IM Questions and Answers-Unit 1 and 2

7/29/2019 IM Questions and Answers-Unit 1 and 2

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Industrial Management (06ME81) Questions and Answersby Yogeesha H.C. AP/Mech, NCET

Unit 1 -Introduction

1. Define Management. Bring out its historical perspectiveManagement in all business and organizational activities is the act of getting people together to accomplish

desired goals and objectives using available resources efficiently and effectively. Management comprises

planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more

people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deploymentand manipulation of human resources, financial resources, technological resources, and natural resources.

Historical Perspective of Management

The verb manage comes from the Italian maneggiare (to handle, especially tools), which derives from the Latinword manus (hand). The French word mesnagement (later mnagement) influenced the development in

meaning of the English word management in the 17th and 18th centuries.

While management has been present for millennia, several writers have created a background of works that

assisted in modern management theories. Classical economists such as Adam Smith (17231790) and John

Stuart Mill (18061873) provided a theoretical background to resource-allocation, production, and pricing

issues. About the same time, innovators like Eli Whitney (17651825), James Watt (17361819), and Matthew

Boulton (17281809) developed elements of technical production such as standardization, quality-control

procedures, cost-accounting, interchangeability of parts, and work-planning. Many of these aspects of

management existed in the pre-1861 slave-based sector of the US economy.

By about 1900 one finds managers trying to place their theories on what they regarded as a thoroughly

scientific basis. Examples include Henry R. Towne's Science of management in the 1890s, Frederick Winslow

Taylor's The Principles of Scientific Management (1911), Frank and Lillian Gilbreth's Applied motion study(1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first college management textbook in 1911.

In 1912 Yoichi Ueno introduced Taylorism to Japan and became first management consultant of the

"Japanese-management style".

The first comprehensive theories of management appeared around 1920. The Harvard Business School offered

the first Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (18411925) and

Alexander Church described the various branches of management and their inter-relationships. In the early20th century, people like Ordway Tead (18911973), Walter Scott and J. Mooney applied the principles of

psychology to management, while other writers, such as Elton Mayo (18801949), Mary Parker Follett (1868

1933), Chester Barnard (18861961), Max Weber (18641920), Rensis Likert (19031981), and Chris Argyris

(1923 - ) approached the phenomenon of management from a sociological perspective.

Peter Drucker (19092005) wrote one of the earliest books on applied management: Concept of the

Corporation. It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of

the organization. Some of the more recent developments include the Theory of Constraints, management by

objectives, reengineering, Six Sigma and various information-technology-driven theories such as agile

software development, as well as group management theories such as Cog's Ladder.

2. Discuss Management is an Art or Science

Harold Koontz has defined management as the art of getting things done through people. Art is an

inborn talent and refers to creative skills and talents which people require to conduct certain activities

in order to accomplish certain goals. Management is an art because of its following features.a. Creative: Managers have to come with creative ideas or solutions to handle unique business

problems

b. Individual approach: Every manager need to adopt his individual approach of managing tohandle situations

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c. Application and dedication: Management requires not only skills and knowledge but there isalso a need for discipline, dedication and commitment

d. Initiative: Managers are like artists take the initiative in doing the right things at right time.

This helps to accomplish objectives more effectively and efficiently.

e. Intelligence: Managers should possess mental intelligence, social intelligence, inter personalintelligence an d emotional intelligence

Management as a ScienceFather of Scientific Management F.W. Taylor has declared management has to be scientific.Management is a social science because it deals with human beings. Following features of

management states that it is a science.

Systematic Decision making: Management starts with the process of systematic

decisions. Before taking any right decisions from right source and at right time is to becollected. This process has to be followed systematically.

Situational Output: The output management process may vary without change in input.This is possible by providing some resources, tools, incentive and by motivation.

Science may be described as a systematized body of knowledge based on proper findings

and exact principles and is capable of verification. It is a reservoir of fundamental truths

and its findings apply safely in all the situations. In this sense, management is a science asit has also developed some systematized knowledge. Like other sciences, management has

also developed certain principles, laws, generalization, which are universal in nature and

are applicable wherever the efforts of the people are to be coordinated. But management isnot as exact science as other physical sciences like physic, chemistry, biology, astronomy

etc. The main reason for the inexactness of science of management is that it deals with the

people and it is very difficult to predict their behavior accurately. In this way,management falls in the area of 'social sciences'. Thus, it is a social science.

From the above, we conclude that management is an art and science both. According to

American Society of Mechanical Engineers. "Management is the art and science ofpreparing, organizing and directing human efforts to control the forces and utilize the

material of nature for the benefit of men. "Thus, it has now been accepted thatmanagement is an art as well as science. It has the elements of both arts and science. In the

words of Dean Stanley, "Management is a mixture of an art an science - the present ratiois about 80% art and 20% science."

3. Explain the contribution of Taylor, Henry Fayol to the evolution of management.

Fredrick W Taylor called as the father of Scientific Management, was born in 1856 in Philidelphia.He began his career in 1871 as an apprentice machinist and turner at Cramp Shipyard, USA. Then he

joined Midvale Steel Works as machinist. By his hardwork, he became chief engineer in 1884.

He developed the Principle of breaking the task i.e. the job is broken into elements for timing the

same. He evolved a principle of investigating the work on scientific basis, by selecting the best

worker for a task and training him further to acquire desired skill, developing the concept calledscientific management.

The four objectives of management under scientific management were as follows:

The development of a science for each element of a man's work to replace the old rule-of-

thumb methods.

The scientific selection, training and development of workers instead of allowing them to

choose their own tasks and train themselves as best they could.

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The development of a spirit of hearty cooperation between workers and management toensure that work would be carried out in accordance with scientifically devised procedures

The division of work between workers and the management in almost equal shares, each

group taking over the work for which it is best fitted instead of the former condition in which

responsibility largely rested with the workers. Self-evident in this philosophy areorganizations arranged in a hierarchy, systems of abstract rules and impersonal relationshipsbetween staff.

F.W. Taylor's Contribution to Organizational Theory

This required an organization theory similar for all practical purposes to that advocated by those

organizational theorists who followed. These theorists developed principles of management which

included much of Taylor's philosophy

His framework for organization was:

clear delineation of authority

responsibility separation of planning from operations

incentive schemes for workers

management by exception

task specialization

Contribution of Henry Fayol:

Henry Fayol, the father of Principles of Modern Management was born in 1841 in France. He

graduated as a mining engineer in 1860 from National School of mining.

Henri Fayol was concerned with the principles of organization and the function of management.

