UNIT 1 of Industrial Management

8/13/2019 UNIT 1 of Industrial Management

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MRS. SABITA SINGH (Lecturer- MBA)

UNIT I

INDUSTRIAL MANAGEMENT

Industrial management is the combination of two words- Industry and management. Industry-the

application of complex and sophisticated method to the production of economic goods and services.

Management Management is to forecast and plan, to organise, to command, to coordinate and to

control.Industrial management- the branch of engineering that deals with the creation and management of

systems that integrates people, materials and energy in productive ways.

Industrial management focuses on design and management of a system to achieve the objective of

productivity improvement which may take the form of (i) maximisation of output in given input or (ii)

Minimisation of input cost for a given output.

Industrial Management can be defined as the effective and efficient running of an industry using its human

and non-human resources in order to achieve its set goals and objectives.

It can also be defined as the effective and efficient utilization of organizational resources to achieve an

industry set goals.

HISTORICAL DEVELOPMENT OF INDUSTRIAL ENGINEERING

Industrial engineering has developed in the past 250 years. Five different phases of industrial engineering

have almost passed. These phases are:

Phase 1: Pre-Industrial Revolution Era (up to early 1800s)

Phase 2: Industrial Revolution (early 1800s to late 1800s)

Phase 3: Scientific Management Phase (1890 to 1940)

Phase 4: Operations Research and Quantitative Phase (late 1940s to early 1980s)

Phase 5: Automation and Computer Integrated Manufacturing Phase (since early 1980s)

The future trend is towards more automation, computer controlled manufacturing, information handling

through computers, and integration of manufacturing systems.


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Phase I - Pre Industrial Revolution Era

Prior to industrial revolution in early 1800s, there was focus on hand operated manufacturing

activity.

India was a major player in global trade mostly in handicraft, agriculture products, etc.

the major developments were:

1774: James Watt developed the steam engine

1776: Adam Smith wrote Wealth of Nations and advocated the concept of division of labour, skill

development, specialization etc.

PhaseII Industrial Revolution

Factory grew up rapidly in size, mechanisation and complexity of operation, accompanied by much

waste and inefficiency.

Need aroused for technically qualified people, who were needed to plan, organize and control the

manufacturing processes. so that waste and inefficiency can be minimised.

First time, industrial engineering emerged as a profession during the industrial revolution.

Phase III- Scientific management phase:-

Fredric W. Taylors contribution brought the era of scientific management. This was overall

improvement in the planning, scheduling and control of the industrial process. Frank B. Gilberth and his wife, Dr. Lillian Gilberth developed time and motion studies. Their

contributions were helpful in designing a job, deciding the time required to perform a job.

Henry L. Gantt provided the concept of planning and scheduling the activities on a graphical chart,

called as Gantt chart. This is very helpful in reviewing the progress and updating the schedule of

work.

Factories emerged in textile, steam engine, metal cutting and fabrication, machine tools, etc. It was

realized that the factories should be managed efficiently and processes should be effective to convertraw material into the finished goods. This became the root of the inception on industrial engineering.

PhaseIV operation research and quantitative- Automation computer-integrated manufacturing:-

Charles Babbage systematically observed factory operations in England and USA.

Mathematical and statistical tools were used in industrial engineering.

L.Porter- Organisation behaviour.

Use of computers in industrial engineering started dominating the scene.

Many research journals started coming out.


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After the advent of computerization of manufacturing activities, automation and application of

flexible manufacturing system, the scene changed considerably.

ERP and E-commerce were introduce

First prototype numerical control (NC) machine.

Phase V- Factory of future: (High automation and Robotised factory Age)

The aim, in almost all industries, is to have a high level of automation to increase productivity and

efficiency. Industrial robots, which have been one important technology enabler in achieving this

aim, perform repetitive, heavy, and dangerous tasks. Robots have worked in very specific niche

applications where the main driver has been safety, but this trend is now changing.

Oil and gas companies have started to explore broader applications where robots may also have a

positive impact on productivity and efficiency. One such application is the remote operation of oil

and gas fields, particularly those in hazardous environments.

SOPE OF INDUSTRIAL ENGINEERING

Industrial engineering is a branch of engineering that concerns the development, improvement,

implementation and evaluation of integrated systems of people, money, knowledge, information,

equipment, energy, material and process.

Industrial engineering draws upon the principles and methods of engineering analysis and synthesis,

as well as 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.


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Whereas most engineering disciplines apply skills to very specific areas, industrial engineering is

applied in virtually every industry.

The name "industrial engineer" can be misleading. While the term originally applied to

manufacturing, it has grown to encompass services and other industries as well. Similar fields

include Operations Research, Management Science, Financial Engineering, Supply Chain,

Manufacturing Engineering, Engineering Management, Systems Engineering, Ergonomics, Process

Engineering, Value Engineering and Quality Engineering.

There are a number of things industrial engineers do in their work to make processes more efficient, to

make products more manufacture-able and consistent in their quality, and to increase productivity.

APPLICATIONS OF INDUSTRIAL ENGINEERING

Industrial engineering is widely used in manufacturing as well as the service sectors. Some examples are:

Sector Few Applications of Industrial Engineering

Manufacturing 1. Formulation of production plan

2. Control of processes and products

3. Inventory control

4. Design of plant layout5. Scheduling of machines and processes etc

Service 1. Construction project planning

2. Airlines operations

3. Hospital management

4. Transportation problems

5. Optimal use of natural resources etc

The basic concepts of industrial engineering and operations research are widely used in financial

management, marketing management, logistics, purchasing etc. For example, the depreciation of machine is

required in financial management also.


