
slowly transforms into Batch Production systems.


production - Batch Type Production Production -C~~-tjn'uous Production
It is associated with production of large quantities with
In this layout, a number of identical items in terms of
high rate of demand. The system is classified as :
cost, specs, volumes etc are manufactured to meet a
specific order.- Pharma .fashion garments/ items etc; Mass Production: Same type of product is produced to
meet the demand of a market. The machinery , with
A batch is produced only once ,at irregular intervals,
slight alterations could be used for manufacturing other
periodically at known intervals.
As the frequency of regular orders goes on increasing,
Flow Production : The plant is designed for a specific
the hatch production system becomes mass production
product unlike in mass production and has to be
Automation can be used effect:ively scrapped if product fails in the market- Cement, Oils etc
Cost per unit would be less . Quality control and special handling systems can be
Process Layout can be used advantageously. employed.
Economies of scale can be realized as quantity is more . Advantages : Mechanization and division of labor.


Pr-;duction and Operating System


Job Production Shop: Tailor shops, cycle repair shops , p
etc r

Batch Production Type: Tyre production shops, ready d

made garments, cosmetic manufacturing companies

. Mass Production Shops: Components of Industrial
products etc
Flow Production: Cement, Sugar, oil refineries etc

output I Product variety

Work Study
Work Study The principal aim of work study is to hring efficiency
and economy by making improvements in the method
Definition: According to British Standard (BSJl38), of doing the job.
~, .
It is concerned with manual work( TIme Study)-Its
design and execution.
It strives to establish better standards of performance
by identifying the essential movements while doing
the job and determining the standard time for agiven
It has two parts - Method Study( Motion Study) and
Work Measurement CJ


Work Study-Benefits
It deals with techniques of analyzing the job to do a given job
Work Study better. Tbe benefits are :
It leads to standardization of the job process
:::::. ;1 Determines the cost of the work done.
Minimizes and saves time by eliminating unnecessary
Enhances the productivity of workers and machines.
Helps to evaluate performance of an employee or department
War!<.Study is the systematic examination of against targets.
the methods of carrying on activities so as
Enables worker to earn incentive.
to improve the effective use of resources
and to set up standards of performance for Contributes to cost savings.
the activities being carried out. Enhances employee morale.
Facilitates the organization to plan and achieve work targets.


Work Study=-Gilb~';ths Contribution

Frank B Gilbreth and his wife Lillian Gilbreth contributed
Work Study- Examples much in the areas of method study and work measurement
Construction of a house Tbey applied work study principles to industrial situations.
- Laying of brick work or
\19tt f[J They examined Scientifically many jobs and determined
best method and time to complete the same.

Banks - Withdrawal of It helps in arranging a less costly way of designing and
IDoneyor obtaining a
draft. tl.~d1.~£. improving productivity.

Production - Ti1T~ The existing equipment

performance .
could be redesigned to improve the

manufucturing a
They devised a symbol called • Therblig' to represent a
component or assembly
of a product like Toy. specific body movement.
Therblig is reverse of Gilbreth .

17 Therbligs 17 Therbligs (continued)
Transport empty (TE) - reach for an object Pre-position (PP) - position object for next operation

Grasp (G) - grasp an object Position (P) - position object in defined location

Transport loaded (TL) - move an object with Assemble (A) - join two parts
band and arm
Disassemble (DA) - separate multiple parts that were
Hold (H) - hold an object previously joined

Release load (RL) - release control of an Search (Sh) - attempt to find an object using eyes or
object hand

Use (U) - manipulate a tool


17 Therbligs (continued) Understanding Ni-ethod Study

It deals with techniques of analyzing the job to do a
Select (St) - choose among several objects in a group
given job better.
Plan (Pn) - decide on an action It is the systematic recording and critical examination
of the existing and proposed ways of doing work.
Inspect (I) - detennine quality of object
It attempts to answer questions to - What , When
Unavoidable delay (UD) - waiting due to factors ,Who, Where and How.
beyond worker control It is used in order to find solutions to a variety of
manufacturing problems. It could be in layout,
Avoidable delay (AD) - worker waiting equipment design, position of tools etc.

Rest (R) - resting to overcome fatigue

--- or Workplace-Arrangement--
Method Study Examples Normal and maximum working areas in the workplace .

.' ,.
•.. '-

\\ , "i<
""" ,,~i_fl''''

"",' oJ.

Illustration Illustration
Two workplace layouts. (b) Good arrangement or parts and tools in workplace

(a) Poor arrangement of parts and tools in workplace Numbers indicate sequence of work elements in relation to
locations of hand tools and parts bins.
1I,,, ••f.,,.,,-,,b

\V.'r •••.
•• n



Adjustable Chatr for Workplace .- Method Studv= Basic Procedure

I Mothod Study I
A.i.m: To l>eftJop wodring
I methods

(s\ ~
kkd the tilde: to be dudied
R \
B.cm.r:d. ~~ted~ilboutCUJ:ft.Dt orpropoiRdm.ethods.
E \
~the &.cumtka.Dyc:onDMriDs
tJ.c be:g po5Ab~-.thod
p~ _d ~IM)W'CH