Fayol laid the foundation of management as a separate body of knowledge. He always insisted that if

scientific forecasting and proper methods are used in management than company can get satisfactoryresults. According to Fayol, management was not personal talent; it is a knowledge base skill.

Henri Fayols Administrative Management is based on six admin activities. They are-

1. Technical : Production and manufacture2. Managerial : Planning, controlling, co-ordination

3. Commercial : Purchasing and selling

4. Financial : Use of capital5. Accounting : Asset, Liabilities, cost, profits

6. Security : Protection of goods and Person

Fayol derived the following fourteen principles.-

Division of work: Division of work means specialization. Each job and work should be

divided into small task and should be assigned to specialist of it.

Authority and responsibility: Authority means right to give order and command while

responsibility means to accomplish objective.

Discipline: Discipline is required at every level in every organization. Fayol stated discipline

in terms of obedience, application, and respect to superiors.

Unity of command: A subordinate should receive order from only one boss.

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Unity of direction: It means that all the works of an organization must work together to

accomplish a common objective in under one plan and head.

Subordination of individual interest to common interest: Worker follows the common interest

of organization rather than individual.

Remuneration: Remuneration should be fair and adequate. It includes both types of incentivesfinancial as well as non-financial.

Centralization: There should be one central point in organization which exercises overalldirection and control of all the parts.

Scalar Chain: Scalar chain is the chain or line of command from superior to subordinates.

Order: Only proper order can give an efficient management.

Equity: Equity creates loyalty and devotion among the employees.

Stability of tenure personnel: Security of job for an employee in an organization is very

important and pre-requisite condition. Retaining productive employee should always a higher

priority of management.

Esprit de corps: Management should encourage harmony and proper understandings between

workers. Fayol said that in union there is strength. Whole organization should work as a team.

Initiative: Manager should be encouraged the employees Initiative for creative working

4. Discuss the contribution of Frank B Gilbreth to Management

F.B. Gilbreth was an American Engineer, building contractor and management consultant. He madehis most distinctive contribution to scientific management.

He made studies in applying principles of motion economy and is considered to be the

originator of motion study.

He took an analysis approach and stressed the importance of giving attention to minute

details of work. This approach was to become an important characteristic of all scientific

management.

He felt that if the one best way to do work could be discovered for each and every element

in a workers movements and surroundings, the resulting gains in productivity is significant, He was the first to apply the motion picture camera to record and analyze the operations.

His particular contribution was to develop management as a social science with the humanbeing the centre of interest.

5. Explain the characteristics of scientific management. Discuss further, any two schools of

management thought.

Characteristics of Scientific Management

Replace working by "rule of thumb," or simple habit and common sense, and instead use the

scientific method to study work and determine the most efficient way to perform specific tasks.

Rather than simply assign workers to just any job, match workers to their jobs based on capabilityand motivation, and train them to work at maximum efficiency.

Monitor worker performance, and provide instructions and supervision to ensure that they're usingthe most efficient ways of working.

Allocate the work between managers and workers so that the managers spend their time planning

and training, allowing the workers to perform their tasks efficiently.

The Schools of Management thought

The schools of management thought are theoretical frameworks for the study of management. Each of

the schools of management thought are based on somewhat different assumptions about human

beings and the organizations for which they work. Since the formal study of management began latein the 19th century, the study of management has progressed through several stages as scholars and

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practitioners working in different eras focused on what they believed to be important aspects of goodmanagement practice. Over time, management thinkers have sought ways to organize and classify the

voluminous information about management that has been collected and disseminated. These attempts

at classification have resulted in the identification of management schools.

Five Major Schools of Management ThoughtMANAGEMENT SCHOOLS Beginning

Dates

Emphasis

CLASSICAL SCHOOL Managing workers and organizations more ef-

ficiently.

Scientific Management 1880s

Administrative Management 1940s

Bureaucratic Management 1920s

BEHAVIORAL SCHOOL Understanding human behavior in the organi-

zation.

Human Relations 1930s

Behavioral Science 1950s

QUANTITATIVE SCHOOL Increasing quality of managerial decision-mak-

ing through the application of mathematical

and statistical methods.Management Science 1940s

Operations Management 1940s

Management Information Sys-

tems

1950s1970s

SYSTEMS SCHOOL 1950s Understanding the organization as a system

that transforms inputs into outputs while in

constant interaction with its' environment.

CONTINGENCY SCHOOL 1960s Applying management principles and process-

es as dictated by the unique characteristics of

each situation.1. THE CLASSICAL SCHOOL

The classical school is the oldest formal school of management thought. Its roots pre-date the

twentieth century. The classical school of thought generally concerns ways to manage work andorganizations more efficiently. Three areas of study that can be grouped under the classical school are

scientific management, administrative management, and bureaucratic management.

SCIENTIFIC MANAGEMENT:

In the late 19th century, management decisions were often arbitrary and workers often worked at anintentionally slow pace. There was little in the way of systematic management and workers and

management were often in conflict. Scientific management was introduced in an attempt to create a

mental revolution in the workplace. It can be defined as the systematic study of work methods in

order to improve efficiency. Frederick W. Taylor was its main proponent. Other major contributorswere Frank Gilbreth, Lillian Gilbreth, and Henry Gantt.

Scientific management has several major principles. First, it calls for the application of the scientificmethod to work in order to determine the best method for accomplishing each task. Second, scientific

management suggests that workers should be scientifically selected based on their qualifications and

trained to perform their jobs in the optimal manner. Third, scientific management advocates genuine

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cooperation between workers and management based on mutual self-interest. Finally, scientificmanagement suggests that management should take complete responsibility for planning the work

and that workers' primary responsibility should be implementing management's plans. Other

important characteristics of scientific management include the scientific development of difficult but

fair performance standards and the implementation of a pay-for-performance incentive plan based onwork standards.

Scientific management had a tremendous influence on management practice in the early twentiethcentury. Although it does not represent a complete theory of management, it has contributed to the

study of management and organizations in many areas, including human resource management and

industrial engineering. Many of the tenets of scientific management are still valid today.

ADMINISTRATIVE MANAGEMENT.

Administrative management focuses on the management process and principles of management. In

contrast to scientific management, which deals largely with jobs and work at the individual level of

analysis, administrative management provides a more general theory of management. Henri Fayol is

the major contributor to this school of management thought.

Fayol was a management practitioner who brought his experience to bear on the subject of

management functions and principles. He argued that management was a universal process consistingof functions, which he termed planning, organizing, commanding, coordinating, and controlling.