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Industrial engineering is concerned with bringing together and effective utilization of various resources to

facilitate efficient production operation. Effective utilization of resources means that input to the production-

operation system-such as people, material, information and equipment are used in right way so that they

form an integrated combination to meet production/operation objectives.

It is important to note that industrial engineering is concerned not merely with the system of material,

equipment and processes but also with people who interact with this system. Therefore, work-study,

ergonomics, motivation, wage-incentive plan, time and motion study, etc, are integral part of industrial

engineering.

Industrial engineers are now expected to work on continuous improvement on product and process.

ROLE OF INDUSTRIAL ENGINEER

Industrial engineers are an important link in an organization for design, operation, control and decision

making activities of a firm. Their role is that of an expert, advisor, analyst, trainer and decision maker. Any

organization, whether manufacturing or service, needs the services of an industrial engineer. His role is quite

varied. It ranges from indentifying areas for process improvement, quality control, work study, etc, to

business process re engineering (BPR), where major changes are made in the entire operations of the

organization.

PROBLEM OF INDUSTRIAL MANAGEMENT

The problems faced by industrial manager are as follows:

1. Problem of plant location:

Before the production process is determined, the Industrial manager has to decide the place at which he has

to set-up his factory. He has to choose the best locality in order to economise the cost of production. In order


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to select the best locality, he has to weigh the pros and cons of various factors, such as nearness to raw

materials, transportation, warehousing, banking and other related facilities.

2. Problem of plant layout:

It implies arrangement of plant and machineries and furniture and fixture in such a way that it occupies

minimum space in the factory. This minimises not only the space but also facilitates easy movement of

materials, men and finished goods. In addition to the layout of building, Industrial manager has to solveother problems such as lighting, ventilation, air-conditioning, sanitation, noise control, etc. The various

methods of overcoming these problems are discussed under Part-II of this book.

3. Problem of product designing:

The selection of the design of the product is another problem faced by Industrial manager. Any change in

the design of the product will affect the design of the plant and its layout which will prove costly and

complex for the enterprise. So, the design problem should be considered in advance.

4. Problem of material and production controlOne of the problems faced by Industrial manager is to ensure ready availability of materials to ensure

continuity in production. With a view to take advantage of reduced cost of material and to avoid excess

losses and wastages, various techniques of material control, such as deciding Economic Order Quantity

(EOQ), level setting, ABC analysis, perpetual stock taking system must be decided. Production planning and

control techniques are essential to keep up promised delivery date.

5. Problem of quality

Customer satisfaction, to a greater extent, depends upon the quality of the products. The quality of goodsmust fulfill the norm set by ISI and ISO series. The Industrial manager must consider product inspection and

statistical quality control techniques to ensure quality of goods.

6. Problem of personnel

By far this is the most serious problem faced by Industrial manager. If demand of the workers is not

fulfilled, they can resort to strikes and lockouts. Labour unrest will lead to inefficiency and consequently

loss of output, both in terms of quantity and quality.

7. Problem of cost of productionThe selling price depends upon the cost of production. If the cost of production is high, selling price will

also be high. Consumers may find it difficult to buy costlier products. On the other hand, if the competitors

price is less, his sales will increase. Thus, the Industrial manager is in a dilemma as to what price he has to

charge for the goods.

8. Problem of environment

The functioning of a factory is affected by various economic and non-economic environmental factors, such

as social, cultural, political, technological, natural, and historical. The Industrial manager has to take into

account all these factors so that the adverse effects may be solved by taking suitable measures


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PRODUCTIVITY

To understand productivity fist understand what do you mean by production

PRODUCTION

Production management means planning, organising, directing and controlling of production activities.

Production management deals with converting raw materials into finished goods or products. It brings

together the 6M's i.e. men, money, machines, materials, methods and markets to satisfy the wants of the

people.

Production management also deals with decision-making regarding the quality, quantity, cost, etc., of

production. It applies management principles to production.

Detail explanation of production is to be studied in next topic

PRODUCTIVITY

Productivity is one of the most commonly used words in industrial engineering. It is a measure of how well

resources are utilized to produce output. The term, productivity, symbolize the following:

It relates output to input in any system, where some value addition is performed on the input resource.

It is a quantitative measure of performance.

It integrates performance aspects of quality, efficiency and effectiveness.

DEFINITION OF PRODUCTIVITY

Productivityis the output-input ratio within a time period with due consideration for quality

Productivity is the ratio of outputs to inputs. It refers to the volume of output produced from a given

volume of inputs or resources. If the firm becomes more productive, then it has become more efficient, since

productivity is an efficiency measure.

Productivity is an overall measure of the ability to produce a good or service. More specifically,

productivity is the measure of how specifically resources are managed to accomplish timely objectives as

stated in terms of quantity and quality.Total productivity: output quality & quantity

Input quality and quantity

MEASUREMENT OF PRODUCTIVITY

The efficiency of any organisation can be tested and verified by measuring productivity but there is no

special method or measuring scale. When we compare output with man hour input or with capital input, the

results are different. With certain examination we get three basic types of productivity.

1) Partial productivity


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2) Total factor productivity

3) Total productivity

1. Partial productivity: It is the ration of output to one class of input among many factors ofproduction. E.g. -Labour, capital and material productivity are the examples of partial productivity.

