Industrial management

Industrial Management
Lecture 1
J Srinivasa Rao

MANAGEMENT
• Management is an art of getting things done
through people
• Management is a process of accomplishing
certain objectives through the utilization of
human and other resources.

Definition
Management is the creation and maintenance
of an internal environment in an enterprise
where individual, working in groups, can
perform efficiently and effectively towards
attainment of group goals.

IMPORTANCE OF MANAGEMENT
• For the accomplishment of the goals.
• For effective utilization of the resources.
• Sound Organization.
• Providing vision &Foresight.
• For the harmony in work.
• To help employees in achieving personal
objective.
• Development of the society and nation.

INDUSTRIAL MANAGEMENT
• Industrial management is now a branch of
engineering which facilitates creation of
management system and integrates same with
people and their activities to utilize the
resources.
• Industrial management is structured approach
to manage the operational activities of the
organization.

Need of industrial management
• To ensure maximum output with minimum cost of production.
• To ensure that activities of different individuals are
coordinated to attain the common purpose in the factory.
• Goods are produced and delivered on the promised dates.
• Goods are manufactured in strict specification of customer’s
orders.
• Proper accounting, reporting and controlling the operations in
the factory.
• To prevent wastage and losses.
• Quality products.
• Utilization of full capacity of the factory.
• Innovation

Scope of industrial management
• Industry Planning
• Industry Organization
• Factory Management
• Materials Management
• Labor Administration
• Industry Control

Application of Industrial Management
Planning Function
• For Designing Conversion
System
• For Scheduling Conversion
System
Organizing Function
• Structuring of Operation
Staffing
• Job & Work Design.
• For Production & Operation
Standard.
• For Payment system.
Controlling Function
• Quality
• Quantity
• Time
• Inventory
• Cost
• Maintenance

Development of Industrial
Management.
Three Basic Approaches :
• Classical Approach
• Neo Classical
• System Approach

Classical Approach
Contributions
• Emphasis on division of
work, specialization and
processes.
• Efficiency of the
organization can be
increased by making each
individual efficient.
• Based on centralization of
authority
Criticism
• Ignores human relations
• Strict rules and
regulations
• Closed system
organization

Neo Classical Approach
Contributions
• Social System
• Social Environment
• Leadership
• Communication
Criticism
• Limited Application
• Lack of scientific Validity
• Invalid Assumption
• Fragmental Approach

Systems Approach
TRANSFORMATION
PROCESS
ENVIRONMENT
INPUT
OUTPUT
FEEDBACK

System Approach Contd.
Contribution
• Interacting Elements
• Vulnerable to changes
in the Environment.
Critics
• Failed to specify the
nature of Interaction
and Interdependencies.
• Does not apply tools
and techniques for
analysis.

Difference Between
Management Administration
(To be done at home and
will be discussed in next
class.)

Lecture-2
• Development of Industrial
Management
• Production
• Productivity
• Production System (Probably in the
next lecture)

Lecture - 3

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

Inputs:
•Men
•Machinery
•Material
•Money
Transformation
Process:
•Product Design
•Process Planning
•Production Control
•Maintenance
Outputs:
•Products
•Services

• It may be defined as the ratio between output &
input
• Output means the amount or numbers of items
produces & inputs are the various resources
employed such as men machinery, material & money
• It is the measure of the quantity of output per unit of
input
Productivity = Amount of Output/Amount of Input
Productivity

Productivity Index
Labor productivity =
Output
No of Labour employed
Direct labor cost productivity =
Output
Amount of wages paid
Capital productivity =
Output
Capital Employed
Energy productivity =
Output
No. of Units of power used
Raw material productivity =
Output
Cost of raw materials
Direct cost productivity =
Output
Sum of all direct costs
Material productivity =
Output
Cost of
(Raw Material+ Packaging material+ Supplies)
Total Factor Productivity =
Output
Labour+ Capital Invested

Factors affecting Productivity
Factors affecting national productivity
1. Human resources
2. Technology and Capital Investment
3. Government Regulation
Factors Affecting Productivity in organization:-
1. Product( or system ) design
2. Machinery and Equipment
3. Skill and Effectiveness of the worker
4. Production Volume

Measures to Increase Productivity
• Material
• Labor
• Plant, Equipment and Machinery
• Land and Buildings

Types of Production Methods / Systems
1. Continuous
• Mass production
• Process or continue flow type
2. One time Large Projects
3. Intermittent
• Batch production
• Job Production

Chapter -3
Industrial Ownership

Sole Proprietorships
The vast majority of small businesses start out
as sole proprietorships. These firms are owned
by one person, usually the individual who has
day-to-day responsibilities for running the
business. Sole proprietors own all the assets
of the business and the profits generated by
it. They also assume complete responsibility
for any of its liabilities or debts.

Advantages of a Sole Proprietorship
• Easiest and least expensive form of ownership to organize.
• Sole proprietors are in complete control, and within the parameters of the law,
may make decisions as they see fit.
• Sole proprietors receive all income generated by the business to keep or
reinvest.
• Profits from the business flow directly to the owner's personal tax return.
• The business is easy to dissolve, if desired.
Disadvantages of a Sole Proprietorship
• Sole proprietors have unlimited liability and are legally responsible for all debts against
the business.
•Their business and personal assets are at risk.
• May be at a disadvantage in raising funds and are often limited to using funds from
personal savings or consumer loans.
• May have a hard time attracting high-caliber employees or those that are
motivated by the opportunity to own a part of the business.
•Some employee benefits such as owner's medical insurance premiums are not
directly deductible from Business income (only partially deductible as an
adjustment to income).

