Unit 1

INDUSTRIAL ENGINEERING & MANAGEMENT1

Unit 1: INTRODUCTION: Definition of Industrial Engineering (IE) - Development, Applications, Role of an industrial engineer, Differences between production management and industrial engineering, Quantitative tools of IE and productivity measurement. Concepts of management, importance, functions of management. Scientific Management – Taylor’s principles. Theory X and Theory Y. Fayol’s principles of management.

Definition:

Industrial Engineering is defined as: “The special field of engineering concerned with the design, improvement and installation of integrated systems of people, materials, equipment and energy.

It draws upon specialized knowledge and skill in the mathematical, physical and social sciences together with the principles and methods of engineering analysis and design to specify, predict and evaluate the results to be obtained from such systems.”

Thus, industrial engineering is an engineering approach to the detailed analysis of the use and cost of the resources of an organization. The main resources are men, money, materials, equipment and machinery. The industrial Engineer carries out such analysis in order to achieve the objectives (to increase productivity, profits etc) and follow the policies of the organization.

Essentially, the industrial engineer is engaged in the design of a system and his function is primarily that of management.If an industrial engineer had to focus on only one concept to describe his field of interest and objective, it would have to be productivity improvement.

• Productivity improvement implies:(i) a more efficient use of resources;(ii) less waste per unit of input supplied;(iii) higher levels of output for fixed level of input supplied etc.

• The inputs may be:(i) Human efforts;

(ii) Energy in any of its numerous forms;(iii) Materials;(iv) Invested capital etc.

1 Prepared by Prof. T.S.Nageswara Rao, Department of Management Studies, DVR & Dr. HS MIC College of Technology, Kanchikacherla as a class notes. Adapted from various sources.

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HISTORY & DEVELOPMENT OF INDUSTRIAL ENGINEERING

• Industrial engineering had its roots in Industrial Revolution (around 1750). It was nourished by individuals who sought to advance organization and management principles at an early date. It emerged as a separate discipline and was formalized in the late 19 th and early 20 th centuries. It achieved maturity after World War II.

• The Industrial Revolution resulted from the advent of new inventions, especially in the textile industry, then steam engine, advances in metal cutting and the production of machine tools. These led to factories with large number of workers. With the growth in the size of industries, came the beginning of management and management thinking.

• The important steps and mile stones in the development of Industrial Engineering are :(a) Division of Labour (Adam Smith)(b) Scientific Management (Frederick Taylor)(c) Analytical Calculating Machine (Charles Babbage)(d) Method Study (Frank and Lillian Gilbreth)(e) Operations Research(f) Value Engineering & Systems Analysis(g) Human Engineering (or) Ergonomics.

• Before 1940, industrial engineering was applied mainly to manufacturing industries for improving methods of production, to develop work standards or to formulate production control and wage policies. Later on, the use of industrial engineering spread to non-manufacturing activities such as construction, transportation, air-line operations and maintenance, public utilities, government and military operations.

• Even today, industrial engineering finds major applications in manufacturing plants and industries. In an industry, besides production, the departments utilizing industrial engineering concept are marketing, finance, purchasing, industrial relations etc.

ROLES OF AN INDUSTRIAL ENGINEER

The following are the different types of roles and functions an industrial engineer may need to take on.

(1) Advisor/Consultant

The Industrial Engineer is available to others for interpretation of data, and to review it.

(2) Advocate/Activist

The Industrial Engineer promotes a process or approach actively..

(3) Analyst

The Industrial Engineer separates a whole into parts and examines them to explore for insights and characteristics.

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(4) Boundary Spanner

The Industrial Engineer bridges the information gap between industrial engineering and user.

(5) Motivator

The Industrial Engineer provides stimulus and skill availability to a group or an individual.

(6) Decision-maker

The Industrial Engineer selects a preference from among many alternatives for the topic of concern.

(7) Designer/Planner

The Industrial Engineer produces the solution specifications.

(8) Expert

The Industrial Engineer provides a high level of knowledge, skill and experience on a specific topic.

(9) Coordinator and Integrator

The Industrial Engineer coordinates the activities of various personnel.

(10) Innovator/Inventor

The Industrial Engineer seeks to produce a creative or advanced technology solution.

(11) Measurer

The Industrial Engineer obtains data and facts about the existing conditions.

(12) Project Manager

The Industrial Engineer operates, supervises and evaluates projects.