Labour productivity = output (total product)

Labour input

Material productivity = output (total product)

Material input

Capital productivity = output (total product)

Capital employed

2. Total factor productivity: It is ratio of net output to the sum of associated labour and capitalinput. Net output means total output minus intermediate goods and services purchased.

Total factor productivity = Net output_____________

(Labour + capital) input

= Total output (product and services)

(Labour + capital) input

3. Total productivity:It is the ratio of total output to the sum of all input factors.

Total productivity = Total Output

Total Input

= Total Output (product + services)

Total Input (labour+material +capital +energy +other expenses)

Example:Consider the ABC Company. The data for output produced and inputs consumed for a particular

time period are given below.

Output =1000 Units

Human input = 300 units

Material input = 200units

Capital input = 300 cr


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Energy input = 100 kw

Other expense input = 50 units

The partial, total-factor, and total productivity values are computed as follows:

Partial productivities:

Human productivity = output/human input = 1000/300 = 3.33

Material productivity = output/material input = 1000/200 = 5

Capital productivity = output/capital input = 1000/300 = 3.33

Energy productivity = output/energy input = 1000/100 = 10

Other expense productivity= output/other expense input = 1000/50 = 20

PRODUCTIVITY INDEX

Input in a production system are of various types such as human input, material input, machinery input,

money input, energy input, technology input, and time input. All of these cannot be combined together to be

put in the denominator of the ratio of productivity. Productivity is therefore calculated for each of the input

out of which some of the critical or more important productivity index are as follows:-

(i) Labour Productivity Index: To calculate the index, the inputs are aggregated in terms of labourhours.

Labour Productivity Index = Number of Units of Output________________________Number of labour hours employed to produce the output

(ii) Direct labour cost productivity index: The input are aggregated in terms of direct labour costs.Therefore it reflects the change of both wage rate and labour mix.

Direct labour cost productivity index = Output at standard price______________________Amount of wages paid in order to produce the output

(iii) Capital productivity index: Capital productivity is measured in several ways. Inputs may bedepreciation charges or capital employed, i.e., book value of capital investment.

Capital productivity index = Value added_____

Capital employedor

Capital productivity index = Total sale value___________Depreciation of capital assets

(iv) Energy productivity index: In this index, the only resource considered is the amount of energyconsumed. This can also be formulated in two ways- in real time or in monetary value terms as

follows:

Energy productivity index = Amount of output produced______________Number of units of power used for production


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(v) Raw material productivity index: In this index, the numerators as aggregate output anddenominators is aggregate raw material consumed.

Raw material productivity index = Output value at standard priceCost of Raw material

(vi) Direct cost productivity index : In this index, all items of direct cost associated with resources usedsuch as labour, capital, materials and energy and aggregated on a monetary value basis.

Direct cost productivity index = Output value at standard price_____________________Sum of all direct costs incurred in producing this output

(vii) Material productivity index: This index takes into account all the material input and not just rawmaterials.

Material productivity index = Output value at standard price______________________Cost of (Raw material+ packing materials+ supplies)

Example

Particulars Year 1 Year 2

Number of outputs (all of one kind) (Rs. 50,000 per unit) 100 200

Direct labour (@Rs. 10 per hour) 5000 8000

Direct labour cost (in Rs.) 40,000 45,000

Capital depreciation (in Rs.) 5000 6000

Capital book value (in Rs.) 20,000 25,000

Total indirect cost (in Rs.) 40,000 46,000

Foreign exchange used $4500 $100

Energy used (@ Rs. 4per watt) 500kw 1800kw

Raw material used (@ Rs. 1000 per ton) 10ton 16ton

Services of consultant hired (Rs.) 10,000 15,000

Calculate productivity index.

(i) Labor productivity index = 200/8000/100/5000 100 = 125(ii) Direct labor productivity index = 200/45,000/100/40,000 100 = 177.8

(iii) Capital depreciation productivity index = 200/6000/100/5000 100 = 166.7

(iv) Capital book value productivity index = 200/25,000/100/20,000 100 = 16

(vi) Foreign exchange productivity index = 200/100/100/4500 100 = 9000

(vii) Energy used productivity index = 200/(18004)/100/(5004) 100 = 55.5

(viii) Raw material productivity index = 200/(161000)/100/(101000) 100 = 125


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DIFFERENCE BETWEEN PRODUCTIVITY AND PRODUCTION

a) Production and productivity are different terms and carry different meaning. It is wrong to assume

that higher production will always lead to higher productivity or vice-versa.

b) Production is related to the activity of producing goods or services. It is a process (or system) of

converting input into some useful, value-added output.

Productivity is related to the efficient utilization of input resource into produced in the form

of value added goods or services.

c) Production is a measure of output produced. The emphasis is not on how well the input-resources are

utilized.

Productivity, on the other hand, puts emphasis on the ratio of output produced to the input

used. Its focus is on how well the input resource is used for conversion into output.

Example

A company is manufacturing 24,000 components per month by employing 100 workers in 8 hour shift. The

company gets additional order from government to supply additional 6000 components. The manage-ment

decides to employ additional workers. What will be production and productivity level when the number of a

additional workers employed are: (i) 30 (ii) 25 (iii) 20.

