INDUSTRIAL ENGINEERING

UNIT – 1
Introduction to Management:
When human being started group activities for the attainment of same common
objectives whenever a group is formed and a group activity is organized to achieve certain
common objectives management is needed to direct, co- ordinate and integrate the individual
activities of a group and secure teams work to accomplish organizational objectives. The
objectives of all business are attained by utilizing the scare resources like men, materials,
machines, money etc.
In process of management, a manager uses human skills, material resources and
scientific methods to perform all the activities leading to the achievement of goods.
Definition: “Management is knowing exactly what you want men to do and then seeing that
they do it the best and cheapest ways”.
_ F.W.Taylor
“Management is defined as the creation and maintenance of an internal environment in
an enterprise where individuals working together in groups, can perform efficiently and
effectively towards the attainment of group goals”.
_ Koontz and O‟Donell
“Management is defined as the art of getting work done through people, with
satisfaction for employer, employees and the public”.
_ O.P khanna

Concept of management:
Management:
-> Management is defined as the art of getting work done through people, with satisfaction for
employer, employees and the public.
-> For getting the work done through the efforts of other people, it is necessary to guide, direct,
coordinate and control human efforts to words the fulfilment of the goals of the enterprise.
-> The goals of the enterprise and fulfilled through the us of resources like men, money,
materials and machines.
-> Management may be called as Art as well as Science.
a) Management has scientific basis because management techniques are susceptible to
measurement and factual determination.
b) Management is an Art because management means coordinating and getting work
done through others.

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-> Management is an executive function which actively directs human efforts to words
common goals.
-> The main characteristics of management is to integrate and apply the knowledge and
analytical approaches developed by numerous other disciplines.
-> Management does not frame policies it only implements the policies laid down by the
administration.
-> The functions of Management are executive and largely governing.
-> Management is the servant of administration it gets salary or a part of profit in lieu of its
services.
-> Management requires a technical ability to function properly.
-> Management uses organisation for achieving the goals of an enterprises.
-> Management is a productive in the character.
-> Planning organisation, staffing, motivating, directing, coordination and control are all
functions of Management.
-> There are different levels in management i.e., top level, middle level and bottom level
management.

Administration:
-> Any enterprise whether it is a run for profit or no need to be controlled.
-> The control of enterprise is effective through administration and management.
-> Administration consists of deciding the determination of the goals under a policy of the
enterprise.
-> Administration is concerned mainly with decision-making, policy making and making
necessary adjustment.
-> The three main elements of Administrations are:-
i) The formulation of goals
ii) The choice of ways and means
iii) The direction of the people in some groups purpose.
-> Administration Make policies and decision the goals to be achieved. It is not directly
concerned with the implementation of policies.
-> The functions of Administration are Legislative and the larger determinative.
-> Administration does not need technical ability.
-> It is not a productive in character.
-> Administration coordinator finance, production and distribution
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-> it frames the organisational structure and exercises control over the enterprise.
-> Administration in the master of industry. It relates to top level management. persons like
owners or the board of directors are in change of it.
-> An administrator
a) organises his own work and that of his subordinates
b) delegates responsibility and authority
c) Measures, evaluates and controls position activities.

Organisation:
-> Organisation is the frame work of Management.
-> It is the function of putting together the different part of an enterprise into working order.
-> Organisation is a system, it is a group od persons, it is a structure of relationship among the
individuals working together for a common goal.
-> Organisation is concerned with the building, developing and maintaining of structure of
working relationships in order to accomplish the objectives of the enterprise.
-> Organisations means that determination and assessment of duties to individuals and also the
establishment and the maintenance of authority relationships among the grouped activities.
-> Organisation is the determining, grouping and arranging of the various activities deemed
necessary for the attainment of the objectives,
i) The assigning of people to those activities
ii) The providing of suitable physical factors of environment
iii) The indicating of the relative authority delegated to each individual charged with
the execution of each respective activity.

FUNCTIONS OF MANAGEMENT:
According to Henry Fayol, “To manage is to forecast and plan, to organize, to
command, & to control”. Whereas Luther Gullick has given a keyword POSDCORB where P
stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R
for reporting & B for Budgeting. But the most widely accepted are functions of management
given by KOONTZ and O‟DONNEL i.e., Planning, Organizing, Staffing, Directing and
Controlling.

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 1. Planning:
It is the basic function of management. It deals with chalking out a future course
of action & deciding in advance the most appropriate course of actions for achievement
of pre- determined goals. According to KOONTZ, “Planning is deciding in advance -
what to do, when to do & how to do. It bridges the gap from where we are & where we
want to be”. A plan is a future course of actions. It is an exercise in problem solving &
decision making. Planning is determination of courses of action to achieve desired
goals. Thus, planning is a systematic thinking about ways & means for accomplishment
of pre-determined goals. Planning is necessary to ensure proper utilization of human &
non-human resources. It is all pervasive, it is an intellectual activity and it also helps in
avoiding confusion, uncertainties, risks, wastages etc

2. Organizing:
It is the process of bringing together physical, financial and human resources
and developing productive relationship amongst them for achievement of
organizational goals. According to Henry Fayol, “To organize a business is to provide
it with everything useful or its functioning i.e., raw material, tools, capital and
personnel’s. To organize a business involves determining & providing human and non-
human resources to the organizational structure. Organizing as a process involves:
• Identification of activities.
• Classification of grouping of activities.
• Assignment of duties.
• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility relationships.

3. Staffing:
It is the function of manning the organization structure and keeping it manned.
Staffing has assumed greater importance in the recent years due to advancement of
technology, increase in size of business, complexity of human behaviour etc. The main
purpose o staffing is to put right man on right job i.e., square pegs in square holes and
round pegs in round holes. According to Kootz & O‟Donell, “Managerial function of
staffing involves manning the organization structure through proper and effective

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 selection, appraisal & development of personnel to fill the roles designed un the
structure”. Staffing involves:
• Manpower Planning (estimating man powerin terms of searching, choose
theperson and giving the rightplace).
• Recruitment, Selection & Placement.
• Training &Development.
• Remuneration.
• Performance Appraisal.
• Promotions & Transfer.

4. Directing:
It is that part of managerial function which actuates the organizational methods
to work efficiently for achievement of organizational purposes. It is considered life-
spark of the enterprise which sets it in motion the action of people because planning,
organizing and staffing are the mere preparations for doing the work. Direction is that
inert-personnel aspect of management which deals directly with influencing, guiding,
supervising, motivating sub-ordinate for the achievement of organizational goals.
Direction has following elements:
• Supervision
• Motivation
• Leadership
• Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the
act of watching & directing work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to
work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.
Leadership- may be defined as a process by which manager guides and influences the
work of subordinates in desired direction.
Communications- is the process of passing information, experience, opinion etc from
one person to another. It is a bridge of understanding.

5. Controlling:
It implies measurement of accomplishment against the standards and correction
of deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if necessary,
to correct any deviation”. According to Koontz & O‟Donell “Controlling is the
measurement & correction of performance activities of subordinates in order to make
sure that the enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore, controlling has following steps:
a) Establishment of standard performance.
b) Measurement of actual performance.

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 c) Comparison of actual performance with the standards and finding out
deviation if any.
d) Corrective action.

SCHOOLS OF MANAGEMENT THOUGHT:

A. Taylor’s Scientific Management
B. Fayol’s Principles of Management
C. Douglas Mc-Gregor’s Theory X and Y
D. Mayo's Hawthorne Experiments
E. Hertzberg’s Two factor Theory of Motivation
F. Maslow’s Hierarchy of Human needs

A. TAYLOR’S SCIENTIFIC MANAGEMENT:

The utility of scientific methods to problems of management was first introduced by

F.W.Taylor
Definition:
Scientific management may be defined as the “Art of knowing exactly what is to be
done and the best way of doing it”. Scientific management is the result of applying scientific
knowledge and scientific methods to the various aspects of management and the problems that
arise from them.

Principles:
Taylor through his principles of scientific management initiated a system in which there
would be an effective and fruitful coordination and cooperation between the management and
the workers.

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Development of Science for each element of work:
Analyze the work scientifically, rather than using thumb rule. It means that an attempt
is made to find out what is to be done by a particular worker, how he is to do it, what equipment
will be necessary to do it. This information is provided to the worker, so as to reduce wastage
of tie, material etc. and improve the quality work.
Scientific selection, placement and training of workers:
This principle states that select the workers best suited to perform the specific task, and
then train team within the industry in order to attain the objectives of the enterprise workers
should also be trained from time to time to keep them informed of latest development in the
techniques of production.
Division of Labour:
Division of work in smaller tasks and separation of thinking element of job from doing
element of the job, this is the principle of specialization. It is essential for efficiency in all
spheres of activities as well as in supervision work.

Standardization of methods, procedures, tools and equipment:

Standardization helps in reducing time, labour and cost of production. The success of scientific
management largely depends upon standardization of system, depends upon standardization of
system, tools, equipments and techniques of production
Use of time and motion study:
Taylor’s introduced time and motion study to determine standard work. Taylor’s
undertook studies on fatigue, incurred by the workers and the time necessary to complete task.
Differential wage system:
Taylor’s differential piece rate scheme provides an incentive for a worker to achieve
high level of optimum output. It distinguishes the more productive workers from less
productive workers and motivates them to produce more.
Cooperation between labour and management:
Mutual respect and cooperation between the workers and management helps in
providing proper and effective leadership. The labour starts thinking that it is their work and
they must put their heart in the work assigned to him.
Principle of Management by Exception:
Taylor suggested that only major or significant deviations between the actual
performance and standard performance should be brought to the notice of top management.
Top management should pay more attention to those areas of work where standards and
procedures could not be established and where there is a significant variation between standard
performance and actual performance

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 B. FAYOL’S PRINCIPLES OF MANAGEMENT:

[Administrative Management Theory (Henri Fayol and others)]

Henri Fayol is called as father of Modern Management. He established the pattern of
management and the pyramidal form of organization. He pointed out that technical ability is
more dominating on the lower level of management managerial ability is more important on
the higher level of management.
Henri Fayol analysed the process of management and divided the activities of an industrial
undertaking into six groups
1. Technical activities
2. Commercial activities
3. Financial activities
4. Security activities
5. Accounting activities
6. Managerial activities
Henry Fayol is called as father of Modern Management He established the pattern of
management and the pyramidal form of organization. He pointed out that technical ability is
more dominating on the lower level of management managerial ability is more important on
the higher level of management.
There are 14 Principles of Management described by Henry Fayol.
1. Division of work:
a. Henri Fayol has stressed on the specialization of jobs.
b. He recommended that work of all kinds must be divided & subdivided and allotted
to various persons according to their expertise in a particular area.
c. Subdivision of work makes it simpler and results in efficiency.
d. It also helps the individual in acquiring speed, accuracy in his performance.
e. Specialization leads to efficiency & economy in spheres of business.
2. Authority & Responsibility:
a. Authority & responsibility are co-existing.
b. If authority is given to a person, he should also be made responsible.
c. In a same way, if anyone is made responsible for any job, he should also have
concerned authority.
d. Authority refers to the right of superiors to get exactness from their sub-ordinates
whereas responsibility means obligation for the performance of the job assigned.
e. There should be a balance between the two i.e., they must go hand in hand.
f. Authority without responsibility leads to irresponsible behavior whereas
responsibility without authority makes the person ineffective.
3. Discipline:
a. According to Fayol, “Discipline means sincerity, obedience, respect of authority &
observance of rules and regulations of the enterprise”.
b. This principle applies that subordinate should respect their superiors and obey their

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order.
c. It is an important requisite for smooth running of the enterprise.
d. Discipline is not only required on path of subordinates but also on the part of
management.
e. Discipline can be enforced if –
- There are good superiors at all levels.
- There are clear & fair agreements with workers.
- Sanctions (punishments) are judiciously applied
4. Unity of Command:
a. A sub-ordinate should receive orders and be accountable to one and only one boss at
a time.
b. In other words, a sub-ordinate should not receive instructions from more than one
person because, - It undermines authority
- Weakens discipline
- Divide’s loyalty
- Creates confusion
- Delays and chaos
- Escaping responsibilities
- Duplication of work
- Overlapping of efforts
c. Therefore, dual sub-ordination should be avoided unless and until it is absolutely
essential.
d. Unity of command provides the enterprise a disciplined, stable & orderly existence.
e. It creates harmonious relationship between superiors and sub-ordinates.
5. Unity of Direction:
a. Fayol advocates one head one plan which means that there should be one plan for a
group of activities having similar objectives.
b. Related activities should be grouped together. There should be one plan of action for
them and they should be under the charge of a particular manager.
c. According to this principle, efforts of all the members of the organization should be
directed towards common goal.
d. Without unity of direction, unity of action cannot be achieved.
e. In fact, unity of command is not possible without unity of direction.
Therefore, it is obvious that they are different from each other but they are dependent on each
other unity of direction is a pre-requisite for unity of command. But it does not automatically
come from the unity of direction.
6. Sub-Ordination of Individual Interest to General Interest:
a. An organization is much bigger than the individual it constitutes therefore interest of
the undertaking should prevail in all circumstances.
b. As far as possible, reconciliation should be achieved between individual and group
interests.
c. But in case of conflict, individual must sacrifice for bigger interests.