Dcfiuc the method 50 de-..eloped


Install 1M new method
\~/ Maintain the in5hlIcd _thod

b:r.~~ Co" aadPmdu.crlritytJuoup



Method Study

•.. '- __ .-_--' thejob to be studied

Process Chart symbols

To Simplify the job and L- __ .-_--'~~'::~ data ••. by direct
develop more
to record the process of doing the job
doing it
methods of .---.===----,byChallenging
'- __ .-_--'sequence,
purpose, place,
and method ofworic: o

r---;;:-:':----,new methods drawilg on contributkwls
'---r----' of
those ooocemed
A StOIr<lgC

L- __ .-_--'resutts of different alternative solutions D

'- __ .-_--'new method and presentit

r--='::;;---,new method and train persons in

11 Opuation

cum Inspection

'----r----'applying ft 8
,---",==_--,and establish control procedures

- Record- Charts and Diagrams (.-h~" r h.--I! •.••_~. "'"Yr'''''
I •••..• 'Vn •.••'11.::0.0
dicL:.:J.La •..••••
C.h,u r ~,..,,-/~: "'·Y('>'$I P'HIJ I""U.er ,,-'
~ • .::.>.>t •• tray.
OuttineProcessChart-Mainevents- Operationsand Inspection
.II ,.~'"
:~ ~~~ Chart(Worker,Material.Equipment)-Scale drawingof (Typi!<t)

Two-Handed Process Chart- Simurtaneousactivities of both the t ";'-,;. T<" ••ut •.•• ;>.-·,.. ornc~
hands ('\) -r~, k •• <1.<.'tL~tiou

< ~ To o ••••
·n orn ••
~~nesActi~~~=~~~n'=le .c;
(-i:) )',el"''''I'"':: [rpl"li- ••

1~J'1'" .yp~.,..I<-f'"·''' •• ,,<.1 .-n' •..•.

~,ga'£l"gram - Ornwnto scale showingthe route fullowed by a

Du.·,n.~ "--heckin~, •• nd ",owning
g~~~~ This is a photographic record for capturing short
T •• c- •••••n

'l"ypc cn ••.


L~tl"" .•••••• ' •••."-i..:.p.·


Record- Example
Outline Chart

Example of

_ .....•.

swttch Rotor

Record- Exa.,!!Y"e
String Diagram Work Measurement
Work measurement:

It is determining how long it should take to do a job. It

is also called time study.

Establishes the time taken by a qualified worker to

complete a specified job at a defined level of

These techniques are used to answer

- How Long and When?

Work Measurement - Basic Procedu;:;

Purpose of Work Measurement
To develop costing systems
To determine the production schedules I Aim: To Devdop Tune St:;w.cb.rd I
To develop incentive schemes
To compare with alternative methods of doing a job.
OUCTiw the a;i¥Vl won: fol"mu.softmtnl
Bl"euthejob iOlodV'lWlocs
To standardize the job in terms of standard time MeUUl'C the pcnonn;AUC'Ie o( the O~R.tor
Detereaine the bese tint~
To determine the optimum number of men and Provide the .•.UoWUQf; for~
machines required for the job. Determine the ~cbrd tim~


Time Study Equipments

They are classified into
Normal Time or Basic Time
a) Time measuring devices NormallBasic Time = Observed time x Rating
StopWatch Standard Rating
Motion Picture Camera (Standard Rating = 100 Rating = Based on Employee)
Time recording Machines
Allowances are added to Basic TIme to arrive at Standard time .
Electronic Timer
Allowances include time for relaxation, fatigue ,delay in
b )Time study boards and time study charts
collection of materials or tools
These are simple and handy hard wood boards
Normal time = 0.3 x no = 0.33 minutes
equipped with stopwatch holders and clamps for
100 ~ Allowan""
holding the observation sheets and time study forms
to record the observations and time. Standard Time= 0.33 + 0.07 = 0.4 minutes

Standard time Statistical Quality Control

It is the process of applying statistical principles / tools
Standard time: to solve quality issues .
The amount of time it should take a qualified
Quality is conformance to a standard
worker to complete a specific task, working at a
Quality is fitness for use
sustainable rate, using given methods, tools and
equipment, raw materials, and workplace Quality refers to any measurable characteristic of a
arrangement. particular product or service. -
Inspection is the process of measuring the output and
comparing with the specification for acceptance.
Inspection is static ,whereas, Testing is dynamic.

Process and Statistical Controls
SQC-Causes for Variation
Chance Causes: They cannot be identified.
Process control is a technique of ensuring the quality Manufacturing output will have variations in
of products during manufacturing. measurements. To accommodate such causes we
Process control is achieved through control charts . create tolerance s. Instead of 2" dia . We may have
If a process consistently produces items within a get 1.96" or 2.04". The spec's will be 2±0.04"
tolerance range of specs, it is said to be statistically Assignable causes: These may affect the quality of
under control. the production process. These could be identified
Statistical control charts provide graphic data to and specified. They exceed the control limits and
analyze output of a machine and to identify the help in identifying the causes.
process variation due to random /chance or assignable

Confidence aridControt Limits'·

SQC- Process Capabailitv Confidence Level: It specifies the acceptance level of a
Process Capability: It refers to the ability to product with a tolerance. It refers to the probability that
achieve measurable results from a combination of a value of a measurement ,like length of a component is
machines, tools, methods, materials and people correct. Dia 40 mm with confidence level of 5 % is
acceptable if it is between 38 and 42JIlID.
engaged in production.
It helps to predict the extent of variability the It is calculated by means of standard deviation Sigma.(cr)
process will exhibit. Control Limits: They are found in control charts . There
It serves as a basis to specify the requirements for are two control limits - UCL - Upper Control limit and
LCL-Lower Control limit . These are determined based
quality performance for new machines.
on the principles of normal distribution.
Any measurement fulling beyond control limits are due
to assignable reasons warranting action for rectification .