Partnerships
In a Partnership, two or more people share ownership
of a single business. Like proprietorships, the law
does not distinguish between the business and its
owners. The partners should have a legal agreement
that sets forth how decisions will be made, profits
will be shared, disputes will be resolved, how future
partners will be admitted to the partnership, how
partners can be bought out, and what steps will be
taken to dissolve the partnership when needed.

Advantages of a Partnership
•Partnerships are relatively easy to establish; however time should be invested in
developing the partnership agreement.
•With more than one owner, the ability to raise funds may be increased.
•The profits from the business flow directly through to the partners' personal tax returns.
•Prospective employees may be attracted to the business if given the incentive to
become a partner.
•The business usually will benefit from partners who have complementary skills.
Disadvantages of a Partnership
•Partners are jointly and individually liable for the actions of the other partners.
•Profits must be shared with others.
•Since decisions are shared, disagreements can occur.
•Some employee benefits are not deductible from business income on tax returns.
•The partnership may have a limited life; it may end upon the withdrawal or death of a
partner.

Types of Partnerships that should be considered
1. General Partnership
Partners divide responsibility for management and liability as well as the shares of
profit or loss according to their internal agreement. Equal shares are assumed unless
there is a written agreement that states differently.
2. Limited Partnership and Partnership with limited liability
Limited means that most of the partners have limited liability (to the extent of their
investment) as well as limited input regarding management decisions, which generally
encourages investors for short-term projects or for investing in capital assets. This
form of ownership is not often used for operating retail or service businesses. Forming
a limited partnership is more complex and formal than that of a general partnership.

Joint Venture
Acts like a general partnership, but is clearly
for a period of time or a single project. If the
partners in a joint venture repeat the activity,
they will be recognized as an ongoing
partnership and will have to file as such as
well as distribute accumulated partnership
assets upon dissolution of the entity.

Corporations
A corporation chartered by the state in which it is
headquartered is considered by law to be a
unique entity, separate and apart from those who
own it. A corporation can be taxed, it can be
sued, and it can enter into contractual
agreements. The owners of a corporation are its
shareholders. The shareholders elect a board of
directors to oversee the major policies and
decisions. The corporation has a life of its own
and does not dissolve when ownership changes.

Advantages of a Corporation
•Shareholders have limited liability for the corporation's debts or judgments against the
corporations.
•Generally, shareholders can only be held accountable for their investment in stock of the
company. (Note however, that officers can be held personally liable for their actions, such
as the failure to withhold and pay employment taxes.)
•Corporations can raise additional funds through the sale of stock.
•A corporation may deduct the cost of benefits it provides to officers and employees.
Disadvantages of a Corporation
•The process of incorporation requires more time and money than other forms of
organization.
•Corporations are monitored by federal, state and some local agencies, and as a result
may have more paperwork to comply with regulations.
•Incorporating may result in higher overall taxes. Dividends paid to shareholders are not
deductible from business income; thus it can be taxed twice.

Management tools.

Work Study
It is an analytical study of use of workers,
materials and equipment in order to improve
existing methods and work performance by
elimination of every type of waste.
Work Study comprises of motion study and time
study.

Objectives of Work Study
• To analyze the present method of doing a job
systematically in order to develop a new and
better method.
• To measure the work content of a job by
measuring the time required to do the job by
a qualified worker.
• To increase the productivity.
• To improve operation efficiency.

Benefits of work study
• Effective use of manpower
• Effective use of methods, machines and equipment.
• Efficient layout of plant and improved workflow.
• Elimination of unnecessary human motions.
• Simplification and standardization of operations.
• Measurement of time required to perform an operation
and establishment of standard level of performance of each
worker.
• Increased productivity and operational efficiency.
• Better HR planning and capacity planning.
• Reduced material handling costs.
• Greater Job satisfaction to employees.

Method study OR work simplification
• Systematic procedure for analyzing the
existing method of doing job including the
various human movements involved in it.
• Method study is the process of recording and
analyzing methods and procedures involved in
work flow with an eye on increasing
productivity.

Objectives of Method Study
• To improve manufacturing processes and
procedures.
• To improve factory, office and workplace layout.
• To improve plant and equipment design.
• To reduce human fatigue and effort in
performance of work
• To improve man power, machine power and
material.
• To improve physical working conditions.
• To ensure safety in all activities.

Advantages of method study
• Objective points “
• Remove “to” and add “ed “
Example:
• To improve manufacturing processes and
procedures.
• Improved manufacturing processes and
procedures.