(13) Trainer/Educator

The Industrial Engineer trains employees with the skills and knowledge of industrial engineering.

(14) Negotiator

The Industrial Engineer helps the management in the negotiations with workers.

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QUANTITATIVE TOOLS USED IN INDUSTRIAL ENGINEERING

(1) Decision Matrices

• Allocation and investment problems involving a relatively small number of possible solutions

(2) Decision Trees

• Allocation and investment problems involving several decision periods

(3) Mathematical Programming

• Attempts to maximize the attainment level of one goal subject to a set of requirements and limitations.

• Linear Programming, Transportation Problem, Assignment model, and Integer Programming are examples.

(4) Network Models

• Family of tools designed for the purpose of planning and controlling complex projects.

• The best known models are PERT and CPM.

(5) Dynamic Programming

• An approach to decisions that are sequential in nature or can be reformulated so as to be considered sequential.

(6) Markov Chains

• Used for predicting the outcome of processes where systems or units change their condition over time (e.g., consumers change their preference for certain brands of products).

(7) Game Theory

• Provides a systematic approach to decision-making in competitive environments and a frame work for the study of conflict.

(8) Inventory Models

• Used for inventory control problems to decide the optimal order quantity that will minimize the annual inventory cost.

(9) Queuing Models

• Used to predict the performance of service systems involving queues.

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(10) Simulation Models

• Used for the analysis of complex systems when all other models fail.

PRODUCTIVITY

Productivity is defined as the ratio between output and input. Output means the amount produced or the number of items produced. Inputs are the various resources employed, e.g., land and building, equipment and

machinery, materials, labour etc. Every organization (whether manufacturing or service) is interested in determining and

increasing its labour productivity and productivity of machinery. If by using 200 workers, the company is able to produce goods worth Rs 20 lakhs daily,

the daily labour productivity is Rs 10,000. Similarly, in APSRTC, if there are 10,000 buses and the daily revenue is Rs 2 crores, the

daily productivity of a bus is Rs 2,000.

The Motivation to Increase Productivity

(A)For Management(i) To earn good profits

(ii) To repay the debts acquired from different sources

(iii) To sell more and

(iv)To stand better in the market.

(B) For Workers(i) Higher wages(ii) Better working conditions(iii) Higher standard of living and(iv)Job security and satisfaction

(C) For Customers Reduced prices of articles.

Productivity Measures

(a) Labour Productivity

The inputs are aggregated in terms of labour hours.

(b) Direct Labour Cost Productivity

The inputs are aggregated in terms of direct labour costs.

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(c) Capital Productivity

The inputs may be the charges during the period to depreciation or the book value of capital investment.

(d) Direct Cost Productivity

The inputs are all items of direct cost associated with resources aggregated on a monetary value basis.

(e) Energy Productivity

The input is the amount of energy consumed.

(f) Raw Material Productivity

In this formulation, the numerators are usually weights of product; the denominator is the weight of raw material consumed.

Increasing Productivity of Resources

• Increasing productivity implies getting more output from the same amount of input.

(1) Material

Industries in which the cost of raw material is a big percentage of the cost of finished goods, higher productivity can be achieved through proper use of materials i.e., by reducing scrap.

Sometimes, a little change in the design of the component or component layout may save a lot of material.

Productivity of materials can also be increased by using correct process, properly trained workers, suitable material handling and storage facilities and proper packaging.

(2) Labour

A little change in the design of component parts so as to facilitate final assembly can increase the number of products assembled per day with the same amount of labour.

(3) Plant, Equipment and Machinery

Productivity can be increased through the use of improved tools, simple attachments and other devices, and by proper maintenance of the machinery.

Total production times can be reduced considerably by improving machine setting up methods.

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(4) Land and Buildings

A suitable plant layout can accommodate more machinery in the same space and thus raise productivity.

Proper orientation, construction and inside conditions of a building definitely increase productivity.

PRODUCTION MANAGEMENT

Production management centers on two major areas:

(1) Design of the production system (which includes product, process, plant, equipment etc.,) and

(2) Development of the control systems to manage inventories, product quality, production schedules and productivity.

The functions of production management also include consideration of control system such as:

(1) Inventory control policies(2) Quality control policies(3) Production-schedule control policies(4) Productivity and cost control policies(5) Constructing control systems(6) Implementing and operating control systems(7) Modifying policies and designs.