Fayol believed that all managers performed these functions and that the functions distinguished

management as a separate discipline of study apart from accounting, finance, and production. Fayolalso presented fourteen principles of management, which included maxims related to the division of

work, authority and responsibility, unity of command and direction, centralization, subordinate

initiative, and team spirit.

Although administrative management has been criticized as being rigid and inflexible and the validityof the functional approach to management has been questioned, this school of thought still influences

management theory and practice. The functional approach to management is still the dominant way oforganizing management knowledge, and many of Fayol's principles of management, when applied

with the flexibility that he advocated, are still considered relevant.

2. THE BEHAVIORAL SCHOOL

The behavioral school of management thought developed, in part, because of perceived weaknesses

in the assumptions of the classical school. The classical school emphasized efficiency, process, andprinciples. Some felt that this emphasis disregarded important aspects of organizational life,

particularly as it related to human behavior. Thus, the behavioral school focused on trying tounderstand the factors that affect human behavior at work.

HUMAN RELATIONS.

The Hawthorne Experiments began in 1924 and continued through the early 1930s. A variety of

researchers participated in the studies, including Clair Turner, Fritz J. Roethlisberger, and Elton

Mayo, whose respective books on the studies are perhaps the best known. One of the majorconclusions of the Hawthorne studies was that workers' attitudes are associated with productivity.

Another was that the workplace is a social system and informal group influence could exert a

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powerful effect on individual behavior. A third was that the style of supervision is an important factorin increasing workers' job satisfaction. The studies also found that organizations should take steps to

assist employees in adjusting to organizational life by fostering collaborative systems between labor

and management. Such conclusions sparked increasing interest in the human element at work; today,

the Hawthorne studies are generally credited as the impetus for the human relations school.

According to the human relations school, the manager should possess skills for diagnosing the causesof human behavior at work, interpersonal communication, and motivating and leading workers. Thefocus became satisfying worker needs. If worker needs were satisfied, wisdom held, the workers

would in turn be more productive. Thus, the human relations school focuses on issues of

communication, leadership, motivation, and group behavior. The individuals who contributed to theschool are too numerous to mention, but some of the best-known contributors include Mary Parker

Follett, Chester Barnard, Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The human

relations school of thought still influences management theory and practice, as contemporarymanagement focuses much attention on human resource management, organizational behavior, and

applied psychology in the workplace.

6. Compare public sector and private sector companies

Private Sector Public Sector

1. Profit is the main motive. It benefits only

owners

Service to the country us the main motive. It

benefits all.

2. It is owned and managed by an individual

or a group of individuals

It is owned and managed by the Government.

3. It has to face tough competition in the

market.

Generally it is a monopoly concern hence less

competition.

4. Large amount of capital may not be

available

Large amount of capital is available

5. It leads to economic inequality.Concentration of wealth in the hands of a

few.

It leads to economic equality. The profits earnedare utilized for public welfare.

6. Large scale business is not possible

because of limited resources.

Large scale business is always possible as the

government has huge resources

7. Private sector dominates in the production

of consumer goods.

Public sector dominates in the production of

producer goods.

7. List characteristics, advantages, and disadvantages of joint stock company and co-operative

organizations.

Joint Stock CompaniesThe companies in India are governed by the Indian Companies Act, 1956. According to the Act a

company means a company formed and registered under this act. It is an artificial person created by

law, having a separate legal entity, with perpetual succession and a common seal. The capital of acompany is divided into a number of shares of equal value. Members of the company holding one or

more shares, are called the companys shareholders

CHARACTERISTICS OF A JOINT STOCK COMPANY

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1. Artificial legal Person: A company is an artificial person created by law and existing only incontemplation of law. A human being, who takes birth, grows, enters into relationships and dies,

whereas a joint stock company also takes birth, grows, enters into relationship and dies. However,

it is called an artificial person as its birth, existence and death are regulated by law.

2. Separate Legal Entity: A company has a separate legal entity distinct from its members. It canown property and enter into contracts in its own name. It can sue and be sued in its own name.

3. Perpetual Succession: A company enjoys a perpetual succession and its life is not affected by thedeath, insolvency, lunacy, etc. of its members or directors.

4. Limited Liability: Liability of the members of a limited company is limited to the value of the

shares subscribed by them or to the amount of guarantee given by them.

5. Common Seal: A company has a common seal because being an artificial person it cannot signfor itself.

6. Transferability of Shares: The shares of a public limited company are freely transferable. They

can be purchased and sold through the Stock Exchange.

7. Separation of Ownership and Management: The number of members of a public company is

generally very large so all of them or most of them cannot take part in the day to day management

of the company. The company is managed by Board of Directors who are elected by the

members, hence the ownership of a company is seprated from its managements.

ADVANTAGES OF JOINT STOCK COMPANIES

There are many advantages which the company form of business organization enjoys over other formof business organizations some of them are as follows:

1. Limited Liability: Shareholders of a company are liable only to the extent of the face value of

shares held by them.

2. Large Financial Resources: Company form of ownership enables the collection of huge financial

resources. The capital of a company is divided into shares of small denominations so that people

with small means can also buy the shares of a company.

3. Continuity: A company enjoys uninterrupted business life. As a body corporate, it will continue to

exist even if all of its members die or desert it.4. Transferability of Shares: The shares of a pubic limited company can be freely transferred by the

members without the consent of other members.

5. Diffused Risk: The risk of loss in a company is spread over a large number of members.

6. Social Benefits: The company organization helps to mobilize savings of the community and

invest them in industry.

LIMITATIONS OF JOINT STOCK COMPANIES

1. Difficulty of Formation: It is a very difficult and expensive to form a company. A number of

documents have to be prepared and filed with the Registrar of companies.

2. Excessive Government Control: A company is subject to elaborate statutory regulations in its day-to-day operations. Periodical reports. Audit and Publications of accounts is obligatory.

3. Oligarchic Management: The management of a company is supposed to be democratic but inpractice company becomes an Oligarchy (rule by few).

4. Delay in Decision: Too many levels of management create problems in taking decisions. A lot of

time is wasted in calling and holding meetings and in passing resolutions.

5. Lack of Secrecy: Under the Companies Act, 1956 a company is required to disclose to the publica variety of information on its working. This results in lack of secrecy

Co-operative SocietiesThe term co-operation is derived from the Latin word co-operari, where the word co means with

and operari means to work. Thus, co-operation means working together. It means those who want to

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work together with some common economic objective can form a society which is termed as co-operative society. It is a voluntary association of persons who work together to promote their

economic interest. It works on the principle of self-help as well as mutual help. Nobody joins a

cooperative society to earn profit. People come forward as a group, pool their individual resources,

utilize them in the best possible manner, and derive some common benefit out of it. Cooperation is aform of organization wherein persons voluntarily associate together as human beings, on a basis of

equality, for the promotion of economic interests of themselves.CHARACTERISTICS OF CO-OPERATIVE SOCIETIES

A co-operative society is a special type of business organization different from other forms of

business organization you have learnt earlier. Let us discuss its characteristics.