.. ..- ....

Control chart
"Normal" bell shaoed curve
tl(l l(..K-n

. .
Add up about 30 of most tnngs
and you start to be 'normal'

Nannal distributions

are divide up
into 3 standard deviations on _
~ io C \ i \
f,0' '0 each side of the mean

~~ Once your that, you

< know a k>t about

5 lCL= ~,2~
what is going on



.cOntrol Chart PUTooses

Confidence Limits
1.Show changes in data pattern
• e,g" trends
± 1.000' 68.27 • Make corrections before process is out
of control
2 ± 1.96<> 95-00
2. Show causes of changes in data
• Assignable causes
J 2.000 95-45
• Data outside control limits or trend in
4 ± 3.00(7 99·73 data
3.Natura1 causes
• Random variations around average



----- X Chart- Control Limits

Control Chart Types

The control Limits are set at±3"

LCL =x-S;R -- Tables

Sub group averagcX:XI + lb+~+x.+~/5

Sub group range R = Max Value - Min value

·-56,c- R Chart Co~r~llimits

Table of Constants For X and R

••• 11,' 1\ \~ (l P
L880 3'168
3 L0>3 1.574
4- 0·719 1.28>


From Tables


0·337 OJB4 db6
0.308 0-»] '·m

In thefollowing table tne length of 10 samples of5 rods
are shown. Construct X bar and R bar charts
Construct X and R charts from the info given. X has
4- 5
been computed based on 5 samples drawn every half 6., 6.8 7-> 6.0 3>-0 6-4 L4
an hour from production. Is the process in control? 5-8 6.0 H 6.8 6.6 p.6 6·5 L6
4-8 5·' 5.8 6.. 6.8 29.0 5-8
6.6 6.8 6-4 6., 6.0 3>-0 6.• 0.8
X 20344539 26:191] 34"T1:l3
6.6 6., 7-> H 7·' 34-6 6·9
R 2339145 r] 40 6.8 6.6 4-Z 4-8 4-0 ,6--4 53 1.8
8.8 7-> 7.8 ].8 5-6 3P 6.6 5-0
4-6 4-8 6.6 6.8 6.0 z8.8 5-7
6.8 7-> 6.6 6.4- 6.0 33-0 6-4
UCl.2 x+A,a1t = 3O.0.56X20 • .cL6 ..La. X-Aa/tz30-D.SU2O=lllA 6.6 4-. 6., 6.6 9.0 5-8
P 2
oa» o,Ji z2...1JJQOa-4J..2 u:J..%'D"R=OX2D-O
309.6 >0.4


x oar and R bar Chart - P2

Solution Draw X bar and R bar Chart given the following data .
Size of each sample is 5 (n=s)
Mean of Samples = X = 309.6/ (lOXS)= 6.182= 6.2
Mean '!!. Range = R = 20.4/ 10= 2.04
~ xbar e

UCL =1C+A2 R bar = 6.2 +0.S8X2.04=7-4 (approx) 7-5 7.6
LCL = X -A2 [bar'= 6.2-0.58 x 2.04= s.o(approx) 8 26/10=
UCL= D4 R bar =2.11 x 2.04= 4- Jl( approx) UCl=
9·5 8.658
LCL= D3 R bar = ox 2.04= 0 lCl=6.0
( From the chart A2= 0.58 , D3= 0 , D4 = 2.11 ) 92
(From the problem n=s) 4 UCL=
1:76 D6

c Chart c Cha t CQntrol Limits

Shows number of nonconformities (defects) in
a unit ueL,; == c + 3Fc Use a =±3 for
• Unit may be chair, steel sheet, en etc. ~ 99.7% limits
• Size of unit must be constant ~
Example: Count no of defects (scratches, LCL,; ==c-3".Jii
chips ete.) in each chair of a sample of 100

Problem onc chart

Specimen A4 were inspected at regular intervals after applying inkblot on
one side. If the blot appeared other side ~itwas treated as defective. Problem on c chart
Twentysbeets were inspected and. the defects found are tabulated below,

• C= 100/20 =5
9 1)

UCL = 5+3,Js =11.69
5 8 '5
6 9
7 4 LCL = 5-3,Js =0
3 13

9 '9

ToQI Number of defects _ 100


C Ehart - Pl---- ~---.

Ten Castings were inspected with following defects . p Chart
Plot c Chart and draw conclusions.
It is used where you require tn find out the number of
defects per sample.
It is also called 'fraction defective chart' or 'percentage
Number-of 2 4 3 4 0 7 Total'*37
defective chart'.
Each item is classified as 'Go' or 'No Go' or as 'good' or
'had' (defective)

Cbar e 37110 = 3.7 Data collection costs and efforts are relatively less
LCL= 3.7 - 3 -.I3.7= -2.972=0
UCL=3.7+3-.1 3.7 = 9.472
Useful when the sample size is larger.

