ENGINEERING MANAGEMENT

ENGINEERING MANAGEMENT

Refers to the activity combining “technical

knowledge with the ability to organize and
coordinate worker power, materials, machinery
and money”.
WHY DO WE NEED
TO STUDY
ENGINEERING
MANAGEMENT?
 INDUSTRIAL ENGINEERS
DESIGN

IMPROVEMENT

INSTALLATION OF SYSTEMS OF :
MEN
MATERIALS
EQUIPMENT
Components of Management
 Planning
Setting goals and deciding how
best to achieve them.

Organizing
Grouping activities and resources
in a logical fashion.

Leading
Involves influencing others to engage
in the work behaviors necessary to
reach organizational goals.
 Staffing
determines the human resource needs,
recruits, selects, trains and develops
human resources for jobs created by
an organization.

Controlling
Process of ascertaining whether
organizational objectives have been
achieved.
 Production
Is the creation of goods & services
 Operations Management
Is the set of activities that creates value in the
form of goods & services by transforming
inputs into outputs.
Input or Output ??
 Organizing to Produce Goods &
Services
To create goods and services, all organizations
perform three functions;

1. Marketing – which generates demand or at

least takes the order for a product or service
2. Production/ Operations – which creates the
product
3. Finance/ Accounting- tracks how well the
organization is doing.
 Why do we need STUDY OM?

• Om is one of the three major

functions of any organization and it
is integrally related to all other
business functions
• We want to know how goods and
services are produced.
• To understand what operations
managers do.
• Costly part of an organization
 WHAT OPERATIONS MANAGERS DO
Basic Management Functions
Planning
Organizing
Staffing
Leading
Controlling
 10 Major Decisions in OM
Design of goods and services
Managing Quality
Process & Capacity Design
Location strategy
Layout strategy
Human Resource & Job design
Supply Chain Management
Inventory, material requirements
planning and just in time
Intermediate and short-term
scheduling
Maintenance
JOBS OF OPERATIONS MANAGER
Significant Events on Operations
Management
 GOODS

TANGIBLE product
Production usually separate
from consumption
Can be inventoried
Low customer reaction
Some aspects of quality is
measurable
Product is transportable
 SERVICES

Intangible Product
Produced and consumed at
the same time
High customer interaction
Often Unique
Quality difficult to measure

Provider, not product is often

transportable
Service or Goods ??
 PRODUCTIVITY
Relationship of the volume of goods and
services produced to the physical inputs used
in its production.
Productivity can therefore be measured in
terms of the ratio of output to input of
labor, capital, energy, materials or
combination of these.
One resource input  single-factor productivity

Units produced
Productivity =
Labor-hours used

1,000
= = 4 units/labor-hour
250

PRODUCTIVITY CALCULATIONS
Multiple resource inputs  multi-factor productivity

Output
Productivity =
Labor + Material + Energy +
Capital + Miscellaneous

 Also known as total factor productivity

 Output and inputs are often expressed in dollars

PRODUCTIVITY CALCULATIONS
EXAMPLE 1: PRODUCTIVITY
ABS-CBN movie title department wants to evaluate its labor and
multi-factor productivity w/ a new computerized search
system. The department has a staff of four, each working 8-
hours per day (for a payroll cost of $640/day) and overhead
expenses of $400/day. ABS-CBN processes and closes on 8
titles each day. The new computerized title search system will
allow the processing of 14 titles/day. Although the staff, their
work hours, and pay are the same, the overhead expenses are
now $800 per day.
 EXAMPLE 1: PRODUCTIVITY SOLUTION
Labor productivity (old) = 8 titles/day = 0.25 titles/hour
32 hrs
Labor productivity (new) = 14 titles/day = 0.4375 titles/hour
32 hrs
Multi-factor productivity (old) = 8 titles/day = 0.0077 titles/dollar
$640 + $400
Multi-factor productivity(new) = 14 titles/day = 0.0097 titles/dollar
$640 + $800
 PRODUCT DESIGN
process of deciding on the
unique characteristics &
features of the company’s
product.
PROCESS SELECTION
development of the process
necessary to produce the
designed product
 IDEA DEVELOPMENT
All product designs begin with an idea.