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 d. In order to achieve this attitude, it is essential that –
- Employees should be honest & sincere.
- Proper & regular supervision of work.
- Reconciliation of mutual differences and clashes by mutual agreement.
For example, for change of location of plant, for change of profit-sharing ratio, etc.
7. Remuneration:
a. The quantum and method of remuneration to be paid to the workers should be fair,
reasonable, satisfactory & rewarding of the efforts.
b. As far as possible it should accord satisfaction to both employer and the employees.
c. Wages should be determined on the basis of cost of living, work assigned, financial
position of the business, wage rate prevailing etc.
d. Logical & appropriate wage rates and methods of their payment reduce tension &
differences between workers & management creates harmonious relationship and pleasing
atmosphere of work.
Fayol also recommended provision of other benefits such as free education, medical & resident
Equity.
a. Equity means combination of fairness, kindness & justice.
b. The employees should be treated with kindness & equity if devotion is expected of
them.
c. It implies that managers should be fair and impartial while dealing with the
subordinates.
d. They should give similar treatment to people of similar position.
e. They should not discriminate with respect to age, caste, sex, religion, relation etc.
f. Equity is essential to create and maintain cordial relations between the managers and
sub-ordinate.
g. But equity does not mean total absence of harshness.
h. Fayol was of opinion that, “at times force and harshness might become necessary for
the sake of equity”.
8. Centralization & De-Centralization:
a. Centralization means concentration of authority at the top level. In other words,
centralization is a situation in which top management retains most of the decision-making
authority.
b. Decentralization means disposal of decision-making authority to all the levels of the
organization. In other words, sharing authority downwards is decentralization.
c. According to Fayol, “Degree of centralization or decentralization depends on no. of
factors like size of business, experience of superiors, dependability & ability of subordinates
etc.
d. Anything which increases the role of subordinate is decentralization & anything
which decreases it is centralization.
e. Fayol suggested that absolute centralization or decentralization is not feasible. An
organization should strike to achieve a lot between the two.

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9. Scalar Chain:
a. Fayol defines scalar chain as ’The chain of superiors ranging from the ultimate
authority to the lowest”.
b. Every order, instructions, messages, requests, explanation etc., has to pass through
Scalar chain.
c. But, for the sake of convenience & urgency, this path can be cut shirt and this short
cut is known as Gang Plank.
d. A Gang Plank is a temporary arrangement between two different points to facilitate
quick & easy communication as explained below:

In the figure given, if D has to communicate with G he will first send the communication
upwards with the help of C, B to A and then downwards with the help of E and F to G which
will take quite some time and by that time, it may not be worth therefore a gang plank has been
developed between the two.
10. Order:
a. This principle is concerned with proper & systematic arrangement of things and
people.
b. Arrangement of things is called material order and placement of people is called
social order.
c. Material order- There should be safe, appropriate and specific place for every article
and every place to be effectively used for specific activity and commodity.
d. Social order- Selection and appointment of most suitable person on the suitable job.
There should be a specific place for everyone and everyone should have a specific place so that
they can easily be contacted whenever need arises.
11. Equity:
a. Equity means combination of fairness, kindness & justice.
b. The employees should be treated with kindness & equity if devotion is expected of
them.
c. It implies that managers should be fair and impartial while dealing with the
subordinates.
d. They should give similar treatment to people of similar position.
e. They should not discriminate with respect to age, caste, sex, religion, relation etc.
f. Equity is essential to create and maintain cordial relations between the managers and
sub- ordinate.
g. But equity does not mean total absence of harshness.

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 h. Fayol was of opinion that, “at times force and harshness might become necessary for
the sake of equity.
12. Stability of Tenure:
a. Fayol emphasized that employees should not be moved frequently from one job
position to another i.e., the period of service in a job should be fixed.
b. Therefore employees should be appointed after keeping in view principles of
recruitment & selection but once they are appointed their services should be served.
c. According to Fayol. “Time is required for an employee to get used to a new work &
succeed to doing it well but if he is removed before that he will not be able to render worthwhile
services”.
d. As a result, the time, effort and money spent on training the worker will go waste.
e. Stability of job creates team spirit and a sense of belongingness among workers which
ultimately increase the quality as well as quantity of work.
13. Initiative:
a. Workers should be encouraged to take initiative in the work assigned to them.
b. It means eagerness to initiate actions without being asked to do so.
c. Fayol advised that management should provide opportunity to its employees to
suggest ideas, experiences & new method of work.
d. It helps in developing an atmosphere of trust and understanding.
e. People then enjoy working in the organization because it adds to their zeal and
energy.
f. To suggest improvement in formulation & implementation of place.
g. They can be encouraged with the help of monetary & non-monetary incentives.
14. (can be achieved through unity of command)
a. It refers to team spirit i.e., harmony in the work groups and mutual understanding
among the members.
b. Spirit De‟ Corps inspires workers to work harder.
c. Fayol cautioned the managers against dividing the employees into competing groups
because it might damage the moral of the workers and interest of the undertaking in the long
run.
d. To inculcate Espirit De‟ Corps following steps should be undertaken –
1. There should be proper co-ordination of work at all levels
2. Subordinates should be encouraged to develop informal relations among
themselves.
3. Efforts should be made to create enthusiasm and keenness among
subordinates so that they can work to the maximum ability.
4. Efficient employees should be rewarded and those who are not up to the mark
should be given a chance to improve their performance.
5. Subordinates should be made conscious of that whatever they are doing is of
great importance to the business & society.
e. He also cautioned against the more use of Britain communication to the subordinates
i.e., face to face communication should be developed. The managers should infuse

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 team spirit & belongingness. There should be no place for misunderstanding. People
then enjoy working in the organization & offer their best towards the organization

C. DOUGLAS MC-GREGOR’S THEORY X AND Y:

In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of
human behaviour at work, or in other words, two different views of individuals (employees):
one of which is negative, called as Theory X and the other is positive, so called as Theory Y.
According to McGregor, the perception of managers on the nature of individuals is based on
various assumptions.
Assumptions of Theory X:
• An average employee intrinsically does not like work and tries to escape it whenever
possible.
• Since the employee does not want to work, he must be persuaded, compelled, or
warned with punishment so as to achieve organizational goals. A close supervision is required
on part of managers. The managers adopt a more dictatorial style.
• Many employees rank job security on top, and they have little or no aspiration/
ambition. Employees generally dislike responsibilities.
• Employees resist change.
• An average employee needs formal direction.
Assumptions of Theory Y:
• Employees can perceive their job as relaxing and normal. They exercise their physical
and mental efforts in an inherent manner in their jobs.
• Employees may not require only threat, external control and coercion to work, but
they can use self-direction and self-control if they are dedicated and sincere to achieve the
organizational objectives.
• If the job is rewarding and satisfying, then it will result in employees‟ loyalty and
commitment to organization.
• An average employee can learn to admit and recognize the responsibility. In fact, he
can even learn to obtain responsibility.
• The employees have skills and capabilities. Their logical capabilities should be fully
utilized. In other words, the creativity, resourcefulness and innovative potentiality of the
employees can be utilized to solve organizational problems.
Thus, we can say that Theory X presents a pessimistic view of employees‟ nature and
behaviour at work, while Theory Y presents an optimistic view of the employees‟ nature and
behaviour at work. Ifcorrelate it with Maslow‟s theory, we can say that Theory X is based on
the assumption that the employees emphasize on the physiological needs and the safety needs;
while Theory X is based on the assumption that the social needs, esteem needs and the self-
actualization needs dominate the employees.
McGregor views Theory Y to be more valid and reasonable than Theory X. Thus, he
encouraged cordial team relations, responsible and stimulating jobs, and participation of all in
decision-making process.

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 D. MAYO'S HAWTHORNE EXPERIMENTS:

Elton Mayo generally recognized as father of human relations approach Mayo led the team
which conducted the study psychological reaction of workers in on- the job situations Mayo
concluded that work arrangements in addition to meeting the objective requirements of
production must at the same time satisfy the employees subjective requirement of social
satisfaction at his work place.
Elton Mayo’s team conducted a number of experiments involving six female workers. These
experiments are often referred to as the Hawthorne experiments or Hawthorne studies as they
took place at The Hawthorne Works of the Western Electric Company in Chicago.
Over the course of five years, Mayo’s team altered the female worker’s working conditions
and monitored how the change in working conditions affected the workers morale and
productivity. The changes in working conditions included changes in working hours, rest
brakes, lighting, humidity, and temperature. The changes were explained to the workers prior
to implementation.
At the end of the five-year period, the female worker’s working conditions, reverted back to
the conditions before the experiment began. Unexpectedly the workers morale and productivity
rise to levels higher than before and during the experiments. The combination of results during
and after the experiment (i.e., the increase in the workers productivity when they were returned
to their original working conditions) led Mayo to conclude that workers were motivated by
psychological conditions more than physical working condition.
After analysing the results from the Hawthorne experiments Mayo concluded that workers
were motivated by more than self-interest and the following had an impact too
E. HERTZBERG’S TWO FACTOR THEORY OF MOTIVATION:

In 1959, Frederick Herzberg, a behavioural scientist proposed a two-factor theory or

the motivator-hygiene theory. According to Herzberg, there are some job factors that result in
satisfaction while there are other job factors that prevent dissatisfaction. According to
Herzberg, the opposite of “Satisfaction” is “No satisfaction” and the opposite of
“Dissatisfaction” is “No Dissatisfaction”
“Herzberg called these factors as „dissatisfiers‟ and not motivators, by this he means
their presence or existence does not motivate in the sense of yielding satisfaction, but their
absence would result in dissatisfaction. These are also referred to as „hygiene‟ factors.
In the second group are the „satisfiers‟ in the sense that they are motivators, which are
related to „Job content‟. He included the factors of achievement, recognition, challenge work,
advancement and growth in the job. He says that their presence will yield feelings of
satisfactory or no satisfaction, but not dissatisfaction.