.p€hart ContrOl"limits
Problems- p Chart
For each of the 14 days , a number of magnets used in
electric relays are inspected and the number of
UCL, = P+3~P(l; p)
defects are recorded. The total number of magnets
tested is 14000. The detail s are :

LCL, =P_3~P(l;P)
'§Ntlll.8m.uz 'M'·fia§#f&
50 60

3 140
P(Average defective)=Totai number gf defectives found
Total number of pieces Inspected •
5 '50
6 50 '3 40
80 14 '40

---- '---~ -.
Problems- p Chart
The average sample size = 14000/'4= 1000 Problem p Chart
Avg Defects Found = P= T. No of Defects found - MQQ.=o.i
1: No of pieces inspected '4000
UCL, =0.1+3 0.1(1-0.1) =0.4

1OO/1()()()=().J uolwoo-o.u LeL, =0.1-3 0.1(1-0.1) =0

50/I()()()oo().05 601lOCJO><O.06

10011‫סס‬0-0.10 J.4O/1ClOO=O.J.4

4 200/1‫סס‬0-0.2 50/lQI()()<t. 0-05

5 150/10Q()a 0.15 7ol1~O-CT]

6 50/tOOCFO·OS
'3 40/lQIOO=«).04

80/1000* 0.08 14 l4O/t()()()-"--o·14



Draw p Chart for the following problem- P2 Work Sampling

It is also called Activity Sampling
It is used when management wants to-
Aug::t JOO '5 "5iJoo-o.1tj 3.]4
Know the percentage of idle time of a worker
AugJ Joo JO
Aug. Joo J5 0.67 Establish the standard time of an operation
Aug5 Joo 40 0.13 13·]3 Fix the performance rate
Aug6 Joo '5 0.15 '5 In this technique a number of observations are made
Aug7 Joo J5 0.67
over a period of time at random for a machine or
Aug9 Joo 40 0'] I)·D
process or a worker or a group of them.
Aug 10 Joo JO
( H a 100 observations aee taken COt J.odays and found that 80
Augu Joo 0·07 6·7 times the workers are engaged and 20 times idling. then it is
Au~lJ Joo 5" 0 .., 16·7 interpreted that 80 % of the time the workers at work and ao "
Totitl_.toD JOOO ]5" :'" .;-:~i'
wasting time )
LCL= 0.0611 UCL=O.1723

Acceptance Sampling Acceptance Sampling-=Ad';antages and Disadvantages

It is a technique of deciding whether to accept the whole It is economical to implement
lot or not, based on the number of defectives from a Can manage inspection with less staff
randomly drawn sample. Less damage to few items as fewer numbers are inspected.
It is the process of ensuring quality of the products at the The process of acceptance will be faster
point of sale. Less chaoces of committing mistakes due to less monotony.
It is widely used while buying a product be it rice or steel Acceptance ofIot depends on sampling plao .
or any product based on a sample. Disadvaotages :
It is used where Sampling Risks
cost of inspection is high compared to loss in Less reliable than 100 % inspection
reputation Greater administration costs .
100% inspection is costly and prone to errors Involves two risks -L Producer's risk (a)- Rejecting good lots
Inspection of the item requires destruction of the item and 2. Consumers risk-Ol)- Accepting bad lots

Assignment Questions - Mgmt Science -'

Criteria of Acceptance Define Management. Explain its nature and features.
The variables are : Define Organization. Are management and
Sample Size- n administration similar ?

Accept number - c What are the functions of Management?

Lot size(N) is not the criteria What do you understand from Scientific management?
What are Henri Fayol's Principles of management?
What are the different Types of Organizations?
What do you understand from :
A 200 7 8
Virtual, Boundry less , Cellular and Organizations
B 33 1 2 Departmentalization , Decentralization and Inverted
Pyramid Structure


Assignment Questions - Mgmt Science Assignment Ouesfions - Mgmt Science

DeaciHne: IS,08,14
7. Explain in brief the factors determining the location of 12.What are the objectives and need for Material Control?
Industrial plant? 13. Explain in brief: a) EOQ b) ABC Analysis c) JIT d) VA
8. What is plant Layout? Explain its systems. and VE e) MRP f) SCM
9. Differentiate Production from Productivity. What are 14. What are the Functions and Utilities of Marketing?
different types of production ? 15. What is Product Life Cycle( PLC)? What are the'
10. What do you understand by Work Study? What is the marketing strategies used at different stages ofPLC?
basic procedure of Method Study and Work 16. What are the different channels of distribution? What
measurement. factors affect the choice of channel of distribution?
n, What is Statistical Quality Control? What are the basic L
types of Charts? Explain in brier , :''-Jax fiu,Wl. .LZ slse c «; ::·X{'u.~;.Uny Tup :-§'t:- -t [G fl~:ci

JtyI. .• £it .nppnlpf"iaie j:tl.J{:'-e~ Pawan Kumar G.D

Operati ng Characteristics (ocf Operating Charactertstics (DC)

Curves Curves
OC curves are graphs As proportfon of
which show the defects increases, the
probability of chance of accepting lot
accepting a lot given decreases
~ouspropo~onsof Example: 90% chance
defects tn the lot of accepting a lot with
X-axis shows % ofitems". 5%defectives;
that are defective in a 10%chance of
lot- "lot quality" " accepdng a lot with
Y-axis shows the 24% defectives
probability or chance
of accepting a lot