Differences between Production Management and Industrial Engineering

Production Management Industrial Engineering

Production management attempts to familiarize a person with concepts and techniques specific to the analysis and management of a production activity.

Industrial engineering deals with the analysis, design and control of productive systems. (A productive system is any system that produces either a good or service).

It tells how to manage, i.e., how to direct human efforts in a production environment with less attention paid to the analysis and design of productive systems.

It does not focus on how to manage but focuses only on designing the system.

Example: Training of a pilot Example: Designing an aircraft

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CONCEPT OF MANAGEMENT

• Management may be labelled as the art of getting work done through people, with satisfaction for employer, employees and the public.

• For getting the work done (of an enterprise) through efforts of other people, it is necessary to guide, direct, coordinate and control human efforts towards fulfillment of the goals of the enterprise.

• The goals of the enterprise are fulfilled through the use of resources like men, money, materials and machinery.

Importance of Management

(1) No enterprise can survive without management, even if it possesses large amount of money, excellent machinery and expert man-power, because without management, it will be all confusion and nobody will know what to do and when to do it.

(2) Management creates a vital, dynamic and life-giving force to the enterprise.(3) Management coordinates activities of different departments in an enterprise and

establishes team spirit among the employees.(4) Management provides new ideas and vision to the organisation to do better.(5) Management tackles business problems and provides a tool for the best way of doing

things.(6) Only management can meet the challenge of change.(7) Management provides stability to the enterprise by changing and modifying the resources

in accordance with the changing environment of the society.(8) Management helps in personality development thereby raising efficiency and

productivity.

Characteristics of Management

(1) Management is goal-oriented.

(2) Management works as a catalyst to produce goods using labour, materials and capital.

(3) Management is a process comprising of functions such as planning, organising, staffing, directing and controlling.

(4) Management represents a system of authority – a hierarchy of command and control. Managers at various levels possess varying degrees of authority.

(5) Management is a unifying force. It integrates human and other resources to achieve the desired objectives.

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(6) Management harmonises the individual’s goals with the organizational goals to minimize the conflicts in the organization.

FUNCTIONS OF MANAGEMENT• One way to look at the process of management is to identify the basic functions which

make up the process.• Some functions are basic to managerial activities and are applicable to all business

enterprises.• The functions used to describe the process of management are: (i) Forecasting; (ii)

Planning; (iii) Organising: (iv) Staffing; (v) Directing; (vi) Coordinating; (vii) Controlling and (viii) Decision-making.

(1) Forecasting• Forecasting estimates the future work or what should be done in future.• Forecasting is a necessary preliminary to planning.• Forecasting begins with the sales forecast and is followed by production forecast and

forecasts for costs, finance, purchase, profit etc. (2) Planning• Planning is a rational, economic and systematic way of making decisions today which

will affect the future e.g., what is to be done in the future, who will do it, and where it will be done.

• Without planning, the activities of an organisation will lead to confusion.• Prior planning is very essential for utilizing the available facilities (men, materials,

machines etc.) to the best advantage. (3) Organizing• Organizing is the process by which the structure and allocation of jobs is determined.• Organizing involves determining activities required to achieve the company’s activities,

grouping these activities in a logical basis and finally assigning persons to the job designed.

• Organizing means organizing people, materials, jobs, time etc and establishing a framework in which responsibilities are defined and authorities are laid down.

(4) Staffing• Staffing is the process by which staff are selected, trained, promoted and compensated.• Staffing involves the developing and placing of qualified people in various jobs in the

organization.• Staffing is a continuous process. The aim is to have appropriate persons to move in to

vacated positions or newly created positions in the organization.(5) Directing• Directing is the process by which performance of subordinates is guided towards the

common goals of the organization.• Directing involves motivating, guiding and supervising subordinates toward company

objectives. Directing thus involves: (a) Giving instructions to the subordinates; (b)

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Guiding the subordinates to do their work; and (c) Supervising the subordinates to make certain that the work done by them is as per the plan established.

• Directing involves: (i) Leadership; (ii) Communication; (iii) Motivation and (iv) Supervision.(i) Leadership

• Leadership is the quality of the behaviour of the managers whereby they inspire confidence and trust in their subordinates, get maximum cooperation from them and guide their activities in an organized effort.