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Herzberg classified these job factors into two categories, they are: 1) Hygiene factors
2) Motivational factor
1) Hygiene factors:
Hygiene factors are those job factors which are essential for existence of
motivation at workplace. These do not lead to positive satisfaction for long-term. But
if these factors are absent / if these factors are non-existant at workplace, then they lead
to dissatisfaction. In other words, hygiene factors are those factors which when
adequate/reasonable in a job, pacify the employees and do not make them dissatisfied.
These factors are extrinsic to work. Hygiene factors are also called as dissatisfiers or
maintenance factors as they are required to avoid dissatisfaction. These factors describe
the job environment/scenario. The hygiene factors symbolized the physiological needs
which the individuals wanted and expected to be fulfilled. Hygiene factors include:
• Pay - The pay or salary structure should be appropriate and reasonable. It must be
equal and competitive to those in the same industry in the same domain.
• Company Policies and administrative policies - The company policies should not be
too rigid. They should be fair and clear. It should include flexible working hours, dress code,
breaks, vacation, etc.
• Fringe benefits - The employees should be offered health care plans (Mediclaim),
benefits for the family members, employee help programmes, etc.
• Physical Working conditions - The working conditions should be safe, clean and
hygienic. The work equipment should be updated and well maintained.
• Status - The employees‟ status within the organization should be familiar and
retained.
• Interpersonal relations - The relationship of the employees with his peers, superiors
and subordinates should be appropriate and acceptable. There should be no conflict or
humiliation element present.
• Job Security - The organization must provide job security to the employees.
2) Motivational factors:

According to Herzberg, the hygiene factors cannot be regarded as motivators. The

motivational factors yield positive satisfaction. These factors are inherent to work. These
factors motivate the employees for a superior performance. These factors are called satisfiers.
These are factors involved in performing the job. Employees find these factors intrinsically
rewarding. The motivators symbolized the psychological needs that were perceived as an
additional benefit. Motivational factors include:

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• Recognition - The employees should be praised and recognized for their accomplishments by
the managers.
• Sense of achievement - The employees must have a sense of achievement. This depends on
the job. There must be a fruit of some sort in the job.
• Growth and promotional opportunities - There must be growth and advancement
opportunities in an organization to motivate the employees to perform well.
• Responsibility - The employees must hold themselves responsible for the work. The managers
should give them ownership of the work. They should minimize control but retain
accountability.
• Meaningfulness of the work - The work itself should be meaningful, interesting and
challenging for the employee to perform and to get motivated.
Limitations of Two Factor Theory: The two-factor theory is not free from limitations:
1. The two-factor theory overlooks situational variables.
2. Herzberg assumed a correlation between satisfaction and productivity. But the research
conducted by Herzberg stressed upon satisfaction and ignored productivity.
3. The theory’s reliability is uncertain. Analysis has to be made by the rates. The rates may
spoil the findings by analysing same response in different manner.
4. No comprehensive measure of satisfaction was used. An employee may find his job
acceptable despite the fact that he may hate/object part of his job.
5. The two-factor theory is not free from bias as it is based on the natural reaction of employees
when they are enquired the sources of satisfaction and dissatisfaction at work. They will blame
dissatisfaction on the external factors such as salary structure, company policies and peer
relationship. Also, the employees will give credit to themselves for the satisfaction factor at
work.
6. The theory ignores blue-collar workers. Despite these limitations, Herzberg’s Two-Factor
theory is acceptable broadly.

Implications of Two-Factor Theory:

The Two-Factor theory implies that the managers must stress upon guaranteeing the adequacy
of the hygiene factors to avoid employee dissatisfaction. Also, the managers must make sure
that the work is stimulating and rewarding so that the employees are motivated to work and
perform harder and better. This theory emphasizes upon job- enrichment so as to motivate the
employees. The job must utilize the employee’s skills and competencies to the maximum.
Focusing on the motivational factors can improve work-quality.

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 F. MASLOW’S HIERARCHY OF HUMAN NEEDS:

Abraham Maslow is well renowned for proposing the Hierarchy of Needs Theory in 1943. This
theory is a classical depiction of human motivation. This theory is based on the assumption that
there is a hierarchy of five needs within each individual. The urgency of these needs varies.
These five needs are as follows
According to Maslow, individuals are motivated by unsatisfied needs. As each of these needs
is significantly satisfied, it drives and forces the next need to emerge. Maslow grouped the five
needs into two categories - Higher-order needs and Lower-order needs. The physiological and
the safety needs constituted the lower-order needs. These lower-order needs are mainly
satisfied externally. The social, esteem, and self-actualization needs constituted the higher-
order needs. These higher-order needs are generally satisfied internally, i.e., within an
individual.

1. Physiological needs: These are the basic needs of air, water, food, clothing and shelter. In
other words, physiological needs are the needs for basic amenities of life.
2. Safety needs: Safety needs include physical, environmental and emotional safety and
protection. For instance- Job security, financial security, protection from animals, family
security, health security, etc.
3. Social needs: Social needs include the need for love, affection, care, belongingness, and
friendship.
4. Esteem needs: Esteem needs are of two types: internal esteem needs (self- respect,
confidence, competence, achievement and freedom) and external esteem needs (recognition,
power, status, attention and admiration).
5. Self-actualization need: This include the urge to become what you are capable of becoming
/ what you have the potential to become. It includes the need for growth and self-contentment.
It also includes desire for gaining more knowledge, social- service, creativity and being
aesthetic. The self- actualization needs are never fully satiable. As an individual grows
psychologically, opportunities keep cropping up to continue growing.
Limitations of Maslow’s Theory:
• It is essential to note that not all employees are governed by same set of needs. Different
individuals may be driven by different needs at same point of time. It is always the most
powerful unsatisfied need that motivates an individual.

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• The theory is not empirically supported.
• The theory is not applicable in case of starving artist as even if the artist’s basic needs are not
satisfied, he will still strive for recognition and achievement.

Systems Approach to Management:

A systems approach to management is meant the study of a firm in its totality so that the men
and material resources of the firm can be organized to realize the firm's overall objectives as
efficiently as possible. For this to be effective, a company should have an overall system of
corporate objectives.
Important features:
1. System approach considers the organisation as a dynamic and inter-related set of parts. Each
part represents a department or a sub-system. Each department has its sub-system. Continuous
and effective interaction of sub-systems helps to attain goals of the larger system. Thus, every
sub-system is a system and has sub-systems which together make an organisation a set of
mutually dependent parts and their sub-parts.
2. It considers the impact of both near and distant future on organisational activities.
Organisations constantly respond to changes in the internal and external environmental
conditions. They also act as market leaders in the dynamic, competitive environment.
3. System approach integrates goals of different parts of the organisation (sub-systems or
departments) with the organisation as a whole. It also integrates goals of the organisation with
goals of the environment or society in which it operates. Integration of goals maintains
equilibrium or balance and enables organisations to grow in the dynamic environment.
4. It synthesizes knowledge of different fields of study such as biology, sociology, psychology,
information systems, economics etc. As business organisation deals with different components
of society, it makes best use of different fields of study to improve interaction with its
counterparts.
5. System approach enables organisations to frame policies that promote business objectives
and social objectives. Business operates in the social system and social values, culture, beliefs
and ethics are important constituents of business operations.
Evaluation of System Approach:
The system approach has the following merits:
1. System approach provides a holistic view of the organisations and emphasizes on their
adaptive nature. It increases organization’s adaptability to environmental changes. The
organisation is studied as a whole and not through its parts. This enables it to adapt to the needs
of the environment. Decisions are made keeping in mind organisation-environment interface.
2. It analyses the system at different levels and inter-relates and integrates it into a unified set
of direction. Starting from individual goals, it focuses on overall organizational goals,
synthesizes the two and converges them into global economy.

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3. System approach provides a framework for effective interaction of parts of the organisation
in a specific arrangement for attainment of its goals. It does not focus on one part of the
organisation.
4. It considers the impact of environment on the organisation and vice versa. Interaction of
external environment with the internal environment is the most significant contribution of
systems theory.
5. System approach synthesizes the classical and behavioural theories into a broader framework
to solve managerial problems. It, thus, focuses on organisations as multi-dimensional in nature.
Limitations of System Approach:
1. Critics of this theory claim this as a theoretical approach to management. The way an
organisation actually works and solves problems (by applying different techniques and
methods) has no appeal in the theory.
2. Relationship amongst parts of the organisation is emphasised upon but the exact nature of
inter-dependence is not defined.
3. Exact relationship between internal and external environment of the organisation is also not
defined. For example, it specifies that change in economic policies necessitates change in
internal policies of the organisation but what changes are required to match the changes in
economic environment is not talked about.
4. System approach fails to provide uniform approach to management. Management practices
change with changes in environmental variables. No standard set of principles apply to all types
of organisations. It has added nothing new to the study of management. Even before this
approach was introduced, managerial decisions were taken keeping in mind the environmental
variables. No specific decision-making techniques are offered to deal with specific problems.
5. It fails to provide concepts that apply to all types of organisations. The small organisations
are less adaptive to environmental variables than large organisations. The theory assumes that
most of the organisations are big, complex and open systems. It, thus, fails to provide a unified
theory

Organizational Structures:
An organizational structure is a system that outlines how certain activities are directed
in order to achieve the goals of an organization. These activities can include rules, roles, and
responsibilities.

The organizational structure also determines how information flows between levels
within the company. For example, in a centralized structure, decisions flow from the top down,
while in a decentralized structure, decision-making power is distributed among various levels
of the organization.Having an organizational structure in place allows companies to remain
efficient and focused.

Businesses of all shapes and sizes use organizational structures heavily. They define a
specific hierarchy within an organization. A successful organizational structure defines each

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employee's job and how it fits within the overall system. Put simply, the organizational
structure lays out who does what so the company can meet its objectives.

This structuring provides a company with a visual representation of how it is shaped

and how it can best move forward in achieving its goals. Organizational structures are normally
illustrated in some sort of chart or diagram like a pyramid, where the most powerful members
of the organization sit at the top, while those with the least amount of power are at the bottom.

Not having a formal structure in place may prove difficult for certain organizations. For
instance, employees may have difficulty knowing to whom they should report. That can lead
to uncertainty as to who is responsible for what in the organization.

Having a structure in place can help with efficiency and provide clarity for everyone at
every level. That also means each and every department can be more productive, as they are
likely to be more focused on energy and time.

Types of Organizational Structures:

1) Functional Structure:
Four types of common organizational structures are implemented in the real world. The
first and most common is a functional structure. This is also referred to as a bureaucratic
organizational structure and breaks up a company based on the specialization of its workforce.
Most small-to-medium-sized businesses implement a functional structure. Dividing the firm
into departments consisting of marketing, sales, and operations is the act of using a bureaucratic
organizational structure.

2) Divisional or Multidivisional Structure:

The second type is common among large companies with many business units. Called
the divisional or multidivisional structure, a company that uses this method structures its
leadership team based on the products, projects, or subsidiaries they operate. A good example
of this structure is Johnson & Johnson. With thousands of products and lines of business, the
company structures itself so each business unit operates as its own company with its own
president.

3) Flatarchy Structure:
Flatarchy, a newer structure, is the third type and is used among many start-ups. As the
name alludes, it flattens the hierarchy and chain of command and gives its employees a lot of
autonomy. Companies that use this type of structure have a high speed of implementation.

4) Matrix Structure:
The fourth and final organizational structure is a matrix structure. It is also the most
confusing and the least used. This structure matrixes employees across different superiors,
divisions, or departments. An employee working for a matrixed company may have duties in
both sales and customer service.

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Benefits of Organizational Structures:
Putting an organizational structure in place can be very beneficial to a company. The
structure not only defines a company's hierarchy but also allows the firm to layout the pay
structure for its employees. By putting the organizational structure in place, the firm can decide
salary grades and ranges for each position.

The structure also makes operations more efficient and much more effective. By separating
employees and functions into different departments, the company can perform different
operations at once seamlessly.

In addition, a very clear organizational structure informs employees how best to get their jobs
done. For example, in a hierarchical organization, employees will have to work harder at
buying favor or courting those with decision-making power. In a decentralized organization,
employees must take on more initiative and bring creative problem solving to the table. This
can also help set expectations for how employees can track their own growth within a company
and emphasize a certain set of skills—as well as for potential employees to gauge if such a
company would be a good fit with their own interests and work styles.

Functional Organization:
This structure most widely used, in the medium and large organizations having limited
number of products.
This was introduced by F.W.Taylor and is logical extension of the division of labour
cover departments as well as men. In this authority is delegated to an individual or department
to control specified processes, policies or other matter relating to activities under taken by
persons in other departments. In this system planning is separated from performance since the
direction of work is divided by various function in the factory. It has been found that this type
of structure becomes ineffective when the work of departments and individuals increases in
variety and complexity.
Merits:
Separation of work: In functional organization, work has been separated from routine work.
The specialist has been given the authority and responsibility for supervision and
administration pertaining to their field of specialization unnecessary over loading of
responsibilities is thus avoided.
Specialization: Specialization and skilled supervisory attention is given to workers the result is
increase in rate of production and improved quality of work.
Narrow range with high depth: The narrow range of activities enable the functional expert to
developing in depth understanding in his particular area of activity.
Ease in selection and training: Functional organization is based upon expert knowledge. The
availability of guidance through experts makes it possible to train the workers properly in
comparatively short span of time.
Reduction in prime cost: Since for every operation expert guidance is there, wastage of material
is reduced and thus helps to reduce prime cost.