Acceptable Quality Level (AQL) , Consumer's Risk (a) & Producer's Risk ([3)
Lot Tolerance Percentage Defective( LTPD)
Consumer's Risk (a) is the
chance of accepting a lot that
,••_\...,.." •••_.,
contains a greater number of : "'-'" iP'OJ.a:-'<: ••••••

LTPD is the upper limit of

defects than the Lot Tolerance
Percentage Defective( LTPD) n~.

the percentage of defective ~:=s~rll) is the risk ,.

items consumers are willing of rejecting a lot containing n_~"'~'{$
to tolerate an acceptable quality level; ~JuI ~.,...Jti
••_ •••

Type I error ~~- . ..., -7;---:;'~~;~ i>



Sampling Plans - Single and Double

They are based on the number of samples drawn for Single Sampling Plan -If N;lOOO, n;50 =3. The
accepting I rejecting the lots. There are four methods : sample is accepted I rejected based on the defects. If
Single Sampling Plan- defects are'; 3( 0,1,2 ,3) the lot is accepted or else
Double Sampling Plan-
Double Sampling Plan- If N;lOOO, ru;40, Cl;2
Multiple Sampling Plan-
Accept the lot, if the defects Cl is (0,1,2) . If defects
Sequential Sampling Plan -
are 3 go for second sample having n2;50 ,C2;3. The
second sample should have zero defects to accept the
lot. If it more, the whole lot is rejected.

,,~-- --- Deming's Contribution to Quality.

Benefits of SQC • William Edwards Deming was an American professor
It helps in identi1)ring the causes for variation who i.nstrumental in improving the quality levels of
It helps to control, maintain and improve quality Japanese products after the " World War.
standards • He applied statistical techniques to improve quality,
Manufacturer can give assurance to customers of reduce cost and improve productivity.
delivering quality products • In recognition of his pioneering work , Japanese
Government has instituted Deming Prize which is
It alerts and guides manufacturer when to make
awarded to most quality conscious company in the
changes in tools and settings
It reduces costs by reducing wastage
• In India many companies have been awarded Deming
It reduces inspection costs Prize including TVS , Rane ,Sona etc
With SQC ,employees become quality conscious.


Deming's System of Profound Knowledge ~w.Edwards Deming's 14 Points In Leadership of QUAlity 1

Appreciation of system: All the stakeholders 1.Create constancy of purpose towards
( manufacturers, suppliers, customers etc ) improvement of product and services.
understanding the complete process .
2. Adopt the new philosophy. We can no longer
Knowledge of Variation: Being, ..vare of causes of
variations and use of statistical tools in
live with commonly accepted levels of
measurements. delays, mistakes, defective workmanship.
Theory of knowledge :Understanding the concepts , 3. Cease dependence on mass inspection.
explaining them and knowing the limits of what can Require, instead, statistical evidence that
be known. quality is built in.
Knowledge of Psychology: Knowing concepts of 4. End the practice of awarding business on
nature of the human and human behaviour.
the basis of price tag.


--~ w. Edwards Deming's 14 Points r


/~ W. Edwards Deming's 14 Points r

5. Find problems. It is management's job to 9. Break down barriers between departments.
work continually on the system. 10.Eliminate numerical goals. posters and
6. Institute modern methods of training on the slogans for the workforce asking for new levels
job. of productivity without providing methods.
7.lnstitute modern methods of supervision of 11. Eliminate work standards that prescribe
production workers. The responsibility of numerical quotas.
foremen must be changed from numbers to 12. Remove barriers that stand between the
quality. hourly worker and his right to pride of
a.Drive out fear that everyone may work workmanship.
effectively for the company.

----~ W. Edwards Deming's 14 Points

13. Institute a vigorous programme of
education and retraining.
14. Create a structure in top management
that will push everyday on the above 13 '-More the Knowledge
points. Le"., the Ego.
Lesser the Knowledge
More the Ego ... •


@Materials: They are the inputs for production .
They could be raw materials (RM) , Work-in-
Progress(WIP) , finished goods , spare parts and
components. MRO's like lubricating oil, cleaning
material and others required for maintenance
and repairs are also considered as materials.
MATERIALS @Materials Management : It is the process of
lanning, organizing and controlling materials in
MANAGEMENT a given organization . It is now called Supply
Chain Management (SCM)

Unit IV/l


@ Materials also include inventory and stores. @Inventory Control: It is the scientific method
@Inventory refers to all the items which have of providing the right type of material , at
economic value . the right time .tn right quantity , at right
place ,at right price to sustain the given
@Inventory could be in RM, WIP ,Component
sub -assembly , assembly or Finished Goods production schedules.
@Stores is a place where the materials required
for current and future production or
consumption is kept in a systematic manner for
easy storage and retrieval.


1. To support the production department to run e Sudden changes in production plan
smoothly. @Increase in Material Costs
2. To minimize investments and maximize Profits @Excess storage costs
3. To avoid accumulation of WIP. e Stock- out costs-Loss of reputation I Opportunity
4. To maintain adequate stocks to improve @Increase in lead time.
customer satisfaction
s. To contribute to the overall profitability of the

> •



@Formulate a clear purchase procedure @Purchasing Function: It is a specialized job
@Classify and codify the items of inventory and occupies a strategic position in an
organization. It determines the working
@Maintain store records
capital needs.
@Minimize costs by procuring on Economic
@Objectives of Purchasing Function:
Order Quantity(EOQ) basis
r. To purchase right quantity material at right
@Monitor each item through ABC analysis
@Set stock levels of each item based on
2. To maintain continuous supplies
3. To develop new sources
@Replenish the stocks as and when required .
4. To obtain best value for money spent
@To train the staff, make policies and
procedures 5. To maintain functional relationships with
other departments.