Procedure of Method Study
• Selection of the job to be studied.
• Collection and recording of data about the
existing method.
• Critical examination or analysis of data collected.
• Development of most practical and economical
method.
• Installation of new method and evaluating its
efficiency.
• Maintenance of new method

Lecture – 5, 6 and 7
Unit- 2

Discuss
• Management
• Nature and characteristics
• Importance
• Managerial Functions(PODSCo)

Planning
It is a mental process requiring the use of
intellectual foresight and sound judgment.
• Determination of objectives
• Forecasting
• Formulation of policies and programmes
• Preparation of schedules and procedures

Organizing
It determines the activities to be done, grouping
the activities, creating the structure of authority.
• Determine nature of activities

Staffing
• HR planning
• Deciding source of recruitment
• Receiving applications
• Testing and interviewing
• Final Selection
• Orientation
• Training

Directing
• Leadership
• Communication
• Motivation
• Supervision

Controlling
• Setting up of standards
• Measuring performance
• Comparing performance with standards
• Taking corrective action

Coordination
• “Function of manager” by henry fayol
• “First principle of organization” by James
Mooney
• “Vital phase of controlling” by Ralph C Davis
“Coordination is the orderly arrangement of
group efforts to provide unity of action in pursuit
of a common purpose”

Significance of Coordination
• Better Results
• E E
• Better utilization of resources
• KEEP ADDING THEM ON

Finally
PLANNING
ORGANISING
STAFFING
DIRECTING
CONTROLLING
CO-ORDINATION

LEVELS OF MANAGEMENT
Board of
directors,
chief Executives
Departmental Heads
Regional managers
Plant Managers
Supervisors, Section Officers
TOP LEVEL
MIDDLE
LOWER

Top Level
• Laying down Board Objectives
• Taking Decisions
• Reviewing work
• Measure the performances of middle level
• Coordination

Middle Level
• Planning for execution of the policies provided
by top level
• Laying down guidelines
• Analyzing achievements of lower level
• Reports to top level

Lower Level
• To organize the activities
• To supervise the workers
• To provide training to workers
• To communicate problems of workers to
above levels

Basic steps involved in
• PODSCo

Steps in Planning
Setting
Objectives
Follow up and
Review
Securing
Cooperation
Formulation of
Derivative Plans
Developing
Premises
Identifying
Alternatives
Choice of the
best
Alternative

Requirements of a good plan
• Simple
• It must be Specific rather general
• Logical and practical
• Flexible
• Stable
• Complete and Integrated

Importance of organization
• Specialization
• Role Clarity
• Clear lines of Authority
• Avoidance of duplication of efforts
• Adaptation of newer Technology

Steps involved in Organizing
• Division of Activities
• Creation of Jobs
• Assignment of Jobs (Operations)
• Establishing the Authority and Responsibility

Authority and Responsibility
AUTHORITY
• Meaning- Right of a
manager to command
his subordinates
• Origin- Arises because
of formal position
• Direction Flow- Flow
Downward direction
RESPONSIBILITY
• Duty to perform the
task
• Superior – subordinate
relationship
• Upward direction

Types of organization
Formal
• Created to achieve
Predetermined objectives
• Official hierarchy
• Stable
Informal
• No predetermined
objectives
• Based on relations or
voluntary
• Not Stable i.e does not last
long

Principles of Management
• Henry Fayol, J.D Mooney, F.W. Taylor, Max
Weber and many other management thinkers
have derived certain generalizations from
their work experience.
• These generalizations are the principles of
management.
“Principle is a basic statement that provides
understanding and guide thinking and action.”

Nature of Management Principles
• General statements
• Dynamic Guidelines
• Based on situation
• Universal

Henry Fayol’s Principles of
Management
14 Principles.
I - Initiative
SEE – Stability, Equity and “Esprit de corps”
DADUU - Discipline, Authority and
Responsibility, Division of work, Unity of
command and Unity of direction.
CROSS – Centralization, Remuneration, Order,
Subordination of Individual Interest to General
Interest and Scalar chain

1. Initiative
2. Stability
3. Equity
4. “Esprit de corps”
5. Discipline
6. Authority and Responsibility
7. Division of work
8. Unity of command
9. Unity of direction.
10. Centralization
11. Remuneration
12. Order
13. Subordination of Individual Interest to General Interest
14. Scalar chain

Assignment - 1
Q.1 Write short notes on
• Six sigma
• System Approach
• Contingency Approach
• Nature of Production Function
Q.2 What is the difference between Management and
Administration.
Q.3 Explain main characteristics of labor. What factors
affect the productivity of labor.
Q.4 Describe the position of a minor as a partner.
Q.5 What considerations should be kept in mind
while choosing a form of business organization.

• Work study may be defined as systematic examination of
methods of carrying on activities so as to improve the
effective use of manpower and equipment and to set up
standards of performance for the activities being performed.
• Work measurement or time study is the application of
techniques designed to establish the time for a qualified
worker to carry out specified jobs at a defined level of
performance.
Work study

• Why use it ?
- Productivity
- Improving equipment utilization
- Conserving materials and energy
- Reducing human effort
- Advancing the goals of the organization on
many fronts
• Changes may be small, but improvements must
be made continually to keep the company
competitive.
• Quality and price are the most important
considerations for staying competitive
• Motion and time study concentrate on reducing
cost but must never lost sight on quality

1. Develop the best work method and efficient utilization of
man, machine & methods.
2. Comparative evaluation of performance
3. Develop economical and efficient tools, fixtures, and
production aids.
4. Assist in the selection of new machine and equipment
5. Train new employees in the preferred method
6. Reduce effort and the unit cost of production.
7. Efficient panning for production.
Objective of Motion and time studies :

1. Definitions
• Motion study involves the analysis of the basic hand, arm,
and body movements of workers as they perform work.
• Work design involves the methods and motions used to
perform a task.
• This design includes
– the workplace layout and environment
– the tooling and equipment (e.g., work holders, fixtures,
hand tools, portable power tools, and machine tools).
• work design is the design of the work system.