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Scope of growth and development of business: This type of organization presents ample scope
for the growth and development of business.
Demerits:
Indiscipline: Since the workers receive instructions from number of specialists it leads to
confusion to whom they should follow. Therefore, it is difficult to maintain discipline.
Shifting of responsibility: It is difficult for the top management to locate responsibility for the
unsatisfactory work everybody tries to shift responsibility on others for the faults and failure.
Kills the initiative of workers: As the specialized guidance is available to the workers the
workers will not be using their talents and skills therefore their initiative cannot be utilized.
Overlapping of authority: The sphere of authority tends to overlap and gives rise to friction
between the persons of equal rank.
Lack of co-ordination between functions: except the function in which he is specialized he is
absolutely indifferent to other functions. Therefore, there is a lack of coordination of function
and efforts.

Divisional Organization:
➢ Perhaps the most common structure in many large American firms today is the
divisional form.
➢ Alfred Chandler’s classic book, Strategy and Structure, outlines the development
of this form in the early 20th century at Dupont and General Motors.
➢ The divisional structure may be considered an extension of the product form but with
much greater responsibility and scope of control for the general manager.
➢ In this form, an individual is placed in charge of a “business” that may be defined by
product group or location or clusters of products.
➢ These divisions typically will be responsible for their own business from start to finish,
including financing, raw materials, manufacturing, sales and marketing.
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 ➢ They also may have authority to organize their divisions the way they want to and that
could be appropriate, given that different businesses may face different environments.

Merits:
1) Each division can work as independent unit.
2) Each division gets adequate freedom
3) Division managers become expected in this area.
4) Removes need for direct supervision of division by corporate managers.
5) Division management improve the use of resources.
6) Timely and effectively decision can be taken
Demerits:
1) These structures are not suitable for small organizations.
2) Duplication of activities may happen in different divisions.
3) When each division is engaged in independent service cost may increase.
4) Head quarters find it difficulty to control each division.
5) When each division manager safeguards his interest alone, he ignores the common goal
of the organization.

Matrix Organization:
This is also called as project orgnisation it is a combination of all relationships in the
organization in vertical, horizontal and diagonal. It is mostly used in complex projects. It
provides a high degree of operational freedom, flexibility and adoptability for both the line and
staff managers in performing their respective roles. The main objective of matrix organization
is to secure a higher degree of coordination than what is possible from the conventional
organizational structure as the line and staff.

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Merits:
1. It offers operational freedom and flexibility
2. It seeks to optimize the utilization of resources
3. It focuses on results
4. It maintains professional identity
5. It holds employees responsible for management of resources
Demerits:
1. It calls for greater degree of coordination
2. It violates unity of command principle
3. It may be difficult to define authority and responsibility precisely
4. Employees may find it frustrating to work with two bosses

Basic concepts of Organisation:

• Organisation is a mechanism that enables living things to work effectively together.
• Organisation may be defined as the process of
(i) Identifying and grouping the work to be performed.
(ii) Defining and dedicating responsibility and authority
(iii) Establishing relationships for the purpose of enabling people to work most
efficiently together in accomplishing objectives.
• Organisation is the pattern of ways in which a large number of people engaged in a
complexity of a tasks, relate themselves to each other in a systematic establishment and
accomplishment of the mutually agreed purposes.
• Almost any business manager will affirm that sound organisation is highly important
to business success.
• Many will characterize organisation as the foundation upon which the whole structure
of a management is built.

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Departmentation:
➢ When the size of an enterprise grows, the number of employees also increases. There
is a limitation on the number of persons and Enterprise can manage directly.
➢ This limitation restricts the size of enterprises if the enterprise does not opt for the
device of departmentation.
➢ Departmentalization is the process of breaking down an enterprise into various
departments.
➢ Hence, departmentization of activities into departments is a very essential because it
limits the number of subordinates to be supervised by a manager it would have
otherwise been very difficult to manage a team of a large number of a subordinate by a
single supervisor and thus the size of the business enterprise would be very limited.
➢ Identifying and grouping of a similar activity on some logical basic so that a team of
persons can be organised in order to attain the objectives of the enterprise may be called
departmentation.
➢ A department is a workgroup combined together for performing certain functions of a
similar nature.
➢ The process of division of the enterprise into different parts is broadly called as
departmentation & it is done for the purpose of administration.
Suitability:
A suitable basis of departmentation is one which facilitates the performance of
organisational functions efficiently and effectively so that the objectives of the organisation are
achieved. Since each basis is suitable to a particular type of organisation, often a combination
of various basis is adopted.

Merits:
• Advantage of managerial specialization.
• Expansion and growth of enterprise facilitated.
• Decentralization facilitated.
• Fixation of responsibility facilitated.
• Performance appraisal and managerial development.
• Facilitates intra-departmental co-ordination.
• Administrative control facilitated.

Demerits:
• There may not be enough work in each department.
• Coordinating various departments will also pose many serious problems.
• It may also develop an unequal development of customer groups in times of expansion
and disappearance of certain customer groups in times of recession.

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Decentralisation:
Decentralisation is referred as a form of an organisational structure where there is the
delegation of authority by the top management to the middle and lower levels of management
in an organisation.
In this type of organisation structure, the duty of daily operations and minor decision-making
capabilities are transferred to the middle and lower levels which allow top-level management
to focus more on major decisions like business expansion, diversification etc.
Delegation refers to the assigning a portion of work and the associated responsibility by a
superior to a subordinate. In simple words, when delegation is expanded on an organisational
level, it is called decentralisation.

Importance of Decentralisation:

1. Rapid decision making – Most of the decisions are taken on the spot, and approval
from the higher authority is not required. The ability to make a prompt decision allows
an organisation to function its operation quickly and effectively.
2. Administrative development – The decentralisation process questions the manager’s
judgement and techniques, when responsibility and challenges to develop solutions are
given to them. This questioning method grows confidence, encourages self-reliance,
and make them a good decision-maker resulting in the development of the organisation.
3. Development of executive skills – It allows the employee to perform task individually,
giving them invaluable exposure. This individual performance creates an environment
where an individual can enhance their expertise, take ownership & more significant
responsibilities, and be suitable for promotion.
4. Promotes growth – Decentralisation also allows the heads of the department to work
independently. This independence helps the department to grow, have a healthy
competition between other departments. Ultimately, the competition will lead to an
improvement and enhancement in productivity.
5. Higher control – It also evaluates and reviews the performances of each department
and gives them a comprehensive perspective of their work. However, controlling is the
biggest challenge of decentralisation and stabilised management and scorecard are
being developed.

Suitability:

Decentralization of authority is suitable, in those organizations, where the work is not

of standard and repetitive nature, management is competent and efficient span of control is
wider and levels of management are few.

Advantages:

1. Reduces the burden on top executives

2. Facilitates diversification
3. Executive Development
4. It promotes motivation
5. Better control and supervision

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Disadvantages:

1. Uniform policies not Followed

2. Problem of Co-Ordination
3. Waste of Resources.
4. Larger Interests of the Enterprise Neglected.
5. Emergency Decision not Possible

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 UNIT – 2
Plant location:

Plant location is a strategic decision several factors influence this decision. The main
objective of any business is to optimize its cost and revenue that is, minimize its costs and
maximize its returns. The degree of significance for the selection of location for any enterprise
mainly depends on its size and nature large scale industries requiring huge amount of
investment there are many considerations other than the local demand in the selection proper
plant location these plants cannot be easily shifted to other place and an error of judgment in
the selection of site can be vary expensive to the organization. However, small-scale industry
mainly selects the site where in accordance with its capacity; the local market is available for
its products. It can easily shift to other place when there is any change in the market.

Factors affecting plant location:

1. Nearness to Market:
If the plant is located close to the market the cost of transportation can be minimized.
This also helps the producers to have direct knowledge of the requirements of the customers.

2. Nearness to supply of raw materials:

As far as possible the site selected should be near the source of raw materials, so that
the cost of transportation can be minimized and storing cost can be reduced due to shorter lead
time.

3. Availability of labor:
Availability of right kind of labor force in required number at reasonable rates is also a
deciding factor in selection of site

4. Transport and communication facilities:

Generally, industries have a tendency to locate the industrial units near the railway
station, highway or port areas. Availability of power and fuel: Coal, electricity, oil and natural
gas are the important sources of power in the industries.
Ex: Tata iron and steel industry is established near the coalmines of Bihar.

5. Climatic conditions:
Climatic conditions largely affect certain production processes and also the efficiency
of the employees.
Ex: Textile mills require moist climate that why this plant located at Mumbai and
Ahmedabad.

6. Availability of water:
Water is used in industries for processing as in paper in chemical industries, for
generation of power in hydroelectric power, plants and also required for drinking sanitary
purpose also.
7. Ancillary industries:
Many industries such as processing and assembly industries are not producing all the
parts of their product but purchase some of the parts from ancillary industries producing it.

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8. Financial and other aids:
For the development of backward regions central as well as state government provide
certain incentives and facilities such as cash- subsides, concession financial assistance, land,
power and other facilities at cheaper rates, tax concession etc.

Comparison of Urban sites & Rural sites:

Selecting the plant site in urban site:

Urban areas are very developed, there is a density of human structures such as houses,
commercial buildings, roads, bridges, and railways. "Urban area" can refer to towns & cities.
In the United States, settlements with 2,500 inhabitants or more are defined as urban.
Factors influencing the Selection of urban site:
1. Availability of Land.
2. Availability of Building.
3. Availability of Labour.
4. Transport Facilities.
5. Market Facilities.
6. Ancillary Units.
7. Good Surrounding.
8. Other Facilities.
Advantages:
• A city is very well connected by rail, road and air.
• It provides a good market also.
• Right labour force is available.

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 • Power and water is easily available.
• It has good hospital, marketing centres, school, banks, recreation clubs, etc.,
• The factory can be set up in an existing available building.
• Worker’s and foremen’ trained classes and many other educational facilities can be
found in cities.
• Services of experts and specialists are easily available.
• Many other small industries existing nearby can work as ancillaries.
• Security is high.
Dis-advantages:
• Land available for the building is limited in area.
• Cost if land and building construction is high.
• Expansion of the industry is seldom possible.
• Local taxes are high.
• Labour salaries are high.
• Union problem are more, employee-employer relations area not good.

Selecting the plant site in rural site:

In general, a rural area or countryside is a geographic area that is located outside the
towns and cities. Whatever is not urban is considered as rural." Typical rural areas have a low
population density and small settlements.
Factors influencing the Selection of rural site:
1) Availability of Raw Materials.
2) Proximity to Markets.
3) Transport Facilities.
4) Availability of Power, Fuel or Gas.
5) Water Supply.
6) Disposal Facility for Waste Products.
7) Climatic and Atmospheric Conditions.
8) Availability of Labour.
Advantages:
• Plenty of land is available for buildings construction and expansion purposes.
• Land is cheap.
• Unskilled labour is available which can be trained to suit the requirements of the
concern.
• Employee-employer relations are good, no union problems.
• Undesirable manufacturing neighbours are not likely to be present.
• Municipal and other regulations and taxes are less
• Government gives instruments as it wants to develop the underdeveloped areas.

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Dis-advantages:
• Skilled labour is not available.
• Rail, road and air links may not be there at all or may not be adequate.
• Power is not available.
• Rural areas are far from selling markers.
• Hospitals, educations and amusement centres are not available.
• Ancillary services cannot be obtained.

Selection of Plant Location:

An ideal location one where the cost of the product is to keep minimum, with in a large
market scale and least are very low risk and maximum gains.
Every entrepreneur is faced with the problem of designing the best layout or sight of
location of factory or plant.
Plant location refers to choosing several reasons of particular site of seating up a
business. Some of the important factors for the selection of plant locations are listed below.
1) Water
2) Transportation
3) Infrastructure
4) Power
5) Whether condition’s
6) Employees
7) Market
8) Availability of raw materials etc.,

Types of Production (or) methods of production:

There are 3 types of productions. They are 1) Job production
2) Batch production
3) Mass production.

1. Job production:
In this system, goods are produced according to the orders with this method, individual
requirements of the consumers can be met. Each job order stands alone and is not likely to be
repeated. This type of production has a lot of flexibility operation and hence in general-purpose
machines are required. Factories adopting this type of production are generally small in size.

Advantages:
1. It is the only method, which can meet the individual requirement.
2. There is no managerial problem because of very less number of workers and small size of
concern.
3. This type of production requires less money and it is easy to start.