1. Voluntary Association: A Cooperative Society is a voluntary association of persons. A membercan join the society as and when he likes, continue for as long as he likes, and leave the society at

will.

2. Open Membership: The membership of a Co-operative Society is open to all those who have acommon interest. Membership is not restricted on the basis of caste, sex, colour or religion, but

may be limited to the employees of a particular organisation.

3. Separate Legal Entity: A cooperative undertaking must seek registration under the Cooperative

Societies Act, 1912, or under the relevant Cooperative Societies Act of the State Government. Acooperative society, has a separate legal existence, distinct from its members.

4. Source of Finance: The capital of a cooperative society is raised from among its members in the

form of share capital. However, it can easily raise loans and secure grants from government afterits registration.

5. Service Motive: The primary aim of a cooperative society is service to its members, though it may

also in the process happen to earn reasonable profits for itself.

6. Voting Power: Each member has only one vote, irrespective of the number of shares held by him

or her.

TYPES OF CO-OPERATIVE SOCIETIES

Co-operatives socities may be classified on the basis of the nature of services rendered by them. The

following are the main types of cooperatives societies.1. Consumers Co-operative Societies: These societies are formed to protect the interest of general

consumers by making consumer goods available at a reasonable price. They purchase goodsdirectly from the producers, this eliminate the middlemen in the process of distribution. Kendriya

Bhandar, Apana Bazar and Super Bazar are examples of consumers co-operative societies.

2. Producers Co-operative Societies: These societies are formed to protect the interest of producerswho are basically small in size, by making available items of their needs for production like raw

materials, tools and equipments and machinery, etc. Handloom societies like APPCO, Bayanika,

Haryana Handloom, etc., are examples of producers co-operative societies.

3. Marketing Cooperative Societies: These are cooperatives societies of small producers andmanufactures who find it difficult to sell their products individually. These societies collect the

products from the individual members and takes the responsibility of selling those products in themarket. Gujarat Co-operative Milk Marketing Federation that sells AMUL milk products is anexample of marketing co-operative society.

4. Credit Cooperative Societies: These societies are formed to provide financial support to the

members. They accept deposits from members and grant them loans at reasonable rates of interestin times of need. Village Service Co-operative Society and Urban Cooperative Banks are

examples of co-operative credit society.

5. Cooperative Group Housing Societies: These are residential societies which are formed to provideresidential houses to members. They purchase land and construct houses or flats and allot the

same to members

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The Advantages of Co-operative Society

A Co-operative form of business organization has the following advantages:

Easy Formation: Formation of a co-operative society is very easy compared to a joint stock

company. Any ten adults can voluntarily form an association and get it registered with the

Registrar of Co-operative Societies.

Open Membership: Persons having common interest can form a co-operative society. Any

competent person can become a member at any time he/she likes and can leave the society atwill.

Democratic Control: A co-operative society is controlled in a democratic manner. The

members cast their vote to elect their representatives to form a committee that looks after the

day-to-day administration. This committee is accountable to all the members of the society.

Limited Liability: The liability of members of a co-operative society is limited to the extent of

capital contributed by them. Unlike sole proprietors and partners the personal properties of

members of the co-operative societies are free from any kind of risk because of businessliabilities.

Elimination of Middlemens Profit: Through co-operatives the members or consumers control

their own supplies and thus, middlemens profit is eliminated.

State Assistance: Both Central and State governments provide all kinds of help to thesocieties. Such help may be provided in the form of capital contribution, loans at low rates of

interest, exemption in tax, subsidies in repayment of loans, etc.

Stable Life: A co-operative society has a fairly stable life and it continues to exist for a longperiod of time. Its existence is not affected by the death, insolvency, lunacy or resignation of

any of its members.

Disadvantages of Cooperative Society

Besides the above advantages, the co-operative form of business organisation also suffers from

various limitations. Let us learn these limitations.

Limited Capital: The amount of capital that a cooperative society can raise from its member isvery limited because the membership is generally confined to a particular section of the

society. Again due to low rate of return the members do not invest more capital.

Governments assistance is often inadequate for most of the co-operative societies.

Problems in Management: Generally it is seen that co-operative societies do not functionefficiently due to lack of managerial talent. The members or their elected representatives are

not experienced enough to manage the society. Again, because of limited capital they are not

able to get the benefits of professional management.

Lack of Motivation: Every co-operative society is formed to render service to its members

rather than to earn profit. This does not provide enough motivation to the members to put in

their best effort and manage the society efficiently.

Lack of Co-operation: The co-operative societies are formed with the idea of mutual co-

operation. But it is often seen that there is a lot of friction between the members because of

personality differences, ego clash, etc. The selfish attitude of members may sometimes bringan end to the society.

Dependence on Government: The inadequacy of capital and various other limitations make

cooperative societies dependent on the government for support and patronage in terms ofgrants, loans subsidies, etc. Due to this, the government sometimes directly interferes in the

management of the society and also audits their annual accounts.

8. List the types of ownership of industries and explain the salient features, advantages,

disadvantages and application of proprietorship and partnership firms.

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Types of ownership industriesa. Proprietorship

b. Partnerships

c. Joint Stock Companies

d. Co-operative Societies

Proprietorship

Meaning: A proprietorship or one mans business is a form of business organization owned andmanaged by a single person. He is entitled to receive all the profits and bears all risk ofownership.

Features: The important features of sole proprietorship are:

1. The business is owned and controlled by only one person.2. The risk is borne by a single person and hence he derives the total benefit.

3. The liability of the owner of the business is unlimited. It means that his personal assets

are also liable to be attached for the payment of the liabilities of the business.

4. The business firm has no separate legal entity apart from that of the proprietor, and so the

business lacks perpetuity.

5. To set up sole proprietorship, no legal formalities are necessary, but there may be legal

restrictions on the setting up of particular type of business.6. The proprietor has complete freedom of action and he himself takes decisions relating to

his firm.

7. The proprietor may take the help of members of his Family in running the business.

Advantages

1. Ease of formation: As no legal formalities are required to be observed.

2. Motivation: As all profits belong to the owner, he will take personal interest in the

business.