Method/Motion Study and work
simplification
• Selection of the work to be studied.
• Collection of Data and recording of relevant facts
about the existing method.
• Critical and impartial examinations of the data
collected( table 1).
• Development of the best method .
• Installation of the new method
• Maintaining the new method.

(Table 1) Critical examination questions
• Purpose
– What, Why, What else might & Should
be done ?
• Place
– Where, Why, Where else & Where
should it be done ?
• Sequence
– When, Why then, When else could &
When should ?
• People
– Who, Why, Who else might & should do
it?
• Method or Means
– How, Why, How else could, How else
should
a sound reason for
every activity
no assumptions so
double check
quality, safety and
health must not
compromised

2.Work Simplification
• Work simplification is defined as the use of equipment ,
ergonomics, functional planning and behavior modification
to reduce the physical and psychological stresses on the
body of activities at home or work . These can be broadly
classified as:-
1. Modifying the workplace layout and equipment.
2. Modifying the loads lifted
3. Controlling the work environment
4. Redesigning work practices

2.1 Work simplification is carried out with
the help of various charts and diagrams
• Process charts:- outline process charts, Two handed
Process charts, Flow Process charts
• Flow diagram
• String Diagrams
• Multiple Activity chart

2.3 Principles of Motion Economy
 Principles of motion economy provides guidelines to help determine
work method, workplace layout, tools and equipment . The objective
of this principle is to maximize efficiency and minimize worker fatigue
. The principles of motion economy eliminate wasted motion , ease
operator tasks and reduce fatigue There are 3 categories of
principles:-
1. Principle that apply to the use of the human body
2. Principles that apply to the workplace arrangement( workplace
layout)
3. Principles that apply to the design of tooling and equipment.

3.Work Measurement or Time Study
• Time study attempts to find out the amount of work that a qualified
operator , properly trained , can do in a given time . The operator
must do the work according to a certain method , under certain
conditions , and at certain pace which will produce a certain physical
reaction.
• Performance Rating is a technique for equitably determining the
time required to perform a task by the normal operator after the
observed values of the operation under study have been recorded.
• Allowance Factor is addition o an allowance to take care of the many
interruptions , delays , and slowdowns brought on by the fatigue ,
which enter into every work assignment.

Importance and Uses of Time Study
• No. of machine tools needed
• No. of production personnel needed
• Manufacturing costs and selling prices
• Scheduling and delivery criteria
• Machine speeds and work balancing
• New equipment purchases
• Incentive wages

3.1 Stopwatch Time Study
 May use various stopwatches-read in decimal minutes.
 Continuous time study- short duration jobs
 Long-cycle time study-long jobs, or when work elements out-of -sequence
3.2 Performance Rating
It is the procedure in which the time study engineer compares the performance of
operators under observation to the normal performance and determines a factor
called Rating Factor
Rating Factor=Observed performance/ normal performance
3.3 Allowances
1. Daily allowance
2. Fatigue allowance
3. Personal allowance
4. Special allowance

Production planning
&
Control
Chapter 2.3

Process planning
Process planning refers to the preparation of
detailed work plan. It determines the most
economical method of performing an operation.
Activities which are planned during process
planning are:-
1. Selection of process
2. Selection of materials
3. Selection of machines, tools & equipments
4. Sequencing of operations
5. Grade of workmen required
6. Time required for each operation

Production control
It is the process that measures current
performance and ensures that it is as per quality
standards laid down in advance. Production
control involves 3 steps:-
1. Dispatching
2. Follow up
3. Corrective action

Various types of control
1. Material control
• Purchasing
• Receiving
• Issuing
2. Labor control
3. Machine utilization control

Production Planning & Control
• It comprises the planning , routing , scheduling ,
dispatching and follow up functions in the
production process so organized that movements of
materials, performance of machines and operations
of labor , however subdivided are direct and
coordinated as to quantity , quality , time and place.
• Planning:- Routing , Scheduling , Loading
Control :- Dispatching , Follow-up , Corrective
action

Advantages of Production Planning &
Control
1. Efficient use of resources
2. Economy
3. Coordination
4. Avoid bottlenecks
5. Inventory control
6. Customer satisfaction
7. Better public image

Elements of Production Planning & Control
1.1 Routing
1.2 Loading
1.3 Scheduling
1.4 Dispatching
1.5 Follow-up
1.6 Corrective measures

1.1 Routing
Routing deals with laying down of path along
which materials are to travel in the process of
production. Routing includes the following
activities:-
1. The volume of production is decided
2. Machine capacity & machine characteristics are found out
3. On the basis of process sheet , the route sheets are prepared.
Routing determines what, how much , where and
with which to be produced

1.2 Scheduling
Scheduling determines when various operations
are to be performed . It leads to fixing up of
starting and completion times for the various
operations to be performed. The information
required to draw production schedule include:-
a) Date of delivery specified by the customer
b) Time interval required to manufacture a component or part
c) Past production records
d) Availability of equipment , materials and specialized skills

Types of scheduling :-
• Master Scheduling
• Parts scheduling
• Machine loading schedule

1.3 Loading
 Loading deals with the quantity of work
assigned to a machine or a worker. The
objectives of loading are as follows:-
i. To check the feasibility of production
programmes
ii. To plan new work orders on the basis of space
capacity available
iii. To balance the workload in the plant
iv. To assist in fixing of reliable delivery promises.