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Disadvantages:
1. There is no scope for continuous production and demand
2. As the purchase of raw materials is less, hence cost of raw materials per unit will be slightly
more.
3. For handling different type of jobs, only skilled and intelligent workers are needed, thus
labor cost increases.

2. Batch production:
This type of production is generally adopted in medium size enterprise. Batch
production is in between job production and mass production. Batch production is bigger in
scale than the job production. While it is smaller than that of mass production, batch production
requires more machines than job production and few machines that the of mass production.

Advantages:
1. Comparing with mass production it requires less capital
2. Comparing with job production, it is more advantageous commercially.
3. If demand for one product decrease, then production, for another product may be increased,
thus the risk of loss is very less.

Disadvantages:
1. Comparing with mass production cost of scales and advertisement per unit is more
2. Raw materials to be purchased are in less quantity than that in mass production; therefore, it
is slightly costlier than that of mass production because less quantity discount is available.

3. Mass production:
This method of production is used by concerns where manufacturing is carried on
continuously in anticipation of demand though demand of the product may not be uniform
throughout the year. In mass production, simplification and standardization of products are
made with the help of specialized (one purpose) machine articles of standardized nature can
easily and economically be produced on a large scale. There is a small difference between mass
production and continuous production. This is mainly in the kind of product and its relation to
the plant. In mass production plant and equipment are flexible enough to deal with other
products, involving same production process. Where as in continuous or process production
only standardized product in a sequence produced.

Advantages:
1. A smooth flow of materials from one work station to the next in logical order.
2. Since the work from one process is fed directly into the next, small in process inventories
result
3. Total production time per unit short
4. Simple production planning control system is possible
5. Little skill is usually required by operations at the production line; hence training is simple,
short and inexpensive.

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Disadvantages:
1. A breakdown of one machine may lead to a complete stoppage of the line that follows the
machine. Hence maintenance and repair are challenging job.
2. The product dictates the layout, changes in product design may require major changes in the
layout.
3. High investments are required owing to the specialized nature of the machines and their
possible duplication in the line.

Plant layout:
A technique of locating machines, processes and plant services within the factory in
order to secure the greatest possible output of high quality at the lowest possible total cost of
production
Objectives of plant layout:
• Proper and effective utilization of available resources.
• Provide enough production capacity.
• Reduce material handling cost.
• Utilize labour efficiency.
• Increase employee morale.
• Reduce accidents.
• Provide easy of supervision and control.
• Provide employee safety and health.
• Allow ease of maintenance.
• Improve productivity.
• To minimize cost of productions.

Types of Plant Layout:

There are 3 types of plant layout. They are 1) Product or line layout
2) Process or functional lay out
3) Project or fixed position layout
1. Product or line layout:
This type of layout is developed for product-focused systems. In this type of layout only
one product, or one type of product, is produced in a given area. In case of product being
assembled, this type of layout is popularly known as an assembly line layout.

Raw Material Finished Product

The work centers are organized in the sequence of appearance. The raw material centre
at one end of the line and goes from one operation to another rapidly with minimum of work-
in-process storage and material handling.

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Advantages:
1. Faster and cheaper production
2. Lower cost of material handling
3. Effective utilization of floor space
4. Easy monitoring
5. Team work benefits

Disadvantages:
1. Huge Capital outlay
2. Little flexibility
3. Discontinuity in Production likely
4. Monitoring each worker made difficult

Applications:
Product Layout can be better employed where;
a. The machines can be continuously handled for longer periods.
b. Time & motion study can be conducted.
c. The products so manufactured do not require high degree of Inspection.

2. Process or Functional layout:

This type of layout is developed for process focused systems. The processing units are
organized by functions into departments on the assumption that certain skills and facilities are
available in each department similar equipments and operations are grouped together, e.g.,
milling, foundry, drilling, plating, heat treatment etc.

The use of process-focused systems is very wide in both manufacture and other service
facilities such as hospitals, large offices, municipal services, etc.

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Advantages:
1. Optimum utilization of resources
2. Flexibility
3. Continuity
4. Monitoring

Disadvantages:
1. Higher material handling costs
2. Larger production cycle
3. Monitoring may be complex
4. Higher inspection costs
5. Higher wage bill

Applications:
a. More varieties of products are manufactured in fewer quantities.
b. Close quality inspection is required.
c. It is necessary to use the same machine for more than one product.

3. Project or Fixed position Layout:

This is the layout for project type systems in which the major component is kept at a
fixed position and all other materials, components, tools machines, work etc. are brought and
assembly or fabrication is carried out. This type of layout is now not used very commonly as
the machines required for manufacturing work are big and complicated. The fixed position
layout is used only when it is difficult to move the major component and fabrication is to be
carried out. Ex: production of ships.

Advantages:
1. It does not involve large investment.
2. High degree of flexibility in matters relating to product design, product mix and
production volume.
3. Workers find it very interesting since Job-enlargement can be effectively practiced.

Disadvantages:
1. As the production period being very long so the capital investment is very high.
2. Very large space is required for storage of materials and equipment’s near the product.
3. As several operations are often carried our simultaneously. So, there is possibility of
confusion and conflicts among different work groups.
Applications:
1. For large and bulky items that cannot be moved.
2. Used to produce a customised product.

Materials Handling:
Material handling is defined as movement of material of any form like raw material,
finished, packaged, solid, liquid, gas, light and heavy from one location to another location,
either in a restricted path by manual or mechanical aids. The movement may be either
horizontal, vertical or may be combination of both.

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 Material handling involves all those activities that are responsible for efficient
movement of goods either with in a plant or a warehouse or between a plant and a transportation
agency.

Functions:
1) Independent movement of work parts between stations.
2) Handle a variety of work part configurations.
3) Temporary storage.
4) Convenient access for loading and unloading work parts.
5) Compatible with computer control.

Objectives:
1) Increase the efficiency of material flow
2) Reduce MH cost
3) Improve facilities utilization
4) Safety and working conditions
5) Manufacturing process
6) Increase productivity
Types:
• Automated guided vehicles (AGVs)
• Hand, platform and pallet trucks.
• Order pickers.
• Pallet jacks.
• Side-loaders.
• Walking stackers.

Categories of Material Handling Equipment:

1) A-Containers and B-unitizing equipment
2) Material transport equipment
3) Storage and retrieval equipment
4) Automatic identification and communication equipment

Material Handling Equipment:

A) Between fixed points over a fixed path:
1) Belt conveyor
2) Roller conveyor
3) Chute conveyor
4) Slat conveyor
5) Screw conveyor
6) Chain conveyor
7) Overhead monorail conveyor

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 8) Trolley conveyor
9) Wheel conveyor
10) Tow conveyor
B) Over limited areas:
1) Hoists
2) Overhead cranes
3) Hydraulic scissors lift
C) Over large areas:
1) Handcart/truck
2) Tier platform truck
3) Hand lift truck / pallet jack
4) Power-driven hand truck
5) Power-driven platform truck
6) Forklift truck
7) Narrow aisle truck
8) Tractor-trailer truck
9) Material lift
10) Drum truck
Advantages:
1) It reduces the time required for handling the materials
2) Reduction in material handling & indirect labor cost.
3) Improvement on productivity
4) Better usage of floor space & facility
5) Least fatigue to the worker
6) Improved work environment
7) Greater flexibility
8) Improved material flow
Dis advantages:
1) Additional capital cost involved in all material handling systems
2) Once a material handling system get implemented, flexibility for further change get
greatly reduced.
3) This system need maintenance

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 UNIT – 3

Work Study:
Work study is one of the most important management techniques which is employed to
improve the activities in the production. The main objective of work study is to assist the
management in the optimum use of the human and material resources.

Work study refers to the method study and work measurement, which are used to
examine human work in all its contexts by systematically investigating into all factors affecting
its efficiency and economy to bring forth the desired improvement.

Objectives:
• Uniform and improved production flow.
• Higher production efficiency.
• Reduced manufacturing costs.
• Fast and accurate delivery dates.
• Better employee- employer relations.
• Better service to customers.
• Job security and job satisfaction to workers.
• Better working and other conditions
• Higher wages to workers.

Work study has two parts, Method Study and Work Measurement. Method study deals with
the techniques of analyzing the way to do a given job better

1. METHOD STUDY:
The systematic recording and critical examination of existing and proposed ways of
doing work, as a means of developing and applying easier and more effective methods and
reducing cost it is also called motion study.

Objectives:

• Improve working process and standardized procedures.

• Better work place layout neat and clean environment and working conditions.
• Less fatigue to operation.
• Better production quality.
• Effective and fast material handling.

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 • Reduced health hazards.
• Streamlined working procedures.

Various steps involved in Method study:

1) Select:
Select the work worth studying and define the objective to be achieved. An
objective may be to reduce the manufacturing cost, bottlenecks, fatigue increase by the
workers in order to increase their efficiency.

2) Record:
Record all the relevant information’s pertaining to the existing method in detail
and in the form of chart to obtain a clearer picture about the same. Recording can be
done with the help of following methods:
a) Process charts:
i) Outline process chart
ii) Flow process chart
iii) Two handed process chart
iv) Multiple activity chart

b) Diagrams:
i) Flow diagram
ii) String diagram
iii) Cycle graph.
iv) Chrono cycle graph.

c) Motion & film analysis:

i) Simo chart

d) Models.

3) Examine:
Examine the records event critically and in sequences. Critical examination
involves answers to a number of questions. An activity can be eliminated, simplified or
combined with another.
Then basic questions are: 1) what is done?
2) Who does it?

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 3) Where it is done?
4) How is it done?
5) When it is done?
4) Develop:
Develop the best method as resulted from critical examination and record it. The
developed method should be, 1) Practical and feasible
2) Safe and effective
3) Economical
4) acceptable

5) Install:
Install the developed method. Installation involves three phases Planning,
Arranging, Implementing.

6) Maintain:
Maintain means ensure the proper functioning of the installed method by
periodic checks and verifications. The purpose of checking and reviews is to find if the
method being practiced is the same.

Types of Process charts:

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Micro motion studies:
Introduction:
Micro motion study technique is best suited for those operations or activities which are
of short duration and which are repeated hundreds of times. These are the operations or motions
which require very small time and it is quite difficult to measure time for these motions
accurately and the time required by these motions cannot be neglected due to repetitive
operations.

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Definition:
The technique in time and motion study of making a pictorial elapsed-time study of the
elements or subdivisions of an operation by means of a high-speed motion-picture camera and
a specialized timing device.

Purpose of Micro Motion Study:

1. To study the nature and path of movements for obtaining the elements of an operation.
2. To study the activities of the machine and the operator.
3. To impart training to the workers or operators regarding motion; economy so that
unnecessary movement by the workers may be avoided.
4. To study the relationship between the activities of operator and the machine.
5. To keep permanent record of the most efficient way of performing a task for future reference.
6. To obtain motion time data for developing synthetic time standards for various elements.
7. For carrying out research in the field of method and time study.

Advantages of Micro Motion Study:

1. It provides a permanent record of motion study on films.
2. A large number of operators can see the procedure at any time even after the completion of
motion study work.
3. Films can easily reveal the difference between the present and the proposed technique.
4. Films can be demonstrated to large work force at any desired speed.
5. It provides very accurate time for each operation or motion in comparison to stop watch time
study.
6. It helps in making detailed and accurate analysis of the prevailing technique.

Memo motion Studies:

Memo motion is a tool of time and motion study that analyzes long operations by using
a camera. It was developed in 1946 by Marvin E. Mundel at Purdue University, who was first
to save film material while planning studies on kitchen work.

A study showed the following advantages of Memo-Motion in regard to other forms of time
and motion study:

1. Single operator repetition work.

2. Area studies, the study of a group of men or machines.
3. Team studies.
4. Utilisation studies.
5. Work measurement.

As a versatile tool of work study, it was used in the US to some extent, but rarely in
Europe and other industrial countries mainly because of difficulties procuring the required
cameras. Today Memo-Motion could have a comeback because more ands more work places
have conditions which it can explore.

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2. WORK MEASUREMENT:
Work measurement is the application of techniques designed to establish time for a
qualified worker to carry out a specified job at a defined level of performance. Work
Measurement seeks to measure the time required to perform the job.

Objectives:
• Determine the time required to do a job.
• Decides man power requited for a job.
• Decides equipment.
• Provides information for effective production planning and maintenance procedures.
• Aids in calculating exact delivery dates.