Solution :-

Present production = 24,000 Components

Present productivity (of Labour) = Present Production (i.e., output)/Total man-hours (i.e., output)

= 24,000 components/(100 workers) (8hour) (30 days of the month)

= 24,000 / 24,000 = 1 Component/man-hour

With increased order

(i) When additional 30 workers are hired

Production = 24,000 + 6000 = 30,000 components

Productivity (of labour) = Increased total production/ Total man-hour

= 30,000 / (100 + 30) (8) (30) = 0.96 Component/man-hour

(ii) When additional 25 workers are hiredProduction = 24,000 + 6000 = 30,000 components

Productivity (of labour) = 30,000/ (100 +25) (8) (30)

= 1 Component/ man-hour

(iii) When additional 20 workers are hired

Production = 24,000 + 6000 = 30,000 components

Productivity (of labour) = 30,000/ (100 +25) (8) (30)

= 1.04 Component/ man-hour

In this example, it is clear that production has increased by 6000 units. Therefore,

Increase in Production = 30,00024,000/24,000 * 100 = 25%


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In case of productivity, the labour productivity falls below the initial level of 1 component per man-hour if

more than 25 workers are hired. This level of additional man-power may be termed as break-even level from

the labour productivity point of view. Therefore other things remaining constant, no more than 26 workers

should be hired for this increased production.

We have understood three things from the above example:

1. Production and productivity are two different things.

2. Increase in production does not necessarily mean increase in productivity.

3. Productivity is always associated with the context in which it is calculated.

FACTORS INFLUENCING PRODUCTIVITY

Productivity is outcome of several interrelated factors, which may broadly be divided into two categories-

human factors and technological factors.

1.Human Factors:

Human nature and human behaviour are the most significant determinants of productivity. Human factors

include both their ability as well as their willingness:

(a) Ability to work:Productivity of an organization depends upon the competence and calibre of its people-

both workers and managers Ability to work is governed by education, training, experience, aptitude, etc. of

the employees.

(b) Willingness to work: Motivation and morale of people are very important factors that determine

productivity. These are affected by- wage incentive schemes, labour participation in management,

communication systems, informal group relations, promotion policy, union management relations, quality of

leadership, working hours, sanitation, ventilation, subsidized canteen, company transport, etc.

2. Technological Factors:

Technological factors exert significant influence on the level of productivity. These include the following:

(a) Size and capacity of plant

(b) Product design and standardization

(c) Timely supply of materials and fuel

(d) Rationalization and automation measures

(e) Repairs and maintenance

(f) Production planning and control

(g) Plant layout and location

(h) Materials handling system

(i) Inspection and quality control

(j) Machinery and equipment used

(k) Research and development


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(l) Inventory control

3. Managerial factors:

The competence and attitudes of managers is important for productivity. In many organizations, productivity

is low despite latest technology and trained manpower. This is due to inefficient and indifferent

management.

Competent and dedicated managers can obtain extraordinary results from ordinary people. Advanced

technology requires knowledgeable workers who in turn work productively under professionally qualified

managers. It is only through sound management that optimum utilization of human and technical resources

can be secured.

4. Natural Factors:

Natural factors such as physical, geographical and climate conditions exert considerable influence on

productivity, particularly in extreme climates (too cold or too hot) tends to be comparatively low. Natural

resources like water, fuel and minerals influence productivity.

5. Political Factors:

Law and order, stability of Government, harmony between States, etc. are essential for high productivity in

industries . Industrial policy affects the size, and capacity of plants. Tariff policies influence competition.

Elimination of sick and inefficient units also helps to improve productivity.

7. Economic Factors:

Size of the market, banking and credit facilities, transport and communication systems, etc. is important

factors influencing productivity.

TECHNIQUES TO IMPROVE PRODUCTIVITY

These twelve productivity improvement techniques are explained as follows:

1. Value Engineering (VE) : Value Engineering (VE) is the process of improving the value of a

product at every stage of the product life cycle.

At the development stage, VE improves the value of a product by reducing the cost without

reducing quality.

At the maturity stage, VE reduces the cost by replacing the costly components (parts) by

cheaper components.

Value is the satisfaction which the consumer gets by using the product. VE tries to give

maximum value for a lowest price.


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2. Quality Circles (QC) : The QC is a small group of employees who meet regularly to identify,

analyse, and solve problems in their department. The QC members advise the management to

implement new methods to solve work-related problems. QC increases the productivity.

3. Financial and Non-Financial Incentives: The organisation must motivate the employees by

providing financial and non-financial incentives. The financial incentives include better wages and

salaries, bonus, etc. The non-financial incentives include better working conditions, welfare

facilities, worker's participation in management, etc.

4. Operations Research (OR) : OR uses mathematical and scientific methods to solve management

problems, including problems of productivity. QR technique uses a scientific method to study the

alternative courses of actions and to select the best alternative. OR uses techniques such as linear

programming, game theory, etc., to make the right decision. Thus, QR helps to improve productivity.

5. Training: Training is a process of increasing the knowledge and skills of the employees. Training is

a must, for new employees and experienced employees. Training increases the efficiency of the

employee. Thus, training results in high productivity.

6. Job Enlargement: Job Enlargement is a horizontal expansion of a job. It is done to make jobs more

interesting and satisfying. It involves increasing the variety of duties.

For e.g. a typist may be given the job of accounts writing in addition to the typing work. This

technique is used for lower level jobs.

7. Job Enrichment: Job Enrichment is a vertical expansion of a job. It makes routine jobs more

meaningful and satisfying. It involves providing more challenging tasks, and responsibilities. For

e.g. a manager who prepares performance a report is asked to make plans for his department. Job

Enrichment technique is used for higher-level jobs.