3. Freedom of Action: There is none to interfere with his authority. This freedom promotes

initiative and self-reliance.

4. Quick Decision: No need for consultation or discussion with anybody.5. Flexibility: Can adapt to changing needs with comparative ease.

6. Personal Touch: comes into close contact with customers as he himself manages thebusiness. This helps him to earn goodwill.

7. Business Secrecy: Maintaining business secrets is very important in todays competitive

world.

8. Social Utility: Encourages independent living and prevents concentration of economic

power.

Disadvantages

1. Limited resources: one mans ability to gather capital will always be limited.2. Limited Managerial Ability

3. Unlimited Liability: Will be discouraged to expand his business even when there are goodprospects for earning more than what he has been doing for fear of losing his personalproperty.

4. Lack of Continuity: uncertain future is another handicap of this type of business. If the

sole proprietor dies, his business may come to an end.5. No Economies of Large Scale: As the scale of operations are small, the owner cannot

secure the economies and large scale buying and selling. This may raise the cost of

production.

Application of Proprietorship

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From the discussion of the advantages and disadvantages of sole proprietorship above, it is clear thatthis form of business organization is most suited where:

1. The amount of capital is small

2. The nature of business is simple in character requiring quick decisions to be taken

3. Direct contact with the customer is essential and4. The size of demand is not very large.

These types of conditions are satisfied by various types of small business such as retail shops, legal ormedical or accounting profession, tailoring, and service like dry cleaning or vehicle repair etc. hencesole proprietor form of organization is mostly suitable for these lines of businesses. This form of

organization also suits those individuals who have a strong drive for independent thinking and highly

venturous some in their attitude.

Partnership Form of OrganizationGenerally when a proprietor finds its difficult to handle the problems of expansion, he thinks of taking a partner.

In other words, once a business grows beyond the capacity of a sole proprietorship and or a Joint Hindu Family, it

becomes unarguably necessary to form partnership. It means that partnership grows out of the limitations of one-

man business in terms of limited financial resources, limited managerial ability and unlimited risk.Partnershiprepresents the second stage in the evolution of ownership forms.

In simple words, a Partnership is an association of two or more individuals who agree to carry on business togetherfor the purpose of earning and sharing of profits. However a formal definition is provided by the Partnership Act of

1932.

Section 4 of the Partnership Act, 1932 defines Partnership as the relation between persons who have agreed to

share the profits of a business carried on by all or any of them acting for all

Features of Partnership

1. Simple procedure of formation: the formation of partnership does not involve any complicated legal

formalities. By an oral or written agreement, a Partnership can be created. Even the registration of the

agreement is not compulsory.

2. Capital: The capital of a partnership is contributed by the partners but it is not necessary that all the partners

should contribute equally. Some may become partners without contributing any capital. This happens when

such partners have special skills, abilities or experience. The partnership firm can also raise additional funds byborrowing from banks and others.

3. Control: The control is exercised jointly by all the partners. No major decision can be taken without consent of

all the partners. However, in some firms, there may partners known as sleeping or dormant partners who do not

take an active part in the conduct of the business.

4. Management: Every partner has a right to take part in the management of the firm. But generally, the

partnership Deed may provide that one or more than one partner will look after the management of the affairs

of the firm. Sometimes the deed may provide for the division of responsibilities among the different partners

depending upon their specialization.

5. Duration of partnership: The duration of the partnership may be fixed or may not be fixed by the partners. In

case duration is fixed, it is called as partnership for a fixed term. When the fixed period is over, the

partnership comes to an end.

6. Unlimited Liability: The liability of each partner in respect of the firm is unlimited. It is also joint and severaland, therefore any one of the partner can be asked to clear the firms debts in case the assets of the firm are

inadequate for it.

7. No separate legal entity: The partnership firm has no independent legal existence apart from that of the persons

who constitute it. Partnership is dissolved when any partner dies or retires. Thus it lacks continuity.

8. Restriction on transfer of share: A partner cannot transfer his share to an outsider without the consent of all the

other partners.

Advantages

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1. ease of formation: partnership can be easily formed without expense and legal formalities. Even the

registration of the firm is not compulsory.

2. large resources: when compared to sole-proprietorship, the partnership will have larger resources. Hence,

the scale of operations can be increased if conditions warrant it.

3. better organization of business; as the talent, experience, managerial ability and power of judgment of two

or more persons are combined in partnership, there is scope for a better organsation of business.

4. greater interest in business: as the partners are the owners of the business and as profit from the business

depends on the efficiency with which they manage, they take as much interest as possible in business.5. prompt decisions: as partners meet very often, they take decisions regarding business policies very

promptly. This helps the firm in taking advantage of changing business conditions.

6. balance judgement: as partners possesses different types of talent necessary for handling the problems of

the firm, the decisions taken jointly by the partners are likely to be balanced.

7. flexibility: partnership is free from legal restriction for changing the scope of its business. The line of

business can be changed at any time with the mutual consent of the partners. No legal formalities are

involved in it.

8. diffusion of risk; the losses of the firm will be shared by all the partners. Hence, the share of loss in the

case of each partner will be less than that sustained in sole proprietorship.

9. protection to minority interest: important matters like change in the nature of business, unanimity amongpartners is necessary hence, the minority interest is protected.

10. 10. influence of unlimited liability: the principle of unlimited liability helps in two ways. First, the partnerswill be careful in their business dealings because of the fear of their personal properties becoming liable

under the principle of unlimited liability. Secondly, it helps the firm in raising loans for the business as thefinancers are assured of the realization of loans advanced by them.

Disadvantages.

1. great risk; as the liability is joint and several, any one of the partners can be made to pay all the

debts of the firm. This affects his share capital in the business and his personal properties.2. lack of harmony: some frictions, misunderstanding and lack of harmony among the partners may

arise at any time which may ultimately lead to the dissolution.

3. limited resources: because of the legal celing on the maximum number of partners, there is limit

to the amount of capital that can be raised.4. tendency to play safe: because of the principle of unlimited liability, the partners tend to play safe

and pursue unduly conservative policies.5. no legal entity: the partnership has no independent existence apart from that of the persons

constituting it, i.e it is not a legal entity.

6. instability: the death, retirement or insolvency of a partner leads to the dissolution of the

partnership. Further even any one partner if dissatisfied with the business,can bring about thedissolution of partnership. Hence partnership lacks continuity

7. 7. lack of public confidence: no legal regulations are followed at the time of the formation of

partnership and also there is no publicity given to its affairs. Because of these reasons, apartnership may not enjoy public confidence.