1.4 Dispatching
• Dispatching deals with setting the productive activities in motion
through release of orders and instructions in accordance with
previously planned timings as embodied in operation sheets route
cards and loading schedules. Dispatching provides information for :-
i. Movement of materials to different workplaces
ii. Movement of tools & fixtures necessary for each operations
iii. Beginning of work on reach operations
iv. Recording of beginning and completion time
v. Movement of work in accordance with a routing schedule
vi. Control of progress of all operations
vii. Making of necessary adjustments in the release of instructions.

1.5 Follow-up or Expediting
• Expediting involves follow up of operations of
various workshops to ensure that production of
goods takes place as per predetermined schedules .
The reasons for follow-up are :-
1. To record the flow of materials and tools
2. To record progress of production activities & make necessary
adjustments
3. To compare & record the amount of work-in-process with schedule
4. To report the machine & manpower idleness & investigations the
reasons for it

1.6 Corrective Actions
• Corrective actions is needed to make any system of
production planning & control effective . By
resorting to corrective measures , the production
manager maintains full control over the production
activities

Definition
Production planning essentially consists of
planning production activities in an industrial
enterprise before the actual operations start.
1. Routing
2. Scheduling
3. Loading or assignment of work

Introduction to Inventory
• Inventory is defined as the list of movable goods
which helps directly or indirectly in the production
of goods for sale. Inventory is service to production.
• Inventory may also be 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 Definition
• A stock of items held to meet future
demand
• It can be defined as the stock of
goods, commodities or other
resources that are stored at any
given period of future production

Types of Inventory
Inputs
• Raw Materials
• Purchased parts
• Maintenance and
Repair Materials
Outputs
• Finished Goods
• Scrap and Waste
Process
In Process
• Partially Completed
Products and
Subassemblies
(in warehouses, or
“in transit”)
(often on the
factory floor)

Classification Of Inventories
• Inventory can be classified as:
1.Direct inventories:- which play a direct role in the
manufacture of a product and becomes an integral part of
the finished product are called direct inventories.
2.Indirect inventories :- are those materials which help
the raw materials to get converted into the finished
products, but do not become an integral part of the
finished products.

Direct Inventories
1. Raw Materials :-are those basic materials from which
components, parts & products are manufactured by the company.
2. In Process Inventories( work in progress):- are the
semi-finished goods at various stages of manufacture.
3. Purchase parts
4. Finished goods

Indirect Inventories
1. Tools:- various tools like Standard tools , Hand tools
2. Supplies :- it includes materials used in running the plant but do
not go into the product . Supplies include :-
• miscellaneous consumable stores such as brooms, cotton waste,
vim powder .
• General office supplies such a s candles , pencils , pens etc.
• Ledgers & journals , Electric supplies etc.

Inventory Control
• Inventory control refers to the process whereby the
investment in materials & parts carried in stock is regulated
within predetermined limits set in accordance with the
inventory policy established by the management.
• Inventory control aims at maintaining the values of the
inventories at the lowest possible level at the same time
seeing that the required inventories are available at all items.

Reasons To Hold Inventory
• Meet variations in customer demand:
– Meet unexpected demand
– Smooth seasonal or cyclical demand
• Pricing related:
– Temporary price discount
– Take advantage of quantity discounts
• Process & supply surprises
– Internal – upsets in parts of or our own processes
– External – delays in incoming goods

Reasons To NOT Hold Inventory
• Increases Carrying cost
– Financially calculable
• Takes up valuable factory space
– Especially for in-process inventory
• Inventory covers up “problems” …
• Wastage of materials
• Increase in Maintenance cost

Determining Inventory Level
1. Order quantity
2. Lead time
3. Safety stock - Extra inventory is needed to
protect against unreliable forecast &
protection against stock outs.
4. Reorder point - It is pre-known that it takes
days between initiating the order & receiving
the required quantity.

Lead Time
• There is always some interval between the time the need
for the material is determined & the time the material is
actually received . This period is known as lead time . It
consists of requisition. It consists of Requisition time ( Rt )+
Procurement time(Pt).
• Requisition time consists of time required to prepare
purchase requisition & placing the order to a selected
vendor.
• Procurement time - time for the seller to get or prepare
the inventory for dispatch & time for inventory to be
dispatched from the supplier & to reach the customer.