8. Inventory Control: There must be a proper level of inventory. Overstocking and under stocking of

inventories must be avoided. Overstocking of inventories will result in blocking of funds and Under

stocking of inventories will result in shortages. This will block the smooth flow of production, and so

the delivery schedules will be affected.

9. Materials' management: Materials' management deals with optimum utilisation of materials in the

manufacturing process. It involves scientific purchasing, systematic store keeping, proper inventorycontrol, etc. The main objective of materials' management is to purchase the right quantity and


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quality materials, at the right prices, at the right time, to maintain favourable relations with suppliers,

to reduce the cost of production, etc.

10.Quality Control: The main objective of quality control is to produce good quality goods at

reasonable prices, to reduce wastages, to locate causes of quality deviation and to correct such

deviations, to make the employees quality conscious, etc.

11.Job Evaluation: Job Evaluation is a process of fixing the value of each job in the organisation. It is

done to fix the wage rate for each job. A proper job evaluation increases the moral of the employees.

This increases the productivity.

12.Human factor engineering: Human factor engineering refers to the man-machine relationship. It is

designed to match the technology to a human requirement. The term Ergonomics means 'Law of

Work'. It tells us how to fit a job to a man's psychology and physiological characteristics to increase

human efficiency and well-being

BENEFITS DERIVED FROM HIGHER PRODUCTIVITY ARE AS FOLLOWS:

1. It helps to cut down cost per unit and thereby improve the profits.

2. Gains from productivity can be transferred to the consumers in form of lower priced products or better

quality products.

3. These gains can also be shared with workers or employees by paying them at higher rate.

4. A more productive entrepreneur can have better chances to exploit export opportunities.

5. It would generate more employment opportunities

PRODUCTION SYSTEM

A production system constitutes an efficient process with an organised procedure for accomplishing the

transformation of input elements to useful outputs products. In production system at one end there is inputs-

Men, Money, Machine, Data, and Technology etc, which go through transformation process and provide

output-goods, Information and services to the customers. Customers provide responses that are helpful in

controlling transformation process.

"Production management deals with decision-making related to production processes so that the resulting

goods or service is produced according to specification, in the amount and by the schedule demanded and at

minimum cost."


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A production management constitutes an efficient production process to produce goods and services at lower

cost and at right time.

TYPE OF PRODUCTION SYSTEM

(I) CONTINUOUS PRODUCTION

Continuous production is very common in food processing industry, oil refinery, drugs and

pharmaceutical unit, chemical processing unit, etc. This is a special type of mass production unit in which

production does not stop. Unlike discrete parts production system, the flow of output is continuous.

Generally, online control and continuous system monitoring may be needed. All such controls are

generally automated and computer controlled.

Continuous production is used under the following circumstances:

1. Material handling is fully automated.

2. Process follows a predetermined sequence of operations.

PRODUCTION SYSTEM

FLOW OR CONTINUOUS PRODUCTION ONE TIEM LARGE PROJECT INTERMITTENT

MASS

PRODUCTION

ASSEMBLY

LINE

PROCESS PRODUCTION

BATCH

PRODUCTION

JOB-PRODUCTION

SYNTHETIC

PRODUCTION

ANALYTICAL

PRODUCTION

OPEN JOB

SHOP

CLOSED JOB

SHOP


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3. Component materials cannot be readily identified with final product.

4. Planning and scheduling is a routine action.

Advantages

Following are the advantages of continuous production:

1. Standardisation of product and process sequence.

2. Higher rate of production with reduced cycle time.

3. Manpower is not required for material handling as it is completely automatic.

4. Unit cost is lower due to high volume of production.

Limitations

Following are the limitations of continuous production:

1. Very high investment for setting manufacturing lines.

2. Product differentiation is limited.

A. MASS PRODUCTIONMass production (also called flow production or repetitive flow production) is the production of

large amounts of standardized products on production lines. Mass production is capital intensive, as it

uses a high proportion of machinery in relation to workers. With fewer labour costs and a faster rate of

production, capital is increased while expenditure is decreased.

1. Particularly suited for high demand items

2. Production lot size is very high and production rate is continuous

3. Product variety is very low, which may be one of its kind

4. Special purpose tools and equipments may be needed

5. Skill level of workers may be moderately low as repeated work on same machine is needed

6. Entire plant is designed to cater to a few special varieties of products

7. Higher investment in machine is needed due to specialized machine and special purpose

operation

AdvantagesFollowing are the advantages of mass production:

1. Higher rate of production with reduced cycle time.

2. Higher capacity utilisation due to line balancing.

3. Less skilled operators are required.

4. Low process inventory.

5. Manufacturing cost per unit is low.

Limitations

Following are the limitations of mass production:

1. Breakdown of one machine will stop an entire production line.

2. Line layout needs major change with the changes in the product design.

3. High investment in production facilities.

4. The cycle time is determined by the slowest operation.


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Example: - In agriculture the development of specialized machines for plowing, seeding, cultivating, and

harvesting followed by factories for preparing, preserving, and packaging food products has drawn heavily

on mass production principles. There are specialized manual tasks supplementing the specialized machines

both in the fields and in the processing plants.