Applications: The advantages and drawbacks of partnership stated above indicate that the partnershipform tends to be useful for relatively small business, such as retail trade, mercantile houses of moderate

size, professional services or small scale industries and agency business. But when compared to sole

proprietorship partnership is suitable for a business bigger in size and operations.

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Unit 2 Quality Philosophy

1. Define the term quality and explain how it is improved. Quality is an attribute of a product or servicethat fulfills or exceeds the human expectations. These expectations are based on the intended use and selling /

service price. It is somewhat of an intangible based on perception. That is why quality is a relative term and

each person has his or her own definition.

As per ISO 9000:2000: Quality means The degree to which a set of inherent characteristics fulfills

requirements.

Here, Degree quality such as poor, good, and excellent Inherent Permanent attribute Requirement need

based or expectation.

According to the oxford dictionary for the business world, quality is defined as the degree of excellence.

Quality means a totality of characteristics of an entity that bear on its ability to satisfy stated and implied

needs.

In some references, Quality is referred to as "fitness for use", "fitness for purpose", "customer satisfaction", or

"conformance to the requirements." The father of Total Quality Management, Dr. William Edward Demingdefined Quality should be aimed at the needs of the customer, present and future (continuous Improvement).

Quality Improvement: Quality improvement means finding ways to do better than the standard and

breaking through to unprecedented levels of performance. According Juran, Proper planning and

Control of quality leads to quality improvement. Quality improvement can be implemented in thefollowing ways,

Define quality attributes on the basis of customer needs

Define how to measure each attribute

Set quality standards

Establish proper tests for each standard

Find and correct the cause for poor quality

Continue to make improvement

2. List different methods of quality control and explain any one of them. Different methods ofquality control are

Pareto diagram

Process flow diagram

Cause and effect diagram

Check sheets

Histograms

Scatter diagrams

Control charts

a. Cause and Effect Diagram The most useful tool for identifying the causes of problems is

a cause-and-effect diagram, also known as a fishbone or Ishikawa diagram, named after

the Japanese quality expert who popularized the concept. A cause-and-effect diagram issimply a graphical representation of an outline that presents a chain of causes and effects.A team typically uses a cause-and-effect diagram to identify and isolate causes of

a problem. The technique was developed by the late Dr. Kaoru Ishikawa, a noted Japanese

quality expert. An example is shown in figure below. At the end of the horizontal line isthe problem to be addressed. Each branch pointing into the main stem represents a

possible cause. Branches printing to the causes are contributors to these causes. The

diagram is used to identify the most likely causes of a problem so that further datacollection and analysis can be carried out.

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b. IDENTIFYING CAUSES Identifying causes is a critical step in the process. It involves thepairing off of causes and effects. Effects are the problems that have already been

identified. Say that one such problem has been targeted for solving. A fishbone diagram

has six spines and represents the six major groupings of causes: manpower (personnel),

method, materials, machines (equipment), measurement, and environment All causes ofwork-place problems fall into one of these major groupings, using the diagram, team members brainstorm

causes under each grouping. For example, under the machine grouping, a cause might be insufficient

maintenance. Under the manpower grouping, a cause might be insufficient training.

Cause-and-effect

diagrams are usually constructed in a brainstorming setting so that everyone can contribute their ideas.

Usually, small groups drawn from operations or management work with an experienced facilitator. The

facilitator guides the discussion to focus attention on the problem and its causes, on facts, not opinions. Thismethod requires significant interaction among group members. The facilitator must listen carefully to the

participants and capture the important ideas.

b. Pareto Diagram The Pareto chart is a very useful tool wherever one needs to separate

the important from the trivial. The chart, first promoted by Dr. Joseph Juran, is named

after Italian economist/sociologist Vilfredo Pareto(1848-1923). He had the insight torecognize that in the real world a minority of causes lead to the majority of problems. This

is known as the Pareto principle.

Pick a category, and the Pareto principle will usually hold. For example, in a factory you

will find that of all the kinds of problems you can name, only about 20% of them will

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produce 80% of the product defects: 80% of the cost associated with the defects will beassignable to only about 20% of the total number of defect types occurring.

Examining the elements of this cost will reveal that once again 80% of the total defect

costs will spring from only about 20% of the cost elements. Charts have shown thatapproximately 20% of the pros on the tennis tour reap 80% of the prize money and that

80% of the money supporting churches in the United States comes from 20% of thechurch membership. Pareto analysis is a technique for prioritizing types or sources ofproblems. Pareto analysis separates the vital few from the trivial many and provides

help in selecting directions for improvement. The Pareto chart below labels a company's

customers A. B. C, D, E. and All Others. The bars represent the percentage of thecompany's sales going to the respective customers. Seventy-five percent of this company's

sales are the result of just two customers. If one adds customer C, 90% of its sales are

accounted for, all the other customers together account for only 10% of the company'ssales. Bear in mind that Other" may include a very large number of small customers.

Which customers are the ones who should be kept happy? Obviously, A, B, and perhaps C

are the most critical. This would suggest that customers A, B, and Care the company's

core market and all the other customers represent a marginal business. Decisions on whereto allocate resources should be made accordingly.

3. Define TQM and explain how it can be achieved. Total Quality Management is a managementapproach that tries to achieve and sustain long term organizational success by encouraging employee

feedback and participation, satisfying customer needs and expectations, respecting societal values and

beliefs, and obeying governmental statutes and regulations.

Total Quality Management (TQM) is an enhancement to the traditional way of doing business. It is a

proven technique to guarantee survival in world-class competition. Only by changing the actions of

management will the culture and actions of an entire organization be transformed. TQM is for themost part common sense. Analyzing these words.

Quality management is all activity of the overall management function that determine the qualitypolicy, objectives and responsibilities within the quality system

TQM is a philosophy advocating four basic principles (i) intense focus on customer satisfaction, (ii)accurate measurement of activities, (iii) continuous improvement of products and processes, and (iv)

empowerment of people.

TQM is a management philosophy that builds a customer driven, learning organization dedicated tototal customer satisfaction through continuous improvement in the effectiveness and efficiency of the

organization and its processes.

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TOTAL Everyone and everything that we doQUALITYGiving the customer what they expect all the timeMANAGEMENTThe way we act and operate our policies and procedures, and ourtraining and instruction to all of our employees.

4. How TQM can be achieved TQM can be achieved by the following concepts.

1. A committed and involved management to provide long-term top-to-bottom organizational support.Agreement must participate in the quality program. A quality council must be established to develop a clearvision, set longterm goals, and direct the program. Quality goals are included in the business plan. An annual

quality improvement program is established and involves input from the entire work force. Managers

participate on quality improvement teams and also act as coaches to other teams. TQM is a continual activity

that must be entrenched in the cultureit is not just a one-shot program. TQM must be communicated to all

people.