Inventory costs
• Inventory analysis identifies 4 major cost
components:
1.Purchase cost
2.Ordering cost
3.Carrying cost – Direct & Indirect cost
4.Stock out cost

Purchase cost
• This refers to the nominal cost
of inventory. It is the purchase
price for the items that are
bought from outside sources,
and the production cost if the
items are produced within the
organization
Ordering Cost/ setup Cost
• Ordering cost is incurred
whenever the inventory is
replenished. It includes costs
associated with the processing
& chasing of the purchase order,
transportations, inspection for
quality, expediting overdue
orders & so on. It is also known
as “procurement cost”

Carrying cost
Direct Cost
• Capital costs
• Storage costs
• Service costs
Indirect Cost
• Risk costs
• Incremental increase in
infrastructure Costs

Stock-out costs
• Stock out cost means the cost associated
with the not serving the customers . Stock
out implies shortages .
Other types of cost in inventory control are
• Warehousing Costs
• Damage & obsolescence cost

Inventory models
• Economic lot size of an item depends on the
following:-
1. Possibility of placing the repeat orders
2. Nature of demand
3. Availability of discount
4. Single or multiple product manufacture.
Inventory models considering the above aspects can be
classified as under:-
A. Static Inventory Models
B. Dynamic Inventory Models

1. Static Inventory Models
• Only one order placed to meet the demand
• Repeat orders are either impossible or too
expensive
• E.g.:-Perishable goods like bread, vegetables;
Seasonal Products like coolers, umbrellas,
crackers, sweaters, rain coats, etc.
2. Dynamic Inventory Models
• Applicable for items where repeat orders can be placed

2.1 Deterministic Models
Based on following assumptions:-
• The demand & lead time of the item is known exactly for a given period
• The demand of the item occurs uniformly over a period of time
• Orders are received instantaneously
• The items can be purchased freely, i.e. ,there are no restrictions of any
kind
• The item has fairly long shelf life. There is no fear of deterioration or
spoilage
• The cost of placing an order is fixed. It does not vary with the lot size
2.2 Probabilistic Models
Take into account the variations in demand and lead time of an item

Economic Order Quantity
• It is the size of the lot to be purchased which is
economically viable
• This is the quantity of materials which can be purchased
at minimum costs
• Generally, economic order quantity is the point at which
inventory carrying costs are equal to order costs
• In determining economic order quantity it is assumed
that cost of managing inventory is made up solely of two
parts i.e., ordering costs and carrying costs

Assumptions of EOQ
• Demand is known with certainty and is constant over time
• No shortages are allowed
• Lead time for the receipt of orders is constant
• Order quantity is received all at once
• No safety stocks as average inventory is Q/2
A= Annual Usage in units (Quantity)
S= Cost of placing the order (Ordering Cost)
P= Price of material per unit (Price)
C= Cost of storage of material (Carrying Cost)
2AS
PC
EOQ =

Limitations of EOQ models
• Erratic Usages
• Faulty basic Information
• Costly Calculations
• No formula Substitute for Commonsense
• EOQ Ordering must be tempered with
Judgment

Inventory Control Techniques
ABC Classification
• Class A
– 5 – 15 % of units
– 70 – 80 % of value
• Class B
– 30 % of units
– 15 % of value
• Class C
– 50 – 60 % of units
– 5 – 10 % of value

ABC Classification
• One of the most important considerations of control
is the value of annual consumption of inventory
items in a year.
• Only a small number of inventory items consume a
very large share of inventory consumption during the
year.
• A little larger number of inventory items covers a
moderate share of annual inventory consumption.
• A very large number of items just cover a very small
share of annual inventory consumption.
• These facts gave birth to the concept of ABC analysis.

ABC Classification (ABC TABLE)
• It has been observed that in an industrial unit only 10% of
items have 70% of the annual inventory consumption,
• 20% of the items have 20% of annual inventory consumption,
and
• 70% of the items have only 10% of the annual inventory
consumption.
• Since 70% of the annual consumption of inventory is covered
by only 10% of the items in the inventory, these items deserve
highest attention and are classified as ‘A’ items.
• Similarly 20% of the items covering 20 % of the inventory
investment are B class items
• Balance 70% of the inventory items are termed as C class
items.

Introduction to
Supply Chain Management

Supply chain management refers to the coordination
of activities involved in making and moving a
product.
It is the network of businesses and business
processes involved in the creation and selling of a
product, from suppliers that procure raw materials
through retail outlets and customers.
Supply Chain process is divided into 2 parts:
Upstream and Downstream

The upstream portion of the supply chain includes :
the organization's suppliers and the processes for
managing relationships with them.
The downstream portion consists of the organizations and
processes for distributing and delivering products to the final
customers.
The manufacturer also has internal supply chain
processes for transforming the materials and services furnished
by suppliers into finished goods and for managing materials and
inventory.

Goal of SCM
• Supply chain management is concerned with the efficient
integration of suppliers, factories, warehouses and stores
so that merchandise is produced and distributed:
– In the right quantities
– To the right locations
– At the right time
• In order to
– Minimize total system cost
– Satisfy customer service requirements

Inefficiencies in the supply chain :
could include parts shortages, underutilized plant
capacity, excessive inventory, or runaway transportation
costs, Which are caused by inaccurate or untimely
information and can waste as much as 25% of operating
costs.
Uncertainties also arise because many events cannot be
foreseen—product demand, late shipments from
suppliers, defective parts or raw material, or production
process breakdowns.

Drivers of Supply Chain Performance
• Facilities
– places where inventory is stored, assembled, or
fabricated
– production sites and storage sites
• Inventory
– raw materials, WIP, finished goods within a supply chain
– inventory policies
• Transportation
– moving inventory from point to point in a supply chain
– combinations of transportation modes and routes
• Information
– data and analysis regarding inventory, transportation,
facilities throughout the supply chain
– potentially the biggest driver of supply chain performance

Classification of supply chain s/w
a)Supply chain planning system:
1) Generate demand forecasts for a product.
2) Develop sourcing and manufacturing plans for that
product
3) Make adjustments to production and distribution plans,
and
4) Share information with relevant supply chain members.
One of the most important supply chain planning
functions is demand planning, which determines how
much product a business needs to make to satisfy all of its
customers' demands.

b) Supply chain execution system:
Physical flow of products through distribution
centers and warehouses to ensure that
products are delivered to the right locations
in the most efficient manner.