@Centralized Buying: The entire responsibility
I Surt L::J~
of procurement of materials is with one
person. 151 r::;:;-)
@Decentralized Buying: The procurement is
c=:J L:':J
done by personnel from other functional areas r \
- production, engineering, marketing
,finance etc § §)
\ !


s Purchasing decision should be based on clearly OF ITEMS OF INVENTORY
defined policies. A rational purchasing decision
helps in following benefits. @Classification is based on the basis of
1. Economical Prices departrnent , product or service ,nature and
2. Faster turnover of inventory quality Of the materials.
3. Continued supplies @Coding is the process of assigning numbers
~. Reduced lead times
and symbols or a combination of both.
5. Savings in transport costs
6. Reduced obsolescence of material quality (j) Example: Harmonic Codes- 84.00 Bearings
7. Improved vendor relationships 72.00 Steel
8. Better quality of materials
9. Efficient inventory control systems
10. Development of inventory information



ADVANTAGES OF CLASSIFICATION @ They facilitate maintenance of accounts of each
item of inventory.
1. Long description of the item can be avoided
@ The following are some of the documents used in

2. The products could be issued properly stores department

1. Material Requisition Note: It contains the
3. Duplication is prevented
description of the items required by the
4. Items are standardized department. It should be duly authorized by the
head and signed by the person receiving the same.
5. Computerization is factlttared
2. Purchase Order- It provides the details of the items
6. Pricing Icosting is made easier to be supplied including quantity ,price, delivery
date, credit terms. Has to be signed by an
7. Inspection process is simplified authority. The supplier has to acKnowledge.
8. Secrecy of materials is ensured 3. Invoice - It is a document sent by the supplier with
the details of items supplied ,usually ,in line with

STORE RECORDS @ It is a technique used to control inventory. It
5. Goods Received Note - This document provides the is based on Pareto's Law, after Vilfredo
info on the supplier , the items supplied, Pareto, the Italian mathematician. Under
requisition , PO number and the purpose for which this, all the inventory is segregated into A, B
it is received.
, and C category in order of value. It is
6.Goods Returned Note-Sometimes a part or whole of
sometimes called 80/20 rule.
the consignment is returned for which a debit
note is raised because the suppliers account has to
Category Value " Volume " Degree of
be debited by the same amount (Rs in lakhs) (Quantity) Control
7.Stores Ledger Account - It provides the details of the
quantity ,price , receipts ,issues and balance A 70 10 Strict
available. 8 20 20 Moderate
8.Bin Card- Slip or Tag attached to the bin providing
C 10 70 low
details of the iteml quantity for tallying


ABC ANALYSIS @ It is defined as the quantity of material that can be
ordered at one time to minimize the cost of ordering
and carrying the stocks.

.'fl 1OO~/o
@Given the annual requirement EOQ helps in lowering toe
acquisition and carrying costs
§ 80
@ Inventory Costs consist of Inventory Ordering costs and
Inventory Carrying Costs
'" 3G 60

@ Inventory Ordering Costs refers to the costs involved in

2':· 40 f\=i
ordering an item which includes wages and salaries to
the Purchase and stores department employees and costs
0. related to telephone, fax , net etc.
.:: 10 10
@.lnventoryCarrying Costs: It refers to the insurance,
property, storage obsolescence and opportunity costs,
P>,mo::t- Gr",m.~ '.: ~p,,~ °rypln;
.alia ••
@ Inventory costs are depending on the number of orders
released and not on the volume {quantity.


Total Costs
A= Annual Demand 5 = Size of the Order
0= Ordering Cost! order C= Carrying Cost 1 unit
o @Ordering Cost = No of Orders Iyear X ordering
Costs 1 Order
] C rrying Costs
Ordering Costs
= A/S XO
'" @Total Carrying Cost Iyear = Avg Inventory Level X
Carrying Cost Iyear
5/2 X C=
EOQ = Ordering Cost = Carrying Cost
EOQ Order uantity
AlS X 0 = 512 XC, 2A0= 52 C .S;oJ2AO/C


Method Advantages Di~dvantages
@There are four methods
FIFO 1.Easy to operate 1. In times of rising prices
1. First -in -First OUt (FIFO)· In this method material
shows higher profits
received first will be issued first at the price at
which it is received till it is exhausted. Then the
next lot is issued . 2.Clostng stock price 2. Cost charged to the job
2. Last -tn -First OUt (LlFO)- In this method, the ts close to latest price may be low and stocks may
material received last will be issued first. be valued at high price
during ristng prices
3. Simple Average Price Method· The average of the
batches prices are considered for pricing 3.Good method when
prfces are falltng
•. Weighted Average Price Method - It is an
improvement over the simple average price LIFO 1.Easyto understand 1. Seems tIIogtcal
method. Here the quantity of the items are 2.Goods issued at as the goods are tssued in
considered along with price.
latest prices reverse order
Weighted average Price = Q1.P1 +Q2.P2+Q3.P3