IDEA PRODUCT PRELIMINARY

FINAL DESIGN
DEVELOPMENT SCREENING DESIGN & TESTING

Product idea Product idea

developed, evaluated, need
Product Final product
sources can be to consider
prototypes built, specifications
customers, operations,
tested and refined completed
competitors or marketing &
suppliers financial req’t
 BENCHMARKING
The process of studying the practices of companies considered
in “best-in-class” and comparing your company’s performance
against theirs.
 TYPES OF BENCHMARKING
Industry or market benchmarking analysis
seeks to assess the overall positioning of a company
within a certain market or industry.
Financial benchmarking in business
This flavor of competitive benchmarking compares
the fiscal performance and well-being of a company
to that of similar organizations.

Product benchmarking analysis

Seeks to compare the performance and/or quality of
similar products or services offered by different
organizations.
 TYPES OF BENCHMARKING

Operational benchmarking
Compares the day-to-day internal business operations
of a company to those of other similar organizations.

Individual benchmarking in business

seeks to compare the performance of individual
employees to that of other, similar employees,
whether internal or external.
 REVERSE ENGINEERING
The process of disassembling a product to analyze its
design features.
 PRODUCT SCREENING
The company’s product screening team evaluates the
product design according to the needs of the major
business function.
 BREAK-EVEN ANALYSIS
Computes the quantity of goods a company needs to sell
just to cover its costs, or break even, called the “break-
even point”.
FORMULA:
QBE= F Profit = total revenue – total cost
SP - VC = (SP) Q – ( F + (VC × Q))

F = Fixed cost Q = Number of units sold

VC = Variable cost per unit SP = Selling price
 EXAMPLE 1: BREAK-EVEN ANALYSIS
Patrick, owner of Sports Feet Manufacturing, is considering whether
to produce a new line of footwear. Patrick has considered the
processing needs for the new product as well as the market
potential. He has also estimated that the variable cost for each
product manufactured and sold is $9 and the fixed cost per year is
$52,000.

a) If Patrick offers the footwear at a selling price of $25, how many

pairs must he sell to break even ?
b) If Patrick sells 4000 pairs at the $25 price, what will be the
contribution to profit ?
 EXAMPLE 1: BREAK-EVEN ANALYSIS
a) If Patrick offers the footwear at a selling price of $25, how many
pairs must he sell to break even ?

QBE= F = $52,000 = 3,250 pairs

SP – VC $25 - $9

The break-even quantity is 3250 pairs. This is how much Fred would
have to sell to cover costs.
 EXAMPLE 1: BREAK-EVEN ANALYSIS
b) If Patrick sells 4000 pairs at the $25 price, what will be the
contribution to profit ?

Profit = total revenue – total cost

= (SP) Q – ( F + (VC × Q))
Profit = $25 (4000) – ($52,000 + ($9 × 4000))
Profit = $12,000

The contribution to profit is $12,000 if Fred can sell

4000 pairs from his new line of footwear.
 DESIGN FOR MANUFACTURE (DFM)
is a series of guidelines that we should follow to produce a product easily and
profitably.
 PRODUCT SIMPLIFICATION
means reducing the number of parts and features of the product
whenever possible.
 PRODUCT STANDARDIZATION
refers to the use of common and interchangeable parts.
 PRODUCT DIVERSIFICATION
when a new product is added to the product mix of an organization.
 PRODUCT LIFE CYCLE
A series of stages that products pass through in their lifetime,
characterized by changing product demands over time.
 CONCURRENT ENGINEERING
An approach that brings together multifunction teams in the early
phase of product design in order to simultaneously design the
product and the process.
 REMANUFACTURING
uses components of old products in the production
of new ones.
TECHNOLOGY DECISIONS
INFORMATION TECHNOLOGY ENTERPRISE RESOURCE
(IT) PLANNING (ERP)

Technology that enables Large software programs

storage, processing, and used for planning and
communication of coordinating all resources
information within and throughout the entire
between firms. enterprise.
GLOBAL POSITIONING RADIO FREQUENCY
SYSTEM (GPS) IDENTIFICATION (RFID)

A type of wireless A wireless technology that

technology uses memory chips
that uses satellite equipped with radio
transmission antennas attached to
to communicate exact objects used to transmit
locations. streams of data.
 AUTOMATION Automated guided vehicle
(AGV)

Using machinery to A small battery-driven

perform work without truck that moves
human operators. materials from one
location to the other.
 Computer Numeric Control
Robotics
(CNC)

are excellent for A machine controlled by a

physically dangerous computer that can
jobs such as working with perform
radioactive or toxic a variety of tasks.
materials.
Computer-Aided Design Computer-integrated
(CAD) manufacturing (CIM)

A system that uses term used to describe the

computer integration of product
graphics to design new design, process planning,
products. and manufacturing using an
integrated computer
system.