QUALITY
• A subjective term for which each person has his
or her own definition.
– Characteristics of a product that bears on it’s
ability to satisfy the stated or implied needs
– A product or service free of deficiencies.
• Quality can be defined as the degree to which a
product can meet the requirements of customer

Steps to Improve Quality
• Improved Raw material
• Better Technology
• Scientific selection of worker
• Good working condition
• Harmonious relation with management
• Industrial Research
Importance of Quality
• Motivated employees
• Market Share
• Reputation
• International competitiveness
• Revenues generation increased (ultimate goal)

Quality Control
• It is a universal managerial process for
conducting operations so as to provide stability--
to prevent adverse change and to “maintain the
status of company”.
• Quality control can also be described as “a
process for meeting the established goals by
evaluating and comparing actual performance
and planned performance, and taking action on
the difference”

Factors influencing Quality
(Determinants of Quality)
• Technological Advancement
• Quality of Human Resources
• Availability of funds
• Management commitments
• Natural Factors – Geographical, Physical Climatic Condition
The Circle of Quality
Plan
Be specific
Identify
measurable goals
Do
Implement the
plan
Record and
document your
actions
Check
Review records and
documents
Get feedback from
process participants
Act
Make adjustments
and changes
Create new plan
element

Quality Control Process
1. Choose control subject
2. Establish Measurement
3. Establish standards of Performance
4. Measure Actual Performance
5. Compare to Standards (interpret the difference)
6. Take action on the difference

Objective of Quality Control
• To achieve the quality standards which are economical to achieve
and acceptable to the customer.
• To establish standard of raw material which are to be purchased.
• To evaluate the methods of production and suggest improvements
• To determine the extent of degree of quality deviations in a
product during the various stages of production.
• To identify the causes of deviations
• To suggest remedial measure to improve the quality

Statistical Quality Control (SQC)
• It is the scientific technique of controlling
quality by means of statistical methods.
• It can be defined as the technique of applying
statistical methods based upon the
mathematical theories of probability to quality
control problems with the purpose of
establishing quality standards and maintaining
devotion to those standards in cost economical
manner

Single Double & Sequential Sampling
• Single sampling: A large no. of enough sample is inspected
and the lot is accepted or rejected on the basis of percentage
or no. of defectives found in one sample.
• Double Sampling: In case, it is not possible to decide the
fate of the lot on the basis of single sample, then a second
sample is drawn from the lot. The final decision is based on the
combined result from both the samples.
• Sequential Sampling: It is also called as item by item
analysis. This sampling involves increasing the sample size by
one part at a time till the sample becomes large enough and
contains sufficient number of defectives on the basis of results
obtained, it is decided whether to accept the lot or not.

Total Quality Management
• It aims at “continuous process improvement “. It goes beyond
documenting processes with a view to optimizing them through
re-design.
• TQM is a philosophy which applies equally to all parts of the
organization.
• TQM can be viewed as an extension of the traditional approach
to quality.
• TQM places the customer at the forefront of quality decision
making.
• Greater emphasis on the roles and responsibilities of every
member of staff within an organization to influence quality.

Elements of TQM
• Leadership
– Top management vision, planning and support.
• Employee involvement
– All employees assume responsibility for the quality of their work.
• Product/Process Excellence
– Involves the process for continuous improvement.
• Continuous Improvement
– A concept that recognizes that quality improvement is a journey with no end and that
there is a need for continually looking for new approaches for improving quality.
• Customer Focus on “Fitness for Use”
– Design quality
• Specific characteristics of a product that determine its value in the marketplace.
– Conformance quality
• The degree to which a product meets its design specifications.

Customers’
expectationsfor
theproductor
service
Customers’
perceptionsof
theproductor
service
Customers’
perceptionsof
theproductor
service
Customers’
expectations
fortheproduct
orservice
Customers’
perceptionsofthe
productorservice
Gap
Perceived quality
is poor
Perceived quality is
good
Expectations >
perceptions
Expectations =
perceptions
Expectations <
perceptions
Perceived quality is governed by the gap between customers’
expectations and their perceptions of the product or service
Customers’
expectationsof
theproductor
service
Gap

Implementing TQM
• Successful Implementation of TQM
– Requires total integration of TQM into day-to-day operations.
• Causes of TQM Implementation Failures
– Lack of focus on strategic planning and core competencies.
– Obsolete, outdated organizational cultures.
• Lack of a company-wide definition of quality.
• Lack of a formalized strategic plan for change.
• Lack of a customer focus.
• Poor inter-organizational communication.
• Lack of real employee empowerment.
• Lack of employee trust in senior management.
• View of the quality program as a quick fix.
• Drive for short-term financial results.
• Politics and turf issues.
Obstacles to Implement TQM