Method Advantages Disadvantages
Simple Easy to calculate Considers only price
Average and not the quantity. @This is also called 'Continuous Stock taking'.
Neutralizes price When large
@The stock verification is done every day.
differences fluctuations occur,
the average price Is @The ledger figure are in line with the
mtsleading physical stocks.
Weighte Price differential Is Difficult to calculate
d neutralized.
e The stores records are updated after every
Average receipt and issue.
Realistic as quantities The valued prices
are considered are cttfferent from
actual prices



@Integrated Materials Management: It refers to Stock Levels: Minimum. Maximum and re-order
centralization of materials function. It level • Safety Stock. Has financial implications.
combines all activities of procurement of an @Maximum Level=
Reorder level +EOQ-Min Qty reqd in lead time
@Inventory Control- It is the process of @Minimum Level=
determining stock levels based on requirement
Reorder level - Avg Usage for Avg Lead Time
@Stock Levels: Minimum , Maximum and re-
@Re-Order Level= Processof placing order would
order level, Safety Stock
be initiated
=Max Usage x Maximum Lead time


Just - in -Tirne: It refers to procuring materials
just before the same are required for processing
U Max
The advantages are :
n !
le ve t
1. No excess inventory is maintained

! I

:Potnt------t--- 2. Optimum use of Working Capital

, ! 3. It reduces the cost of carrying material
The requirements are:
+-~,- ~~'! I ~~n
1. Reliable vendors are required
2. The set up time of machines has to be
safety stock 3. No disruption in production.


Material Requirement Planning Systems: e Just- in -rtme
@It is an internal production process designed @Material Requirement Planning Systems
. to ensure that the RM , components, WIP •
MROare available as and when required. It @Vendor Rating and Development
is a software programme tailored to specific @Value Engineering (VE)and Value Analysis (VA)
@Based on the market forecast. the Master
production schedule (MPS)is prepared
@ MPSis prepared after comparing capacities
with planned production
@MRPhas evolved into ERP.



Value Analysis (VA) and Value Engin""rin! (VE):
Vendor Rating and Development:
It Is a cost reduction technique. It looks at the cost In
@All the suppliers are selected and rated relation to its worth or functions.
6'1 It tries to eliminate unnecessary costs in a product by
based on their performance in terms of d<>leting Isubstituting I redesigning the part/raw
price, quality, delivery. material I product .
@ It Is a systematic way of studying the product and
@They are trained in new practices and are redudn~the costs in terms of better process and
made to upgrade to the OEM's level to technology.
Very effective when the volumes are very high - Mlc's •
become partners. Hero
@Any new certifications ,if required , need to Examples:
1. Hike shoes with calorie recorder
be obtained for continued relationship.
2. Using plasttcs Instead of steel In Motorcycles and cars
@Best vendors are awarded annually. •. Using Plywood Instead of teak wood
••. Redest~ntng to reduce manufacturing costs


@Freight Transportation S352, S455
Billion @Profit 4% Profit

@Inventory Expense Lo!istics

S221, S311
Billion @Logistics Cost 21%
@Administrative Expense S27, S31 Billion Marketing
@Logistics Related Activity 11%, 10.5% of @Marketing Cost 27%
@Manufacturing Cost 48% Manufacturing


@Compaq estimates it lost S.5 billion to S1 e Deftnttton: Flow of material, information, money,
billion in sales in 1995 because laptops were etc. from raw material suppliers through factories
not available when and where needed to customers
@P&G estimates it saved retail customers S65 @It includes: organizations, procedures, people
million by collaboration resulting in a better @SCM: Integration of the business processes along
match of supply and demand the chain, Planning, Organizing, control of many
e Activittes: Purchasing, delivery, packaging,
checking, warehousing, etc.






I Customer I
• ••
Supply Chain


10,. ~

Firm Intrasbucture .-------,--------,---.------,--, "m'~:''''~~'',r::e:.

Hurm;e:=:= 1--+_+--+-_-;---1 -~
tEl· ,m ·13 -.':f":.-,..
Procurement f--+-+--+--+-~ ro- __ ....A. ---.
. ;".--. ·-·tiFT ,:
liJ ·m ..m
m -s 'm
-- tEl -ta
~a~x!,~-~ ---
m .,a '::Jr~~,

@Marketing is a societal process by which
individuals and groups obtain what they need
MARKETING and want through creating " offering and
freely exchanging products and services of
MANAGEMENT value with others - Philip Kotler
Unit IVIZ @Marketing creates and delivers the standard of
living to the society- Malcolm Mc Nair


@Selling refers to transferring ownership of Objective Marketing Selling Concept
the goods and services from seller to buyer. Concept
@Selling is product and profit oriented. Focus Customer Product
@Marketing refers to the whole process needs Oriented Oriented
encompassing the entire range of activities
starting from identifying the customers Means Integrated Promoting sales
requirements to satisfying these in Marketing
mutually beneficial manner (to both seller ,
manufacturer and consumer) End Objective Profits through Profits through
customer increased sa led
@Marketing is customer oriented.
@Marketing identifies the need and creates the
product to satisfy the customer


@Marketing creates four types of utilities: @Marketing Functions include buying, selling,
1. Form· Development of product transporting, storage, standardisation
2. Place- Distribution ,grading, financing, risk taking and market
J. Time - Availability
@Marketing functions direct and facilitate the
4. Possession- acquisition or buying
flow of goods and services from the
Selling provides only possession utility. producers to the end users.