2. An unwavering focus on the customer, both internally and externally. The key to an effective TQM

program is its focus on the customer. An excellent place to start is by satisfying internal customers. We must

listen to the voice of the customer and emphasize design quality and defect prevention. Do it right the first

time and every time, for customer satisfaction is the most important consideration.

3. Effective involvement and utilization of the entire work force. TQM is an organization-wide challenge

that is everyones responsibility. All personnel must be trained in TQM, statistical process control (SPC), and

other appropriate quality improvement skills so they can effectively participate on project teams. Including

internal customers and, for that matter, internal suppliers on project teams is an excellent approach. Those

affected by the plan must be involved in its development and implementation. They understand the process

better than anyone lese. Changing behavior is the goal. People must come to work not only to do their jobs, but

also to think about how to improve their jobs. People must be empowered at the lowest possible level to

perform processes in an optimum manner.

4. Continuous improvement of the business and production process. There must be a continual striving toimprove all business and production processes. Quality improvement projects, such as on-time delivery, order

entry efficiency, billing error rate, customer satisfaction, cycle time, scrap reduction, and supplier

management, are good places to begin. Technical techniques such as SPC, benchmarking, quality function

development, ISO 9000, and designed experiments are excellent for problem solving.

5. Treating suppliers as partners. On the average 40% of the sales dollar is purchased product or service;

therefore, the supplier quality must be outstanding. A partnering relationship rather than an adversarial one

must be developed. Both parties have as much to gain or lose based on the success or failure of the product or

service. The focus should be on quality and life-cycle costs rather than price. Suppliers should be few in

number so that true partnering can occur.

6. Establish performance measures for the processes. Performance measures such as uptime, percent

nonconforming, absenteeism, and customer satisfaction should be determined for each functional area. These

measures should be posted for everyone to see. Quantitative data are necessary to measure the continuous

quality improvement activity. Explain the principle of TQM

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The principles of Total Quality Management seek to satisfy the external customer as well as the

companys internal customers with quality goods and services; to satisfy the external and internal

suppliers; and to continuously improve processes by working smarter and using special quality

methods. TQM requires that the principles of quality management should be applied in every branchand at every level in the organization with an emphasis on integration into business practices and a

balance between technical, managerial and people issues.

It is a company-wide approach to quality, with improvements undertaken on a continuous basis by

everyone in the organization. As seen above, the principles are universal in nature and therefore are

applicable in any organization.

Be Customer focused: Whatever you do for quality improvement, remember that ONLY

customers determine the level of quality. Whatever you do to foster quality improvement,

training employees, integrating quality into processes management, ONLY customers

determine whether your efforts were worthwhile.

Insure Total Employee Involvement: You must remove fear from work place, then empower

employee... you provide the proper environment.

Process Centered: Fundamental part of TQM is to focus on process thinking. Integratedsystem: All employees must know the business mission and vision. An integrated business

system may be modeled by MBNQA or ISO 9000 Strategic and systematic approach:

Strategic plan must integrate quality as core component.

Continual Improvement: Using analytical, quality tools, and creative thinking to become more

efficient and effective.

Fact Based Decision Making: Decision making must be ONLY on data, not personal or

situational thinking. Communication: Communication strategy, method and timeliness must be well defined.

5. Define standardization. List different techniques used for standardization.

Standardization is the process of developing and implementing technical standards. There aretypically four different techniques for standardization

a. Simplification or variety control

b. Codification

c. Value engineering

d. Statistical process control

6. Write a note on codification system

7. Discuss quality costs.A quality costis considered to be any cost that the company would not have incurred if the quality of theproduct or service were perfect. Every time work is redone, the cost of quality increases. Obvious

examples include: The reworking of a manufactured item.

The retesting of an assembly.

The rebuilding of a tool. The correction of a bank statement. The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food

order in a restaurant.

In short, any cost that would not have been expended if quality were perfect contributes to the cost ofquality. The Cost of Quality is a measure of what an organization is spending for its overall quality. It can

be viewed as the difference between the actual cost of making and selling products and services and the

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cost if there were no failures of the products and services during manufacture or use.

Four types of quality costs:-

1. Prevention Costs: These are the costs of activities aimed at preventing defects occurring during the

development, production, storage and transport of a product. They relate to quality before a single unit ofproduct is made. They usually represent up-front costs that should minimize overall costs by performing

the task properly and hopefully at the first attempt.

Prevention costs are all costs incurred in the process of preventing poor quality from occurring. They

include quality planning costs, such as the costs of developing and implementing a quality plan. Also

included are the costs of product and process design, from collecting customer information to designingprocesses that achieve conformance to specifications. Employee training in quality measurement is

included as part of this cost, as well as the costs of maintaining records of information and data related to

quality.Examples are the costs of:

New product review

Quality planning Supplier capability surveys

Process capability evaluations Quality improvement team meetings

Quality improvement projects Quality education and training

2. APPRAISAL COSTS: Appraisal costs are incurred in the process of uncovering defects. They

include the cost of quality inspections, product testing, and performing audits to make sure that quality

standards are being met. Also included in this category are the costs of worker time spent measuringquality and the cost of equipment used for quality appraisal. These are the costs of inspecting and testing

to ensure that the products, parts and raw materials conform to quality requirements. These are generallythe easiest type of quality costs to measure and include:

These include the costs of:

Incoming and source inspection/test of purchased material In-process and final inspection/test

Product, process or service audits Calibration of measuring and test equipment

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Associated supplies and materials

Examples include

-Incoming inspection and test:

-In-process inspection and test:-In-process evaluation of conformance to requirements.

-Final inspection and test:-Evaluation of conformance to requirements for product acceptance.

-Document review

-Examination of paperwork to be sent to customer.

-Balancing-Examination of various accounts to assure internal consistency.

-Product quality audits-Performing quality audits on in-process or finished products.

-Maintaining accuracy of test equipment:

-Keeping measuring instruments and equipment in calibration.

-Inspection and test materials and services-Materials and supplies in inspection and test work (e.g., x-ray film) and services (e.g., electric power)

where significant.

-Evaluation of stock inventory-Testing products in field storage or in stock to evaluate degradation.

FAILURE COSTS The costs resulting from products or services not conforming to requirements orcustomer/user needs. Failure costs are divided into internal and external failure categories.