ISO 9000 Series
ISO 9000 includes the following standards:
• ISO 9000:2000, Quality management systems - Fundamentals and vocabulary.
covers the basics of what quality management systems are and also contains the
core language of the ISO 9000 series of standards.
• ISO 9001:2000 Quality management systems - Requirements is intended for use
in any organization which designs, develops, manufactures, installs and/or services
any product or provides any form of service.
• ISO 9004:2000 Quality management systems - Guidelines for performance
improvements covers continual improvement. This gives you advice on what you
could do to enhance a mature system. This standard very specifically states that it
is not intended as a guide to implementation.
1. ISO-9000
2. SIX SIGMA
BENCHMARKING

SIX SIGMA
Key concepts of Six Sigma
At its core, Six Sigma revolves around a few key concepts.
• Critical to Quality: Attributes most important to the customer
• Defect: Failing to deliver what the customer wants
• Process Capability: What your process can deliver
• Variation: What the customer sees and feels
• Stable Operations: Ensuring consistent, predictable processes to improve what the
customer sees and feels
• Design for Six Sigma: Designing to meet customer needs and process capability
Six
Sigma
A statistical concept that measures a process in terms of
defects – at the six sigma level, there 3.4 defects per
million opportunities
A philosophy and a goal : as perfect as practically possible
A methodology and a symbol of quality

Define
Measure
Analyze
Six Sigma Phases
Define the project goals and customer (internal and
external) deliverables
Measure the process to determine current performance
Analyze and determine the root cause(s) of the defects
Improve
Control
Correct/Re-Evaluate Potential Solution
Define and Validate Monitoring and Control System

Control Charts
Process Control
Variables
X- Chart
R-Chart
Product Control
Attributes
P-Chart
nP-Chart
C-Chart

Process Control charts for variables
X-bar chart
In this chart the sample means are plotted in order
to control the mean value of a variable (e.g., size of
piston rings, strength of materials, etc.).
R chart
In this chart, the sample ranges are plotted in
order to control the variability of a variable.

The Process Control Chart Method
R Control Chart:
UCL = D4 x R
LCL = D3 x R
CL = R
X Control Chart:
UCL = X + A2 x R
LCL = X - A2 x R
CL = X
CL= Central Line
UCL= Upper Control Limit
LCL= Lower Control Limit
X = Mean of Mean or Grand Mean
R = Mean of Range
R = Range= Maximum –Minimum
A2 = Limit Average,
D3 = Range lower limit
D4 = Range Upper limit
will be given in the question
deviationstandard
3XLCL
3XUCL







Example: Control Charts for Variable Data
Slip Ring Diameter (cm)
Sample n 1 2 3 4 5 X R
1 5.02 5.01 4.94 4.99 4.96 4.98 0.08
2 5.01 5.03 5.07 4.95 4.96 5.00 0.12
3 4.99 5.00 4.93 4.92 4.99 4.97 0.08
4 5.03 4.91 5.01 4.98 4.89 4.96 0.14
5 4.95 4.92 5.03 5.05 5.01 4.99 0.13
6 4.97 5.06 5.06 4.96 5.03 5.01 0.10
7 5.05 5.01 5.10 4.96 4.99 5.02 0.14
8 5.09 5.10 5.00 4.99 5.08 5.05 0.11
9 5.14 5.10 4.99 5.08 5.09 5.08 0.15
10 5.01 4.98 5.08 5.07 4.99 5.03 0.10
50.09 1.15

Calculation
From Table above:
• ∑X = 50.09
• ∑R = 1.15
• N = 10
Thus;
• X= 50.09/10 = 5.009 cm
• R = 1.15/10 = 0.115 cm

Trial control limit
• UCLX = X+ A2 R = 5.009 + (0.58)(0.115) =
5.075 cm
• LCLX = X - A2R = 5.009 - (0.58)(0.115) =
4.943 cm
• UCLR = D4R = (2.114)(0.115) = 0.243 cm
• LCLR = D3R = (0)(0.115) = 0 cm

Control Chart Factors
Sample size X-chart R-chart
n A2 D3 D4
2 1.88 0 3.27
3 1.02 0 2.57
4 0.73 0 2.28
5 0.58 0 2.11
6 0.48 0 2.00
7 0.42 0.08 1.92
8 0.37 0.14 1.86

R Chart
0.00
0.05
0.10
0.15
0.20
0.25
0 1 2 3 4 5 6 7 8 9 10 11
Range
Subgroup
LCL
CL
UCL

Control Charts for Attributes
The inspection results based on the classification of
product’s deffectiveness and acceptability on the basis of
prescribed specifications. Representation in this way is
known as attributes.
The various control chart for attributes are :
A)P-Chart: Also known as fraction defective chart. It is
used for % defectives in a sample
B)The C chart: Also known as count chart. It is used to
monitor the number of defects per unit.
C)The np chart : In this chart the plotting is done on the
number of defectives per batch, per day, per machine
like c-chart but control limits are based on binomial
distribution. It is used when the subsize group is
constant and not variable and defectives are not rare.

The P Chart
P = sum of defective value
total no. of products inspected
UCLp= p + 3
LCLp = p - 3

The C Chart
C = sum of defects in all samples
total no. of items in all samples
UCLc = c + 3
LCLc = c - 3

The n- p Chart
P = np
total no. of products inspected
UCLnp= np + 3
LCLnp= np - 3

Industrial management

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (20)

Similar a Industrial management

Similar a Industrial management (20)

Más de Srinivasa Rao

Más de Srinivasa Rao (20)

Último

Último (20)

Industrial management