Concentrating Functions Disperstng Functions TIme and Place Possesston Utility Form Uttlity
BlI)'1ng Seiling Acttvlttes

Assembl1ns Transportation Understanding the Form'ng the

needs policies
Transportation Transportation
Storing Creating Demand Ftnancing

Storing Storing Packing Finding buyers Supervision

and sellers
Gr.uting Groding
Dividing Negotiating Accounting
Financing Flnandng
Grading Transfer of Title Securtng
Risk- Bearing Risk -bearing

Concentrating Functions= Focus on bringing the Order Assembly Equallsatfon Risk· Takfng
goods to the market centers
Dispersing Functions - Focus on selling the goods,
IThis concept is based on utilities. Marketing basically I
constitute utilities
providing after sales service


Functions of Functions of Facilitating @ PLC describes the growth pattern of a
Exchange Physical Functions product. It provides insights into the future
Exchange sales and helps strategies actions.
Selling Transportation Financing @ The different stages are
( Demand
L Imroduction
Assembling Storage and Risk-taking 2. Early growth
(Buying) Warehousing 3. Rapid Growth
Standardization 4. Maturity
Marketing s. Saturation
I Risks; Social , P<Iitical , Physical, I Research and 6. Decline
conomical,Trans portation ) Information


1. tntroductton- Slow Sales , Innovators buy, High
promotional costs, Low Profits Introduction Growth Maturity OecUne

2. Early growth - Sales increase, increased promotion

, critical stage, May succeed or Fail Product
life cycle
3. Rapid Growth- Word of mouth push increase sales,
.• curve

profits increase , Competitors enter , Market size
4. Maturity - Sales slow down , Over capacity in
industry, Price offers, low profits, Competition ~rl~~
s. Saturation-No Market Growth, replacement sales ,
New customers replace old , New features to
extend PLC
Inoill Diffusion
6. Decline - New products enter market, sales decline
,profitability is low, Either divest or harvest.


@ Growth Stage
etntroducticn Stage 1. Maximizing own market share in the face of new
L Create awareness of product, competitors
2. Provide distinct identity 2. Sacrifice short term profitability by incurring
higher expenditures on promotion, distribution
3. Offer Basic product
and adding new features.
4. Add additional features
3. Establish strong brand image
5. Use skimming/penetration price
4. Reduce price to capture price sensitive customers
6. Rope in established channel partners
7. Selective promotional activities aimed at
channel partners and End users.



@ Maturity Stage @Dedine Stage:
1. Focus on more profitability 1. Minimize marketing expenditure.
2. Modify the product lines or extend the life by 2. Use or divert resources on to newly launched
adding new features to attract more customers. products that are at intro or growth stage.
3. Match the prices with competition, but not at 3. Cut prices and rationalize products to serve
the cost of profitability . profitable segments .

4. Spend more on promotion instead of price 4. Reduce or eliminate less effective distributors .
reduction 5. Reduce promotion to minimal leveL


A set of interdependent organizations that are I Manufacturer I~ I Customer
involved in the process of making a product or Zero level
service available for use or consumption.

They perform many of the distribution functions

'--_R_e_ta_i_le_r----JIr) I Customer
on behalf of suppliers.

It refers to ways and means of reaching

the customer through intermediaries
Wholesalers, Retailers.

The channel intermediaries provide place, time.

and possession utility to the marketing
~~.l_CV!_IM.,::: Three <Level


1.Manufacturer - Consumer: Goods directly
L- ~a~rd~!!Oct~f~IQ~W ~ sold to the customer without intermediaries.
@ Examples - Aero-planes ,ships, Industrial
products, E -commerce.
2. Manufacturer- Wholesaler-Consumer: Used
in industrial goods and high valued products.
Examples: Computer hardware - Singapore,
Consumer goods- TV's, M/C's, Cars etc
3. Manufacturer- Retailer- Consumer: Large
retail chains operate on these lines .
. Ex: Shoppers Stop, Health and Glow, Lifestyle



4. Manufacturer- Wholesaler- Retailer- Consumer: 1. The type, size and nature of customers demand.
Used for mass markets. When the volume is more 2. The nature of company's business- Industrial,
, widely spread customers, products of low consumer or services
value. 3. The type of product sold- Consumer durable I non-
durable, Industrial, agricultural
Ex: Manufacturer of consumer goods ,like Provision
4. The price of the nit sold -Aero-planes ,
stores. Advertising by manufacturers and Vegetables.
distributors. Retailers are in direct contact with 5. The margins and mark-ups- Product type ,
customers. Hence are relied on by the innovativeness, fashion items, technology related
manufacaturer. 6. Degree of competition- Use innovative methods
like door to door campaign, Vending machines,
service (E· Commerce)


-+ Need - food ( is a must) -+ Goods
-+ Services
-+ Want - Pizza, Burger, French fry's
-+ Events
( translation of a need as per our experience ) -+ Experiences

-+ Demand - Burger ( translation of a want as per -+ Personalities

our willingness and ability to buy) -+ Place

-+ Organizations
-+ Desire - Have a Burger in a five star hotel
-+ Properties
-+ Infonnation
-+ Ideas and concepts




Customer Communication