Time study:
Time Study is the analysis of a specific job by a qualified worker in an effort to find the
most efficient method in terms of time and effort. Time Study measures the time necessary for
a job or task to be completed using the best method.
Steps involved in time study:
• Establish the quality to be achieved in the product. Strike a balance between a low and
very high quality. Low quality means more rejection and scrap and very hight quality
marks uneconomical production.
• Identify the operations.
• Obtain the improved procedure from the method study department.
• Collect the necessary equipment’s and ensure their accuracy.
• Select the worker to be a be observer.
• Take the worker as well as supervisor into confidence and explain objectives of the
project to them.
• Explain to the worker the improved working procedure and the use of tools, fixtures
and other attachments.
• Break the operation into small elements and write them in the proper form.
Equipment:
Basic equipment’s requited to make the time study are: 1) Time study board
2) Stopwatch
3) Time study forms
1) Time study board:
Time study board is simply a flat board, usually of plywood sheet or plastic sheets
should have fitting to hold a stopwatch under Time study forms. The use of board provides
support and resisting face while writing observation on the shop-floor and makes the hand free
to write and operate stopwatch.

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2) Stopwatch:
Stopwatch is the measuring instrument to observe the element timing and usually a
decimal watch is used. A decimal minute stop watch has two hands. The small hand represents
minutes on dial and completes one revolution in 30 minutes. The large hand repeats centi
minutes and completes one revolution in one minute and each division on a larger dial
represents 0.01 minutes.
Two commonly used types of stop watch are: i) Cumulative stop watch
ii) Fly back stop watch
i) Cumulative stop watch:
The watch is started by pressing the winding knob located on the head of the
watch and is stopped by pressing the winding knob. Pressing winding knob third time
snap the hands back to zero. Once started it will run until required number of cycles
have been times.
ii) Fly back stop watch:
This is the most commonly used watch. In this type of watch the movement is
started and stopped by slide. At the side of the winding knob, pressure on the top of the
winding knob causes both the hands to fly to 0 without stopping the mechanism from
which point they move forward immediately. This type of a watch is used for either
flyback or cumulative timing method.
3) Time study forms:
Time study forms are usually printed forms of standard size. The use of standard forms
is desirable as the constant information such as part number, part name, operation description,
observers name and other descriptions are pre-printed on the top of the form which eliminates
the possibility of any details being missed. As the size of the forms are standardised, they can
be easily filed for future referencing.

PERFORMANCE RATING:
Performance Rating can be defined as the procedure in which the time
study engineer compares the performance of operator(s) under observation to the
Normal Performance and determining a factor is called as performance Rating Factor.
Different methods of Performance rating:
There are 4 methods of performance rating: 1) Speed rating
2) Westing house system of rating
3) Synthetic rating
4) Objective rating
1) Speed rating:
In this technique the speed of the movements of the operator is the only factor
considered for performance rating. The speed rating is found by the observer by comparing

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pace of operators working with his own concept of normal pace. An average worker is rated at
100% better than average worker is rated at a figure higher than 100 and below average worker
will be rated below 100. If worker is rated at 125% it means that the speed is 25% higher than
the observer’s concept of normal and rating of 80% means the worker is working 20% below
the observer’s concept of a normal worker
2) Westing house system of rating:
Westing house system utilise a set of criterial to measure the performance of the
operators. The factors are: i) Skill
ii) Effort
iii) Consistency
iv) Conditions
i) Skill:
Measures the workers proficiency in adhering to a given method, coordination
of proper hand and eye movements, rhythm of movements.
ii) Effort:
Measure the speed with which the skill is applied.
iii) Consistency:
Measure’s factor which affects the consistency of the operator to perform the
work cycle repeatedly within the same time.

iv) Conditions:
Measure the extent to which the conditions like temperature, vibrations, light
and noise affect the operator’s performance.
3) Synthetic rating:
The performance rating under this method is established by comparing observed time
of some of the manual element with those of known time value of the elements from
predetermined motion and time studies.
The ratio is the performance index or rating for the operator for the particular element.
Performance rating factor (R) is given by
P
R=A

P = Predetermined time for elements

A = Average actual time value for the same element P
4) Objective rating:
In this method, the observer’s speed is rated against a single standard pace which is
independent of job difficulty. The observer mainly rates speed of movement or activity, paying

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no attention to job itself. After the pace rating is made, a allowance or a secondary adjustment
is added to pace rating to take care of job difficulty
Allowances:
The normal time for an operation does not contain any allowance for the worker. It is
impossible to work throughout the day even though the most to practicable, effective method
has been developed. Even under the best working method situations, the job will still demand
of the expenditure of human effect and some allowance must therefore be made for recovery
from fatigue and for relaxation. Allowances must also be made to enable the worker to his
personal needs.
The Allowances are categorised as: 1) Relaxation allowance.
2) Interference allowance.
3) Contingency allowance.
1) Relaxation allowance:
Relaxation allowances are calculated to allow the worker to recover from fatigue. It is
a addition to the basic time intended to provide the worker with the opportunity to recover from
the physiological and psychological effect of carrying out the specified work under specified
conditions and to allow attention to personal needs. The amount of allowance will depend on
nature of job.
Relaxation allowances are of two types: i) Personal need allowance
ii) Allowance for basic fatigue
i) Personal need allowance:
It is intended to compensate the operator for the time necessary to leave, the
workplace to attend needs like drinking water, smoking, washing hands. Women
require longer personal allowance than men. A fair personal allowance is 5% for men
and 7% for woman.
ii) Allowance for basic fatigue:
This allowance is given to compensate for energy expended during working. A
common fatigue considered as allowance is 4% of the basic time.

2) Interference allowance:
It is allowance of time include into the work content of a job to compensate the operator
for the unavoidable loss of production due to simultaneous stoppage of two or more machines
being operated by him. This allowance is applicable for machine or process-controlled jobs.
Interference allowance varies in proposition to number of machines assigned to the operator.
The interference of the machine increases the work content.

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3) Contingency allowance:
It is a small allowance of time which may be included in a standard time to meet
legitimate and expected items of work or delays, the precise measurement of which is
uneconomical because of them in frequent or irregular occurrence.
This allowance provides for small unavoidable delays as well as for occasional minor,
extra work. Some of the examples for contingency allowance are:
• Tool breakage involving removal of tool from the holder and all other activities to
insert new tool into tool holder.
• Power failure of small duration.
• Obtaining the necessary tools and gauges from central tool store. Contingency
allowance should not exceed 5%

Standard time calculations:

(problems)

Work sampling:
A technique in which a statistically competent number of instantaneous observations
are taken over a period of time of a group of machines, processes or workers. Each observation
recorded for a particular activity or delay is a measure of the percentage of time observed by
the occurrence.
Steps of work sampling:
1) Object of the study is very important to first set the objectives of study as the duration
of the study, number of observations, the design study sheet and element breakdown
depends upon the objective.
2) Obtain the approval of the supervisor of the department in which work study is to be
department understand the purpose of the study
3) Work and delay element represent the headings under which the observations are to be
recorded
4) Duration of the study depends upon the objective number if observers, the accuracy
desired and the frequency of occurrence of the activity.
5) Determine the desired accuracy of results maybe stated as the standard error of a
percentage or desired accuracy. The confidence level is also to be started.
6) Make a preliminary estimate of the percentage occurrence of the activity or delay to be
measured.
7) Design the study
a) Determine no. of observations to be made.
b) Determine no. of observations needed.
c) Determine the no. of days or shift needed for study.
d) Make the detailed plans for taking observations.
e) Design the observation form.

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 8) Make the observations according to the plan, analyse and summarise the data.
9) Check the accuracy or precision of the data at the end of the study.
10) Prepare the report and state conclusion.

Standard Time Calculations:

The standard time (Ts) calculation is define as, it is a calculated from multiplying the
observed time (To) by the performance rating (R) and the personal need, fatigue and
unavoidable delays.

(problems)
P – Activity percentage
A – Limit of accuracy
C – Confidence level
No. of observations at a confidence level of 95% is given by
4(1 − p)
N=
A2 , p
Applications:
1) Activity and delay sampling:
To measure the activity and delay of workers or machines.
Ex. The % of time in a day, a person is working and the % that a person is not working.
2) Performance sampling:
To measure working time and non-working time of a person on a manual work and to
establish a performance index or performance level for a person during his working
time.
3) Work measurement:
Under certain circumstances, to measure a manual task that is to establish a time
standard for an operation.

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 UNIT – 4

Inventory Models:
Inventory model is a mathematical model that helps business in determining the
optimum level of inventories that should be maintained in a production process, managing
frequency of ordering, deciding on quantity of goods or raw materials to be stored, tracking
flow of supply of raw materials and goods to provide
One of the basic problems in inventory is to find out the order quality so that it is most
economical from overall operational point of view. Here the problem lies in the minimising the
two conflicting cists i.e., ordering cost and inventory cost. Inventory model helps to find out
the order equality which minimize the total costs.

Types of inventory models:

1) Simple EOQ model
2) EOQ model with stockouts allowed
3) Inventory model under risk.
1) Simple EOQ model:
-> The simple EOQ model can be used if the demand is known with certainty.
-> The demand and lead time are known.
-> The item will be purchased from outside and the demand will continue well into the future.
-> It is also assumed that not only the demand is known with certainty, but that is the same
from day-to-day and the stockouts, are not allowed.

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-> If we start to observe the inventory position immediately after receipt of an order, the
quantity in stock Q decreases steadily Unit a lead times supplied in recharge.
-> If Lead time (L) is a 5 days and demand is 4 pieces per day, a Lead time supply is 20 pieces.
Therefore, when 20 units remain in the store, an order is placed. This is called the re-order.
Exactly 5 days after the order is placed, the stock is replenished and the cycle repeat itself.

2) EOQ model with stockouts allowed:

-> Stock out means running out of stock.
-> In simple EOQ model, the stock will always available.
-> The out-of-stock position will lead to back order. The situation is frequently found in
mailing-order hours where an item is a temporarily out of stock and the customer is waiting
until it to replaced.
-> The film does suffer some cost in this situation, since at the very latest some expediting and
extra communication with the customer must take place. In addition to explicit costs, repeated
back order will certainly lead to an erosion of goodwill.

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Where Q is Economic order quantity.
U is Annual use
P is Procurement cost per order
C is cost per piece
I is cost of carrying inventory
B is cost incurred for every backorder
M is maximum inventory.
3) Inventory model under risk:
In this simple EOQ model it was assumed that demand and lead time were both known
with certainty. Under this condition, whenever inventory levels reach lead time worth of
demand and order was placed. Then as the stock was finally depleted a replacement order
would arrive.

Deterministic models:
Deterministic models of inventory control are used to determine the optimal inventory
of a single item when demand is mostly largely obscure. Under this model inventory is built
up at a constant rate to meet a determined, or accepted, demand. ... Such models are used when
demand is not known.
Economic Order Quantity (EOQ):
Economic order quantity is defined that quantity of materials, which can be ordered at
one time to minimize the cost of ordering and carrying the stocks. In other words, it refers to
size of each order that keeps the total cost low.

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EOQ models:
The annual inventory carrying cost (product of average inventory x carrying cost) is
directly proportional to quality in stock. The inventory carrying cost decreases, if the quality
ordered per order is a small. The two costs are directly opposite to each other. The right quantity
to be ordered is one that strikes a balance between the two opposing costs. The quantity is
referred to as a “Economic order quality”.
Annual cost:
The equivalent annual cost is the cost per year of owning and operating an asset over
its entire lifespan.
Re-order quality:
The reorder point is the level of inventory which triggers an action to replenish that
particular inventory stock. It is a minimum amount of an item which a firm holds in stock, such
that, when stock falls to this amount, the item must be reordered.
Total cost (or) Annual total cost:
The total cost formula is used to derive the combined variable and fixed costs of a batch
of goods or services. The formula is the average fixed cost per unit plus the average
variable cost per unit, multiplied by the number of units.
Holding cost (or) Annual inventory carrying cost:
It is the total of all expenses related to storing unsold goods. The total includes
intangibles like depreciation and lost opportunity cost as well as warehousing costs. A
business' inventory carrying costs will generally total about 20% to 30% of its total inventory
costs.
Ordering cost (or) Annual ordering cost:
Annual ordering cost = no. of orders placed in a year x cost per order
= annual demand/order quantity x cost per order. EOQ (Economic Order Quantity) Model.