• Leadership is more than personal ability and skill.(ii) Communication

• Communication is the process by which ideas are transmitted, received and understood by others for the purpose of carrying out desired results.

• Communication may include verbal or written orders, reports, instructions etc.• An ineffective communication leads to confusion, misunderstanding, dissatisfaction and

sometimes even strikes. (iii) Motivation

• Motivation means inspiring the subordinates to do a work or to achieve company objectives effectively and efficiently.

• Motivation could be classified as:(a) Financial motivation such as salary, bonus, extra increments, cash awards

etc., and(b) Non-financial motivation such as promotion, recognition, praise etc.

(iv) Supervision• Supervision is necessary in order to ensure:

(a) that the work is going on as per the plan established;(b) that the workers are doing as they were directed to do.

(6) Coordinating

• Coordinating means achieving harmony of individual effort towards the accomplishment of company’s objectives.

• Ineffective coordination between different functions of a business enterprise such as production, sales, administration can ruin the enterprise.

• Coordination involves making plans that coordinate the activities of subordinates, regulate their activities on the job, and regulate their communications.

(7) Controlling

• Controlling is the process that measures current performance and guides it towards some pre-determined goal.

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• Controlling involves: (i) the monitoring of programme activities to make sure that end objectives are being met and (ii) the initiation of corrective action as required to overcome problems, if any, hindering the accomplishment of objectives.

• Controlling is necessary to ensure that orders are not misunderstood, rules are not violated and objectives have not been unknowingly shifted.

• Controlling is a continuous process which measures the progress of operations, verifies their conformity with the predetermined plan and takes corrective action, if required.

(8) Decision-making

• Decision making is the process by which a course of action is consciously chosen from available alternatives for the purpose of achieving desired results.

• An outstanding quality of a successful manager is his ability to make sound and logical decisions.

THEORY OF SCIENTIFIC MANAGEMENT (Frederic Taylor)

• Frederick W Taylor proposed the concept of scientific management, in 1910.

• The basic assumption here is that “MAN IS ECONOMIC IN NATURE”

• Scientific Management is the result of applying scientific knowledge and the scientific methods to the various aspects of management.

• The primary emphasis of scientific management was on planning, standardizing and improving human effort at the operative level in order to maximizing output with minimum input.

Basic Approach of Scientific Management

(i) Analyse work scientifically. Investigate all aspects of work on a scientific basis rather than using rules of thumb.

(ii) Provide specific guidelines for worker performance.(iii) Develop one best way of doing a job (using time and motion studies).(iv) Select workers best suited to perform the specific tasks.(v) Train and develop each workman in the most efficient method for doing the job.

(vi) Divide the work so that workmen and management share almost equally in the daily performance of each task; workers do their jobs as per the standards laid down and management does planning.

(vii) Achieve support and cooperation from workmen by arranging better working conditions, service conditions and guidance and by giving them greater economic rewards which in turn are obtained through increased efficiency and productivity.

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Scientific Management removed the workers’ judgment in planning, organizing and controlling his own task performance. Rather, it required that management should plan, organize and control the workers’ performance.

Opposition to Scientific Management

• Primary resistance to scientific management came from the managements, who were not prepared to discard the old style of working in favour of scientific approach.

• Another cause for opposition was that the scientific management treated workers like cogs in a well-oiled machine and that the system destroyed humanistic practices in industry.

THEORY X and THEORY Y (Douglas McGregor)

• Management researcher Douglas McGregor’s research suggested that managers’ assumptions about worker motivation tended to fall into one of two categories.

• McGregor felt that such assumptions exert a heavy influence on how managers operate:

The two theories are: (1) Theory X (Traditional Theory) and (2) Theory Y (Modern Theory).

THEORY X

The assumptions of Theory X are:

(i) Employees inherently (= naturally) dislike work and always try to avoid it.

(ii) Most employees are less ambitious, they do not want to take any responsibility and do not want to improve the wok through interest but wait for formal directions/instructions.

(iii) Most people need to be coerced (compelled), controlled and threatened with punishment to get them to work and achieve goals.

(iv) Motivation occurs only at the physiological and safety levels.

(v) Most people have little capacity for creativity, problem solving, and decision making.

(vi) Workers feel that they are of less importance in an organization. They think that they are considered as cogs in the wheel.

Based on the above assumptions, Theory X suggests that workers are to be directed, controlled and punished to achieve the desired results.