3.INTERNAL FAILURE COSTS: Internal failure costs are associated with discovering poor product

quality before the product reaches the customer site. One type of internal failure cost is rework, which isthe cost of correcting the defective item. Sometimes the item is so defective that it cannot be corrected and

must be thrown away. This is called scrap, and its costs include all the material, labor, and machine costspent in producing the defective product. Other types of internal failure costs include the cost of machine

downtime due to failures in the process and the costs of discounting defective items for salvage value.Failure costs are incurred when a product fails to conform to its design specifications. Failure costs can be

either internal or external.

Internal failure costs result from identification of defects before they are shipped to customers. Thesecosts include scrap, rejected products, reworking of defective units, and downtime caused by quality

problem. The more effective a company's appraisal activities the greater the chance of catching defectsinternally and the greater the level of internal failure costs. This is the price that is paid to avoid incurring

external failure costs, which can be devastating. The costs of deficiencies discovered before delivery. We

associate deficiencies or nonconformities with the failure to meet explicit requirements or implicit needs

of external or internal customers. Internal failure costs come from deficiencies discovered before delivery.These include all the costs associated with the failure (nonconformities) to meet the needs of your external

and internal customers. This failure cost is one of the 4 key components ofExamples of Internal FailureCosts :

Scrap: The labor, material, and (usually) overhead that created the defective product. The item cannot

be economically repaired. The titles are numerousscrap, spoilage, defectives, etc.

Rework: The cost to correct the defective material or errors in service products. Lost or missinginformation: The cost to retrieve this expected information.

Failure analysis: The cost analyzing nonconforming goods or services to determine the root causes.

Supplier scrap and rework: Scrap and rework costs due to nonconforming product received from

suppliers. This includes the costs to the buyer of resolving the supplier quality problems.

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100% sorting inspection: The cost of completing 100% inspection to sort defective units from good

units. Retest: The cost to retest products after rework or other revision.

Changing processes: The cost of modifying the manufacturing or service processes to correct the

deficiencies.

Redesign of hardware: The cost to change designs of hardware to correct the issues.

Redesign of software: The internal cost to changing software designs.

Scrapping of obsolete product: The cost of disposing scrap.Scrap in support operations: Costs from defective items in indirect operations.

Rework in internal support operations: Costs from correcting defective items in indirect operations.

Downgrading: The cost difference between the normal selling price and the reduced price due toquality reasons.

Variability of product characteristics: Rework losses that occur with conforming product (e.g.,overfillof packages due to variability of filling and measuring equipment).

Unplanned downtime of equipment: Loss of capacity of equipment due to failures.

Inventory shrinkage: Loss costs due to the difference between actual and recorded inventory quantity.

Non-value-added activities: Cost due to redundant operations, sorting inspections, and other non-valueadded activities. A value-added activity increases the usefulness of a product to the customer; a non-

value-added activity does not.

4. EXTERNAL FAILURE COSTS: External failure costs are associated with quality problems that

occur at the customer site. These costs can be particularly damaging because customer faith and loyalty

can be difficult to regain. They include everything from customer complaints, product returns, and repairs,to warranty claims, recalls, and even litigation costs resulting from product liability issues. A final

component of this cost is lost sales and lost customers. For example, manufacturers of lunch meats andhot dogs whose products have been recalled due to bacterial contamination have had to struggle to regain

consumer con?dence. Other examples include auto manufacturers whose products have been recalled due

to major malfunctions such as problematic braking systems and airlines that have experienced a crash

with many fatalities. External failure can sometimes put a company out of business almost overnight.Failure costs occurring after delivery or shipment of the product -- and during or after furnishing of a

service -- to the customer. When a defective product is delivered to customer, external failure cost is theresult.

External failure costs include warranty, repairs and replacements, product recalls, liability arising from

legal actions against a company, and lost sales arising from a reputation for poor quality. Such costs can

decimate profits.

8. What is Value Engineering? Explain how it helps in reducing the cost and improving the

quality.Value engineering (VE) is a systematic method to improve the "value" of goods or products and

services by using an examination of function. Value, as defined, is the ratio of function to cost. Value

can therefore be increased by either improving the function or reducing the cost. It is a primary tenetof value engineering that basic functions be preserved and not be reduced as a consequence of

pursuing value improvement.

Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the

analysis of function to identify relationships that increase value. It is considered a quantitative method

similar to the scientific method, which focuses on hypothesis-conclusion approaches to test

relationships, and operations research, which uses model building to identify predictive relationships.

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Value Engineering is a tool that will improve your ability to manage projects, solve problems,innovate, and communicate.

A VE program in your organization will provide your staff with a definitive tool to improve value in

any product, project or process. Cost savings, risk reduction, schedule improvements, improveddesigns and better collaboration have been the outcomes of some VE studies. Value Engineering

helps organization in : Lowering O & M costs

Improving quality management

Improving resource efficiecy

Simplifying procedures

Minimizing paperwork Lowering staff costs

Increasing procedural efficiency

Optimizing construction expenditures

Developing value attitudes in staff

Competing more sucessfully in marketplace

9. Explain the methodology of Value EngineeringValue engineering is often done by systematically following a multi-stage job plan. Larry Miles'

original system was a six-step procedure which he called the "value analysis job plan." Others have

varied the job plan to fit their constraints. Depending on the application, there may be four, five, six,or more stages. One modern version has the following eight steps:

Preparation

Information

Analysis

Creation

Evaluation

Development

Presentation Follow-up

Four basic steps in the job plan are:

a. Information gathering - This asks what the requirements are for the object. Function

analysis, an important technique in value engineering, is usually done in this initial stage. It

tries to determine what functions or performance characteristics are important. It asksquestions like; What does the object do? What must it do? What should it do? What could it

do? What must it not do? Alternative generation (creation) - In this stage value engineers ask;

What are the various alternative ways of meeting requirements? What else will perform thedesired function? Evaluation - In this stage all the alternatives are assessed by evaluating how

well they meet the required functions and how great will the cost savings be. Presentation - Inthe final stage, the best alternative will be chosen and presented to the client for final decision.VE follows a structured thought process to evaluate options as follows.

Gather information 1.What is being done now? Who is doing it? What could it do? What

must it not do?

b. Measure 1.How will the alternatives be measured? What are the alternate ways of meeting

requirements? What else can perform the desired function?

c. Analyze 1.What must be done? What does it cost?

d. Generate What else will do the job?

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e. Evaluate 1.Which Ideas are the best? 2. Develop and expand ideas What are the impacts?What is the cost? What is the performance? 3.Present ideas Sell alternatives

Documents

IM Questions and Answers-Unit 1 and 2