In the service industries, such as air transportation, the division and specialization of skills can be observed

B. ASSEMBLE LINEA manufacturing tool, first made popular by Henry Ford in his manufacturing of automobiles. The principle

of an assembly line is that each worker is assigned one very specific task, which they have to simply repeats,

and then the process moves to the next worker who does his task, until the task is completed and the product

is made. It is a way to mass produce goods quickly and efficiently. All workers do not have to be human;

robotic workers can make up an assembly line as well.

C. PROCESS PRODUCTION

In this, various process are inter linked and production is carried on continuously through a uniform and

standardized sequence of operations. This type of production is used in bulk processing of crude oil into

petroleum, kerosene, diesel oil, etc. More stress is given on automation and volume of production is very

high. This method is used for those products whose demand is continues like petroleum, chemical,

medicines, etc. Single raw material can be transformed into different kinds of product at different stages of

production process. Planning and scheduling is done in advance.

(i) ANALYTICAL PRODUCTION

Here a raw material is broken down into different products.

Example : Raw material Gas

Petrol

Crude oil Kerosene

Diesel oil

(ii)SYNTHETIC PRODUCTION

It involves the mixing of two or more materials to manufacture a product.

Example:-

Lauric achid

Myristic acid Finished Product (Soap)

Plasmitic acid

Stearic acid


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(II) ONE TIME LARGE PROJECT

Many civil engineering projects for construction or military related activities are project production. In

this, complex and large manufacturing tasks are undertaken. Generally, work is carried out at the site of

the work rather than in a factory. All resources such as tools, material, labor, etc, reach the site

themselves. Ship building activity is an example of project production. A fixed position plant layout is

recommended for this variety of production system.

(III) INTERMITTENT

In manufacturing method of producing there are several different products using the same production line.

Once an initial production line has run, a second product will be produced which increases the amount of

productivity for which a company is capable of at one time.

A. BATCH PRODUCTIONBatch production is defined by American Production and Inventory Control Society (APICS) as a

form of manufacturing in which the job passes through the functional departments in lots or batches and

each lot may have a different routing. It is characterised by the manufacture of limited number of

products produced at regular intervals and stocked awaiting sales.

Characteristics

Batch production system is used under the following circumstances:

1. When there is shorter production runs.

2. When plant and machinery are flexible.

3. When plant and machinery set up is used for the production of item in a batch and change of set up is

required for processing the next batch.

4. When manufacturing lead time and cost are lower as compared to job order production.

Advantages

1. Better utilisation of plant and machinery.

2. Promotes functional specialisation.

3. Cost per unit is lower as compared to job order production.

4. Lower investment in plant and machinery.

5. Flexibility to accommodate and process number of products.

6. Job satisfaction exists for operators.

Limitations

1. Material handling is complex because of irregular and longer flows.

2. Production planning and control is complex.

3. Work in process inventory is higher compared to continuous production.

4. Higher set up costs due to frequent changes in set up.


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Example

credit card companies process billing. The customer does not receive a bill for each separate credit card

purchase but one monthly bill for all of that month's purchases. The bill is created through batch processing,

where all of the data are collected and held until the bill is processed as a batch at the end of the billing

cycle.

B. JOB SHOP PRODUCTION

Job shop production are characterised by manufacturing of one or few quantity of products designed and

produced as per the specification of customers within prefixed time and cost. The distinguishing feature of

this is low volume and high variety of products.

A job shop comprises of general purpose machines arranged into different departments. Each job demands

unique technological requirements, demands processing on machines in a certain sequence.

Characteristics

The Job-shop production system is followed when there is:

1. High variety of products and low volume.

2. Use of general purpose machines and facilities.

3. Highly skilled operators who can take up each job as a challenge because of uniqueness.

4. Large inventory of materials, tools, parts.

5. Detailed planning is essential for sequencing the requirements of each product, capacitiesfor each

work centre and order priorities

Advantages

1. Because of general purpose machines and facilities variety of products can be produced.

2. Operators will become more skilled and competent, as each job gives them learning opportunities.

3. Full potential of operators can be utilised.

4. Opportunity exists for creative methods and innovative ideas.

Limitations

1. Higher cost due to frequent set up changes.

2. Higher level of inventory at all levels and hence higher inventory cost.

3. Production planning is complicated.

4. Larger space requirements.

Examples

Job shop include a machine tool shop, a factory machining center, paint shops, a French restaurant, a

commercial printing shop, and other manufacturers that make custom products in small lot sizes.

Volume and standardization is low and products are often one of a kind.

(i) Closed job shop: -A closed job shop is shop is closed to job orders from outside the organization.


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Example:Machine shop of big form manufacturing automobile parts is an example of closed job shop.

(ii) Open Job Shop: -It makes products according to requirement of the customers.

FACTORS AFFECTING THE CHOICE OF MANUFACTURING PROCESS

1) Effect of volume/variety:This is one of the major considerations in selection of manufacturingprocess. When the volume is low and variety is high, intermittent process is most suitable and with

increase in volume and reduction in variety continuous process become suitable. The following

figure indicates the choice of process as a function of repetitiveness. Degree of repetitiveness is

determined by dividing volume of goods by variety.

2) Capacity of the plant:Projected sales volume is the key factor to make a choice between batch andline process. In case of line process, fixed costs are substantially higher than variable costs. The

reverse is true for batch process thus at low volume it would be cheaper to install and maintain a

batch process and line process becomes economical at higher volumes.

3) Lead time:- The continuous process normally yields faster deliveries as compared to batch process.Therefore lead-time and level of competition certainly influence the choice of production process.