THEORY Y

The assumptions of Theory Y are:

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(i) Work is as natural as play or leisure, if the conditions are favourable.

(ii) The workers are committed to the objectives of the organization. They are self-controlled and no coercion (= force) is required.

(iii) The workers feel responsible for the work for which they are appointed.

(iv) The workers are active, creative and have the capability of decision-making. They also actively participate in decision-making.

(v) Motivation occurs through self-actualization and satisfaction.

(vi) The intellectual potentials of most individuals are only partially utilized in most organizations.

(vii) When conditions are favourable, the average person not only accepts responsibility but also seeks it.

Thus, Theory Y suggests that people are self-driven, self-controlled and are participative in nature. So, the management must create an environment suitable for the employees to excel.

THEORY X (or) THEORY Y?

• McGregor felt that in some situations Theory X assumptions may be more appropriate than those of Theory Y.

• For example, when people are being asked to perform tasks they would strongly prefer not to perform, Theory X is more appropriate. Here, the work is not ‘as natural as play’.

• From McGregor’s point of view, an effective leader should apply the appropriate theory depending upon the context.

PRINCIPLES OF MANAGEMENT (Henri Fayol)

• Henri Fayol, a French industrialist is known as the ‘father of modern management theory”. He joined a coal-and-iron company as an apprentice mining engineer and reached the top position of Managing Director.

• On the basis of his experience as a top-level manager, Fayol realized that it is possible to develop theories about management that could be taught to individuals with administrative responsibilities.

• Fayol outlined a number of principles that he found useful in running his large organization.

• The fourteen principles are: (1) Division of work; (2) Authority & responsibility; (3) Discipline; (4) Unity of command; (5) Unity of direction; (6) Subordination of individual interest to general interest; (7) Remuneration; (8) Centralization; (9) Scalar chain; (10)

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Order; (11) Equity; (12) stability of personnel tenure; (13) Initiative and (14) Espirit de Corps.

• He added that these principles apply not only to business but also to political, religious, charitable, military and other organizations.

(1) DIVISION OF WORK

• Division of work or work specialization results in efficient use of resources and increases productivity. This is applicable to both managerial and technical functions.

(2) AUTHORITY & RESPONSIBILITY

• Authority means the right to give orders or command. Responsibility is the obligation to achieve objectives. Authority and responsibility should be commensurate with each other.

• If there is too much authority, it is likely to be misused. If there is too much responsibility, it may result in frustration.

(3) DISCIPLINE

• Discipline means following of rules, regulations, policies and procedures by all employees of the organizations. Discipline is absolutely necessary for running of an organization. There must be a clear and fair agreement for observing the rules and regulations.

(4) UNITY OF COMMAND

• An employee should receive orders from one supervisor only to avoid possible confusion and conflict. (= A worker should not be under the control of more than one supervisor).

(5) UNITY OF DIRECTION

• The activities of an organization should be organized such that there is one plan and one person in charge.

(6) SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST

• The interests of one employee or group of employees should not be given importance over the interests of the organization.

(7) REMUNERATION

• Compensation and methods of compensation should be fair to both the employee and the employer.

(8) CENTRALIZATION

• If all the powers are vested in the top management, it is called centralization of authority. If all the powers are vested in the lower management, it is called decentralization. A

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balance between centralization and decentralization must be achieved. The objective here is the optimum utilization of the capabilities of the personnel.

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(9) SCALAR CHAIN

• A scalar chain of authority extends from the highest to the lowest rank of an organization and defines the communication path. However, horizontal communication may also be encouraged as long as managers are kept informed.

(10) ORDER• Order is the principle of arrangement of things and people.• Everything should be in its place and there must be a place for everything.• Order leads to the creation of sound organization with efficient management.(11) EQUITY • Organizations run best when managers are fair with their employees.

(12) STABILITY OF TENURE OF EMPLOYEES• Stability of tenure increases the efficiency of the employees and is a symbol of sound

management. Because time is required to understand the jobs at hand and become effective in new jobs, high turnover of employees should be prevented.

(13) INITIATIVE• Managers should encourage and develop the subordinates to take initiative.• Initiative is the result of creative thinking and imagination and helps in formulating,

planning and in execution.(14) ESPIRIT DE CORPS• Espirit de corps means team spirit. • Union is strength. Harmony and teamwork, the prerequisites for better performance and

effective organization, are essential in every organization.

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