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Determine EOQ:
Step1:
Total Ordering cost per year = No. of orders placed per year x ordering cost per order
= (A/S) x O
A = Annual demand
S = Size of each order (units per order) O = Ordering cost per order

Step2:
Total Carrying cost per year = Average inventory level x Carrying cost per year
= (S/2) x C
A = Annual demand
S = Size of each order (units per order) C = Carrying cost per unit

Step3:
EOQ is one where the total ordering is equal to total carrying cost
A/S x O = S/2 x C
2AO = S² x C
S² = 2AO
C
EOQ ‘S’ = √AO
C
EOQ problems are from Sir notes… (sir send one pdf in group)

With Shortages Models:

The EOQ model with shortages relaxes the assumption that shortages cannot exist.
Because back-ordered demand, or shortages, S, are filled when inventory is replenished, the
maximum inventory level does not reach Q, but instead a level equal to Q S.

Without Shortages Models:

The EOQ model assumes that demand is constant, and that inventory is depleted at a
fixed rate until it reaches zero. Since the model assumes instantaneous replenishment, there
are no inventory shortages or associated costs.

Inventory Models with Price Breaks:

Purchase Cost is per item if the quantity ordered is between 0 and, if the order quantity
is between and, etc. Holding Cost is per item in inventory per year (note holding cost is based
on the cost of the item). Delivery time (lead time) is constant.

Probabilistic Models:
A probabilistic method or model is based on the theory of probability or the fact that
randomness plays a role in predicting future events. The opposite is deterministic, which is the

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opposite of random. it tells us something can be predicted exactly, without the added
complication of randomness.

Discrete variable:
A discrete random variable is a (random) variable whose values take only a finite
number of values. The best example of a discrete variable is a dice. ... For example, the
probability of each dice outcome is 1/6 because the outcomes are of equal probabilities.

Continuous variable:
Continuous variables are variables that can take on any value within a
range. Continuous variables are also considered metric or quantitative variables, where
the variable can have an infinite number or value between two given points.

Inventory:
It defined as a comprehensive list of movable items which are required for
manufacturing the products and to maintain the plant facilities in working conditions.

Inventory Control:
The systematic location, storage and recording of goods in such a way the desired
degree of service can be made to the operating shops at minimum ultimate cost.

Objectives of Inventory Control:

1. To support the production departments with materials of the right quality in the right
quantity, at the right time and the right price, and from the right supplier
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 2. To minimize investments in the materials by ensuring economies of storage and
ordering costs
3. To avoid accumulation of work in process
4. To ensure economy of costs by processing economic order quantities
5. To maintain adequate inventories at the required sales outlets to meet the market needs
promptly, thus avoiding both excessive stocks or shortages at any given time
6. To contribute directly to the overall profitability of the enterprise

Functions of inventory control:

• To develop policies, plans and standards essential to achieve the objectives
• To build up a logical and workable plan of organization for doing the job satisfactory
• To develop procedure and methods that will produce the desired results economically
• To provide the necessary physical facilities
• To maintain overall control by checking results and taking corrective actions.

Factors affecting Inventory Control:

Inventory Control function gets increasingly complex due to;
1. Sudden changes in the production plans.
2. Increase in the material process
3. Excessive storage costs
4. Stock Out Costs
5. Increasing Lead time.

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 UNIT – 5
Inspection and quality control:
Inspection:
Inspection is normally used to examine a component of a product in relation to the
design standards specified for it. For a mechanical component, this would probably be
concerned with the dimensions of the part.
These might be checked with several go/no go gauges or they might be measured with
a micro meter and other instruments. The corfion situation that warrant inspection are:
• Incoming raw materials.
• At various stages during manufacturing.
• At the completion of processing on the parts.
• Before shipping the final assembled product to the customer
Inspection methods are of two types. They are: 1) Contact type inspection method
2) Non-Contact type inspection method

1) Contact type Inspection methods:

• In contact inspection, physical contact is made between the object to be inspected, and
the measurement devices.
• Typically contact is achieved using a mechanical probe or other devices that touches
the item and allows the inspection procedure to occur.
• By its nature, contact inspection is concerned with some physical dimension of the part,
and also contact methods are widely used in manufacturing and production industries
to assess metal parts, and for electrical circuit testing.
Types of contact Inspection methods:
➢ Conventional inspection
➢ Stylus measuring system
➢ Coordinate measuring machine

2) Non- Contact type inspection method:

• Non-contact inspection methods utilize a sensor located at a certain distance from the
object to measure or gathered a desired feature.
• The non-contact inspection technologies can be classified into two categories:
1) Optional inspection
2) Non-optical inspection
• Optical instrument technologies make use of light to accomplish the measurement or
gaging cycle. The most important optical technology is mission.
• Non-optical inspection technologies utilize energy forms other than light to perform the
inspection. These other energies include the various electrical fields, radiation and
ultrasonics.

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 The non-contact methods are divided into two categories for our purposes:
1) Optical
a) Machine vision
b) Scanning laser beam devices
c) Photogrammetry
2) Non-Optical
a) Electrical field techniques
b) Radiation techniques
c) Ultrasonic

Inspection Methods:
The following are the methods of inspection based on merits

1) Incoming inspection:
In this method, the quality of the goods and services arriving into the organization is
inspected. This ensures that the material suppliers here to the given specifications with this
defective material cannot enter into the production process. This focuses on the vendor’s
quality and ability to supply acceptable raw materials.

2) Critical point inspection:

Inspecting at the critical points of a product manufacture gives valuable insight into the
completely functional process. At the points of manufacture that involve high costs or which
offer no possibility for repair or rework, inspection is crucial further operation depend on these
results critical point inspection helps to drop the defective production and thereby facilitate
avoiding unnecessary further expenditure on them.

3) Process inspection:
This is also called patrolling inspection or floor inspection or roving inspection. Here
the inspector goes around the manufacturing points in the shop floor to inspect the goods
produced on random sample basis from time to time.

4) Fixed inspection:
It provides for a centralized and independent where work is brought for inspection from
time to time. This method is followed where the inspection equipment cannot be moved to the
points of productions.
.
5) Final inspection:
This is centralized inspection making use of special equipment. This certifies the quality
of the goods before they are shipped.

Quality Control:
Process for conducting operations so as to provide suitability to prevent changes and
maintain the status, quality control process actual performance is to set of goals & task action
on different work process.
• Conformance to specifications.
• Fitness for use of work.
• Value for prize paid.
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 • Support to services.
• Maintenance of operation process.
• Control for working process.
• Nature of materials.
• Design of the prototype.
• Reusage of waste materials.
• Testing by automation.

Statistical Quality Control (SQC):

It is defined as customer satisfaction in general and fitness for use in particular. Both
the external consumer who buy the product and services and the internal consumers that is, all
divisions or departments of the business organization are equally interested in the quality.
Quality is the determining factor the success of any product or service large resource
are committed in every organization to ensure quality.
The process of applying statistical principles to solve the problem of controlling the
quality control of a product or service is called statistical quality control.

Quality elements:

a) Quality design:
Quality of design refers to product feature such as performance, reliability durability,
ease of use, serviceability.

b) Quality conformance:
Quality conformance means whether the product meets the given quality specification
or not.

Elements of statistical Quality Control:

a) Process control:
Process control is a technique of ensuring the quality of the products during the
manufacturing process itself. If a process consistently produces items with acceptable or
tolerable range of specification. It is said to be statically under control. Process control is
achieved through control charts. Process control aims to control and maintain the quality of the
products in the manufacturing process.

b) Statistical control charts:

A control chart compares graphically the process performance data to computed
statistical control limits. These control limits act as limit lines on the chart control chats are the
tools to determine whether the process is under control or not. The quality of the production
process may be affected by chance cause or assignable cause.

c) Chance cause:
such causes, which may or may not affect the manufacturing process are called chance
cause, chance cause cannot even be identified. It is not possible to always maintain the given
specification.

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d) Assignable Cause:
Assignable causes affect the quality of the production process. These causes can be
identified and specified. Causes such as change in the labour shift, power fluctuations, or
excessive tool wear are said to be assignable causes as they affect the quality of manufacturing
process in different ways.

e) Process capability:
Process capability refers to the ability to achieve measurable results from a combination
of machines, tools, methods, materials and people engaged in production

Techniques Variables:

A variable is any property, a characteristic, a number, or a quantity that increases or

decreases over time or can take on different values (as opposed to constants, such as n, that do
not vary) in different situations.

When conducting research, experiments often manipulate variables. For example, an

experimenter might compare the effectiveness of four types of fertilizers.

Types of Variables:

1. Qualitative Variables.
2. Quantitative Variables.
3. Discrete Variable.
4. Continuous Variable.
5. Dependent Variables.
6. Independent Variables.
7. Background Variable.
8. Moderating Variable.
9. Extraneous Variable.
10. Intervening Variable.
11. Suppressor Variable.

Techniques Attributes:
It is a property or characteristic of an entity that can be distinguished quantitatively or
qualitatively by human.
• Transforming strategic planning into specific actions across the organization.
• Communicate the cause-effect that is present in the management process.
• Provide indicators consistent with the objectives and strategic initiatives.
• Improve the feedback level to correct the direction and intensity of resources allocated
to each task, according to the gaps between goals and actual results observed.

Control chats:
A variable is one whose quality measurement changes from unit to unit. The quality of
these variables is measured in terms of hardness, thickness, length, and so on. The control

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charts for variables are drawn using the principles of normal distribution. There are two types
of control charts for variables X and R chart.

Statistical quality control evacuates batch quality and controls the quality of process
and products SQC uses three scientifically techniques.

SQC

Sampling Abaltsis of the

inspection data Control charts

Assumptions made in control charts:

Control charts are based on statistical sampling theory according to which an a
desecrate sized sample drawn at random from a lot representing the lot. Control chart is a
graphical presentation of the collected information.
-> A control chart indicates whether the process is in control (or) not
-> It determines a process variability and detects unusual variations taking place in a process.
-> It ensures product quality level.
-> It warns in time and it the process is rectified at that time, scrap (or) percentage rejected can
be reduced
-> It provides information about the selection of a process and setting of tolerance limits.
-> Control charts blind up the reputation of the organisation through customer satisfaction.
Applications of control charts:
It controls applications in controlling the quality characteristics
1) Final assemblies
2) Manufactured components
3) Bullets and shells
4) Soldered joints
5) Casting
6) Defects in components made glass
7) For studying tool wear.

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Types of Control charts:

Control
charts

Variable
(or) Attribute charts
Ameasurement charts

X chart P chart

R chart np chart

σ chart C chart

U chart

Sample chart and control charts are also based on attributes (or) variables. In other
words, Quality can be controlled either through actual measurements (or) through attributes
Variables charts Attribute’s chart

1) This chart involves the measurement of 1) This chart is only differentiating between
the job dimensions and an item is accepted a detective items and a non-detective item
(or) rejected in its dimensions are within (or) without going into the measurement of its
beyond the fixed tolerance limits. dimensions
2) Variable chart is made detailed and 2) Attribute chart being based upon go and
contain more information’s as compared to no-go data require comparatively bigger
attribute chart sample size.

3) Variable chart is relatively expensive 3) Attribute’s chart is the only way to control
because of the grater cast of collecting quality in this case where measure meant of
measured data quality characteristics is either not possible
(or) it is very complicated and costly to do so
as in the case of checking colour (or) finished
of a product

X and R charts:
The X chart is used to show the process variations based on the average measurement of
samples collected. It shows lighter on diagnosing quality problem when read along with R
chart. It shows the erratic or cyclic shifts in the manufacturing process. It can also focus on
when to take a remedial measure to set.

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X chart:
-> It shows changes in process average and is attested by changes in process variability.
-> It is a chart for the reassure of central tendency.
-> It shows erratic (or) cyclic shits in the process
-> It defects steady progress changes like tool wear.
-> It is the most commonly used variables chart
-> When used along with R chart.
-> It tells when to leave the process alone and when to choose and go for the causes leading to
variation.
-> It secures information in establishing (or) modifying process, specifications (or) inspection
procedure.
-> It controls the quality of incoming material.
-> X and R charts when used together form a powerful instrument for diagnosing quality
problems.