4) Flexibility and Efficiency:- The manufacturing process needs to be flexible enough to adaptcontemplated changes and volume of production should be large enough to lower costs.

Degree ofRepetitiveness

One Quantity many

IMPORTANCE OF PRODUCTION MANAGEMENT

The importance of production management to the business firm:

1. Accomplishment of firm's objectives: Production management helps the business firm to achieveall its objectives. It produces products, which satisfy the customers' needs and wants. So, the firm

will increase its sales. This will help it to achieve its objectives.

Jobbing

Batching

Line

Process


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2. Reputation, Goodwill and Image: Production management helps the firm to satisfy its customers.

This increases the firmsreputation, goodwill and image. A good image helps the firm to expand and

grow.

3. Helps to introduce new products: Production management helps to introduce new products in the

market. It conducts Research and development (R&D). This helps the firm to develop newer and

better quality products. These products are successful in the market because they give full

satisfaction to the customers.

4. Supports other functional areas: Production management supports other functional areas in an

organisation, such as marketing, finance, and personnel. The marketing department will find it easier

to sell good-quality products, and the finance department will get more funds due to increase in sales.

5. Helps to face competition: Production management helps the firm to face competition in the

market. This is because production management produces products of right quantity, right quality,

right price and at the right time. These products are delivered to the customers as per their

requirements.

6. Optimum utilisation of resources: Production management facilitates optimum utilisation of

resources such as manpower, machines, etc. So, the firm can meet its capacity utilisation objective.

This will bring higher returns to the organisation.

7. Minimises cost of production: Production management helps to minimise the cost of production. It

tries to maximise the output and minimise the inputs. This helps the firm to achieve its cost reduction

and efficiency objective.

8. Expansion of the firm: The Production management helps the firm to expand and grow. This is

because it tries to improve quality and reduce costs. This helps the firm to earn higher profits. These

profits help the firm to expand and grow.

The importance of production management to customers and society:

1. Higher standard of living: Production management conducts continuous research and development

(R&D). So they produce new and better varieties of products. People use these products and enjoy a

higher standard of living.

2. Generates employment: Production activities create many different job opportunities in the country,

either directly or indirectly. Direct employment is generated in the production area, and indirect

employment is generated in the supporting areas such as marketing, finance, customer support, etc.

3. Improves quality and reduces cost: Production management improves the quality of the products

because of research and development. Because of large-scale production, there are economies of

large scale. This brings down the cost of production. So, consumer prices also reduce.


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Advantages of a Sole Proprietorship

A sole proprietor has complete control and decision-making power over the business.

Sale or transfer can take place at the discretion of the sole proprietor.

No corporate tax payments.

Minimal legal costs to forming a sole proprietorship.

Few formal business requirements.Disadvantages of a Sole Proprietorship

The sole proprietor of the business can be held personally liable for the debts and obligations of the

business.

All responsibilities and business decisions fall on the shoulders of the sole proprietor.

Investors wont usually invest in sole proprietorships.

Applications:-

For retail traders, service concern and small engineering firms which require relatively small capitalto start with and to run

For those businesses which do not involve high risks of failure.

The business which can be taken care of by one person.

2. PARTNERSHIP FIRMPartnership is an association of two or more (up to 20) person carry on business as co-workers for

sharing profit. They put money, ability, skill, knowledge etc for the purpose of running an enterprise

and earn profits. Partnerships are based upon a partnership agreement (in writing).

Partnership becomes necessary when the size of business enterprise grows beyond a certain limit.

Advantages of partnership

Formation of partnership is easy. Even the registration of a firm is optional; hence no legal

formalities are required.

As the partnership is formed by two or more persons, capital contribution is higher and there are

greater managerial abilities.

The principle of division of labour can be applied to a greater extent in a firm, which results in

greater specialization.

The statement of accounts of the firm need not be published and this ensures secrecy.

As the liability of the partner is unlimited, severally and jointly, careful management of business is

ensured and this increases the credit-worthinessof the firm which in turn enables to obtain credit

from third parties easily.

Partnership business isflexible, as suitable changes can be easily introduced whenever necessary.

Minimum legal restriction; therefore it enjoys freedom in administration.


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Riskdoes notfall on one individual's shoulderin this type; it is shared by all the partners.

As the decisions aretaken by two or more persons collectively, it is likely to be more balanced.

As each partner is interested in profits, he tries to do his best to get more reward and this increases

efficiency.

It can be easily dissolved. Any partner can give 14 days' notice to other partners and dissolve the

firm with the consent of other partners.

Disadvantages of partnership

As there are more than two persons in the business, unity among them becomes utmost essential. If

unity is not secured, disputes ariseand disturb the smooth workingof the business.

As there is limitation on the total number of partners, the capitalthat can be raised becomes limited.

There is no Governmental supervision over the affairs of the business of a partnership and

publishing accounts is also not necessary. Hence, public may not have full confidencein them.

The liability of the partners is unlimited, jointly .and severally. This discourages many people from

becoming the partners of the firm.

A partner cannot transferhis interest to a third partywithout consent of other partners.

If a partner acts dishonestly, it may land all others in trouble, because he is an agent of the firm.

Partnership lacks continuity of existence, as the death, insolvency or insanity of a partner leads to

its dissolution.