R - chart:
-> It controls general variability of the process and is attribute by changes in process variability.
-> It is a chart for measure of spread.
-> It is generally used along with an X-chart

Plotting of X and R - charts:

For each sample, the mean value and range is found out
d1,d2,d3,d4,d5
If a sample contains 5 items, whose dia are 5
R = Maximum diameter- minimum diameter
A number of samples are selected and their average values and range are tabulated.

P - chart:
In statistical quality control, the p-chart is a type of control chart used to monitor the
proportion of nonconforming units in a sample, where the sample proportion nonconforming
is defined as the ratio of the number of nonconforming units to the sample size, n.
-> It can be a faction defective chat (or) % defective chat (loop)
-> Each item is classified as non- defective (or) defective.
-> This chart is used to control the general quality of the component parts and it checks if the
fluctuation in product quality is due to chance cause alone.

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-> It can be used even it sample size is variable but calculating control limits for each sample
is rather cumbersome.
-> P-chart is plotted by calculating the fraction defective and then the control limits. In this
case the process is out of control investigation to hunt for the cause become necessary.

C - chart:
In statistical quality control, the c-chart is a type of control chart used to monitor count
type data, typically total number of nonconformities per unit. It is also occasionally used to
monitor the total number of events occurring in a given unit of time.
-> It is the control chart in which number of defects in a piece (or) a sample are plotted
-> It controls number of defects observed per unit (or) per sample
-> Sample size is constant
-> The chart is used where average number of defects are much less than the number of defects
which would occur otherwise if everything possibly goes wrong.
-> Whereas P-chart considers the number of defective pieces in a given sample, C- chart takes
into account the number of defects in each defective piece (or) in a given sample.
-> The C-chart is preferred for large and complex parts. Such parts being few and limited
however restrict the field of C-chart.
-> C-chart is plotted in the same manner as P-chart except that the control limit is based on
possion distribution which describes more appropriately the distribution of defect

Acceptance Sampling Plan:

Sampling plan using attribute (or) variable
Acceptance sampling uses statistical sampling to determine whether to accept or reject
a production lot of material. It has been a common quality control technique used in industry.
It is usually done as products leaves the factory, or in some cases even within the factory.
Single Sampling plan:
A lot is accepted (or) rejected on the basis of a single drawn from shat lot.
For a single sampling plan, one sample of items is selected at random from a lot and
the disposition of the lot is determined from the resulting information. These plans are also
denoted as (n,c) plans since there are n observations and the lot is rejected if there are more
than c defectives.
A lot is accepted or rejected on the basis of a single sample drawn from that lot. Under
this plan, a lot is accepted or rejected on the basis of a single sample drawn from that lot.
Double Sampling plan:
Double sampling is taking a second set of samples in a one-stage survey because the
retrospective power of the test did not meet design objectives. At the same time, double
sampling causes the Type 1 error rate to exceed the rate specified for the one-stage survey.

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 It is not possible to decide the fate of the lot on the basis of first sample, a second sample
is drawn and the decision is taking on the basis of the combined result of first and second
sample.
Application of double sampling requires that a first sample of size n-1 is taken at
random from the (large) lot. The number of defectives is then counted and compared to the
first sample's acceptance number a-1 and rejection number r-1.
• Design of a double sampling plan
• Example of a double sampling plan
• How double sampling plans work
• Construction of the ASN curve

[Multiple sampling plans:

A lot is accepted (or) rejected based upon the result obtained from several samples of
parts from the lot.
Sequential sampling plan:
Sequential sampling involves increasing the sample size by one part at a time till the
sample becomes large enough and contain sufficient number of defectives to decide
integrations whether to accept (or) reject the lot]
OC curve:
The operating characteristic (OC) curve depicts the discriminatory power of an
acceptance sampling plan. The OC curve plots the probabilities of accepting a lot versus the
fraction defective. You should always examine the OC curve before using a sampling plan.

OC curve for Single Sampling plan:

Below graph is an OC curve for a sampling plan with n = 50 and C = 1.

Graph shows the probability of acceptance of lot for various values of percent
defectives in the lot. Suppose, if the actual bad quality were 1 percent, samples of n = 50 would

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accept the lot as satisfactory about 94 percent of the time and reject it about 6 percent of the
time.
If the actual quality of the lot were somewhat worse than 1% defective, say 5% the
probability of accepting these lots drastically to about 29%. This is the situation, we would like
in a sampling plan. If the actual quality is good, then there should be a high probability of
acceptance, but if the actual quality is poor, then the probability of acceptance should be low.
Thus, in this way the OC curve shows how well a given sampling plan discriminates.

The discriminating power of any sampling plan depends largely on the size of the
sample. Above graph show the OC curves for sample sizes of 100, 200 and 300 with the
acceptance number remaining in the proportion to the sample size. Graph shows that the OC
curve becomes steeper as the sample size goes up.
If the discrimination power of all the three plans shown in the graph is compared, it is
found that these would accept lots of about 0.7% defectives about 80% of the time.
If actual quality fall to 3 percent defectives, the plan with n = 100 accepts lots about 25% of
the time, n = 200 about 10% of the time, and n = 300 less than 1% of the time. Therefore, it
shows that the plans with larger sample sizes are definitely more effective.

OC curve for Double Sampling plan:

Double sampling plans are generally specified by following:
n1 = number of items in the first sample,
c1 = acceptance number for the first sample (i.e., maximum number of defectives that will
permit the acceptance of the lot on the basis of first sample)
n2 = number of items in the second lot
c2 = acceptance number for the two samples combined (i.e., maximum number of defectives
that will permit the acceptance of the lot on the basis of two samples.
Fig. 60.6 shows three O.C. curves involved in the analysis of this double sampling plan.

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These three curves divide the figure in four zones indicating following possibilities for accep-
tance or rejection:
1. I zone (lowest zone)/Acceptance after first sample.

2. II zone (highest zone)/Rejection after the first sample.

3. III zone (lower without hatching zone)—Acceptance after second sample.

4. IV zone (higher with hatching zone)—Rejection after second sample.

Advertisements:

Characteristics of the lowest curve is n = 30 and C = 0.

Characteristics of the highest curve is n = 60 and C = 3.

Characteristics of the middle curve is the actual O.C. curve of the double sampling plan.

Total Quality Management:

Total Quality Management is an extensive and structured organization management

approach that focuses on continuous quality improvement of products and services by using
continuous feedback. Joseph Juran was one of the founders of total quality management just
like William E. Deming.

Total quality management originated in the industrial sector of Japan (1954). Since that
time the concept has been developed and can be used for almost all types of organizations such

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as schools, motorway maintenance, hotel management and churches. Now-a-days, Total
Quality Management is also used within the E-business sector and it perceives quality
management entirely from the point of view of the customer. The objective of total quality
management is doing things right the first time over and over again. This saves the organization
the time that is needed to correct poor work and failed product and service implementations
(such as warranty repairs).

Total Quality Management can be set up separately for an organization as well as for a
set of standards that must be followed- for instance the International Organization for
Standardization (ISO) in the ISO 9000 series. Total Quality Management uses strategy, data
and communication channels to integrate the required quality principles into the organization’s
activities and culture.

Total Quality Management principles:

Total Quality Management has a number of basic principles which can be converted to
the figure below.

Focus on customer:
When using total quality management, it is of crucial importance to remember that only
customers determine the level of quality. Whatever efforts are made with respect to training
employees or improving processes, only customers determine, for example through evaluation
or satisfaction measurement, whether your efforts have contributed to the continuous
improvement of product quality and services.

Employee involvement:
Employees are an organization’s internal customers. Employee involvement in the
development of products or services of an organization largely determines the quality of these
products or services. Ensure that you have created a culture in which employees feel they are
involved with the organization and its products and services.

Process centred:
Process thinking and process handling are a fundamental part of total quality
management. Processes are the guiding principle and people support these processes based on
basis objectives that are linked to the mission, vision and strategy.

Integrated system:
Following principal Process centred, it is important to have an integrated organization
system that can be modelled for example ISO 9000 or a company quality system for the
understanding and handling of the quality of the products or services of an organization.

Strategic and systematic approach:

A strategic plan must embrace the integration and quality development and the
development or services of an organization.

Decision-making based on facts:

Decision-making within the organization must only be based on facts and not on
opinions (emotions and personal interests). Data should support this decision-making process.

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Communication:
A communication strategy must be formulated in such a way that it is in line with the
mission, vision and objectives of the organization. This strategy comprises the stakeholders,
the level within the organization, the communications channels, the measurability of
effectiveness, timeliness, etc.

Continuous improvement:
By using the right measuring tools and innovative and creative thinking, continuous
improvement proposals will be initiated and implemented so that the organization can develop
into a higher level of quality.

Benefits of total quality management:

➢ Strengthened competitive position
➢ Adaptability to changing or emerging market conditions and to environmental and other
government regulations
➢ Higher productivity
➢ Enhanced market image
➢ Elimination of defects and waste
➢ Reduced costs and better cost management
➢ Higher profitability
➢ Improved customer focus and satisfaction
➢ Increased customer loyalty and retention
➢ Increased job security
➢ Improved employee morale
➢ Enhanced shareholder and stakeholder value
➢ Improved and innovative processes

Quality circle:
As per the ISO 9000, 1987 Quality control involves operational techniques and
activities aimed at monitoring a process and at eliminating cause of unsatisfactory performance
at relevant stages of quality loop in order to result in economic effectiveness.
A quality circle is a group of workers who do the same or similar work, who meet
regularly to identify, analyse and solve work-related problems. The first company in Japan to
introduce Quality Circles was the Nippon Wireless and Telegraph Company in 1962.
Importance:
1) Cost reduction
2) Increase productivity
3) Improve quality
4) Better communication.
5) Better house-keeping.
6) Increased team work.

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 Design/
Specifications
Marketing engineering
and market Proccerement
research

Process
Disposal
planning and
after use
developement

Quality circle
Technical asst
and Production
maintenacne

Installation Inspection,
and Testing adn
operation Examination

Sales adn Packing and

Distribution storage

BIS standards:
The Bureau of Indian Standards is the national Standards Body of India working under
the aegis of Ministry of Consumer Affairs, Food & Public Distribution, Government of India.
It is established by the Bureau of Indian Standards Act, 1986 which came into effect on 23
December 1986.
BIS Recognised the importance of preparation of Indian Standards on quality system.
Therefore, an Indian Standard manual on quality assurance system, IS 10201 was published in
1982 which describes a basic set of quality elements by which quality management system
could be developed and implemented within an organisation. After the publication of
international standards on the quality system BIS adopted these as IS 14000 of standards.
The characteristics of the Indian Standard are tabulated as below
S.no Indian Standards Characteristics
1 IS 13999: 1990 Quality system – vocabulary

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 2 IS 14000: 1990 Quality system-guide lines for selection and use of
standards on quality system
3 IS 14001: 1990 Quality system-model for quality assurance in
design/development production, installation and
servicing
4 IS 14002: 1990 Quality system-model for quality assurance in
production and installation
5 IS 14003: 1990 Quality system-model for quality assurance in final
inspection and testing
6 IS 14004: 1990 Quality system-guidelines on element of quality
management system.

Importance:
BIS is the National Standard Body of India established under the BIS Act 2016 for the
harmonious development of the activities of standardization, marking and quality certification
of goods and for matters connected.

ISO standards:
The International Organization for Standardization is an international standard-setting
body composed of representatives from various national standards organizations, founded on
23 February 1947, the organization promotes world-wide proprietary, industrial, and
commercial standards.
ISO is founded in 1946 with the objective of promotion and development of
international standards and the related activities, including conformity assessments such as
testing, inspection, laboratory accreditation certifications and quality assessments for
facilitating international exchange of goods and services.
There are five standards in ISO 9000 series, ISO 9000 to ISO 9004.
ISO – 9000 - Quality management and quality assurance standards guidelines for selection
and use
ISO – 9001 - Quality system model for quality assurance in design, production, installation
and servicing
ISO – 9002 - Quality system model for quality assurance in production and installation
ISO – 9003 - Quality system model for quality assurance in final inspection and test
ISO – 9004 - Quality management and quality system elements guidelines.

Importance:
In terms of standard, we can define it as quality, safety and efficiency of the products
or services provide by the businesses. The ISO certificate helps to improve your business
credibility and authority as well as the overall efficiency of the business.

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