TYPES OF PARTNERS IN PAERNERSHIP FIRM

There are various types of partners in a partnership firm. They are as follows:

(i) Active Partner: Partner who takes an active part in the management of the business is called active

partner. He is an agent of the other partners in the ordinary course of business of the firm and

considered a full fledged partner in the real sense of the term.

(ii) Sleeping or Dormant Partner:A sleeping or dormant partner is one who does not take any active

part in the management of the business. He contributes capital and shares the profits which is usually

less than that of the active partners.

(iii) Nominal Partner:A partner who simply lends his name to the firm is called nominal partner. He

neither contributes any capital nor shares in the profits or take part the management of the business.

But he is liable to third parties like other partners.

(iv) Partner in Profits: A partner who shares in the profits only without being liable of the losses is

known as partner in profits. He does not take part in the management of the business but he is liable

to third parties for all the debts of the firm.

(v) Minor Partner:Partnership arises from contract and a minor is not competent to enter into contract.

Therefore, strictly speaking, a minor cannot be a full-fledged partners. But with the consent of all the


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partners he can be admitted into partnership for benefits only. He is not personally liable to third

parties for the debts of the firm, on attaining majority, if he continues as a partner, his liability will

become unlimited with effect from the date of hi original admission into the firm.

3. JOINT HINDU FAMILY BUSINESS

It is a form of family business governed by the Hindu law. Two systems of inheritance are common:(a) Dayabhaga: Both male and female members of the family can become co-partners in the family

business or property. It is only found in West Bengal in India.

(b) Mitakashara:This system is found in India at places other than West Bengal. Only the male members

of the family can become the co-partner in the family business.

Property of a Hindu is inherited after the death by his son, grand sons and great grand songs, i.e., by

next three generations. Each member of the three generations are co-partner in the ancestral property. The

undivided family business (or property) in handled and controlled by the head of the family, who is called asKarta.

salient features:

(i) Membership is granted by birth of a child. In case of mitakashara system, only male child gets automatic

members after the birth.

(ii) Minors can become full-fledged members.

(iii) There is no limit on number of members. However, the lower limit is two members.

(iv) There is no need for the registration of the family business.

(v) The management of business is handled by Karta of the family.

(vi) Any member can ask for his share of account from the Karta.

(vii) The system is continuous or perpetual. It runs generation after generation.

(viii) The liability of Karta is unlimited, while the liability of other members is limited to the share of their

property.

4. JOINT STOCK COMPANYIn the modern times the business and industry has been developed on a large scale the capital required for

such industry and trade is huge which cannot be accumulated either in a sole proprietorship or a partnership

organization. As a result of this change, a new form of organization has become quite popular in modern

times which are known as Joint Stock Company.

An association of many people who contribute money or moneys worth to common stock or employ it in

some trade and business, and who share profit or loss arising from there.

It means the joint stock company is a voluntary association of individual who contribute their money orprofit to a common stock for carrying on a particular business. The money or moneys worth contributed by

the member known as share holders forms the capital of the company. The capital is divided into numbers


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of unit called share. Each share carries definite face value and is transferable in the market without any

restriction or formalities

TYPES OF JOINT STOCK COMPANY

(A) Private Limited Company

(B) Public Limited Company

(A) Private Limited Company:-

These are closely held businesses usually by family, friends and relatives.

Private companies may issue stock and have shareholders. However, their shares do not trade on public

exchanges and are not issued through an initial public offering.

Shareholders may not be able to sell their shares without the agreement of the other shareholders.

Features:-

Limited Liability: It means that if the company experience financial distress because of normal

business activity, the personal assets of shareholders will not be at risk of being seized by creditors.

Continuity of existence: business not affected by the status of the owner.

Minimum number of shareholders need to start the business are only 2 and maximum number of

shareholders allowed is 50.

Scope of expansion is higher because easy to raise capital from financial institutions and the

advantage of limited liability.

Advantages

Continuity of existence

Limited liability

Less legal restrictions

Disadvantages

Shares are not freely transferable

Not allowed to invite public to subscribe to its shares

Scope for promotional frauds

Undemocratic control

(B) Public Limited Company

A public limited company is a voluntary association of members which is incorporated and, therefore has a

separate legal existence and the liability of whose members is limited.

Features:-

The company has a separate legal existence apart from its members.

A company must have a minimum of 7 (seven) members but there is no limit as regards themaximum number.


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The company collects its capital by the sale of its shares and those who buy the shares are called the

shareholders or members. The amount so collected is called the share capital.

The shares of a company are freely transferable and that too without the prior consent of other

shareholders or without subsequent notice to the company.

The liability of a member of a company is limited to the face value of the shares he owns. Once he

has paid the whole of the face value, he has no obligation to contribute anything to pay off the

creditors of the company.

The shareholders of a company do not have the right to participate in the day-to-day management of

the business of a company. This ensures separation of ownership from management. The power of

decision making in a company is vested in the Board of Directors, and all policy decisions are taken

at the Board level by the majority rule.

As a company is an independent legal person, its existence is not affected by the death, retirement or

insolvency of any of its shareholders.

Advantages

Continuity of existence

Larger amount of capital

Unity of direction

Efficient management

Limited liability

Disadvantages

Scope for promotional frauds

Undemocratic control

Scope for directors for personal profit

Subjected to strict regulations

Distinction between a Public Company and a Private Company

Parameters A Private Ltd Company A Public Ltd Company

1. Minimum Paid-up Capital Rs. 1,00,000 Rs. 5,00,000.

2. Minimum number of

members

02 (Two) members 07 (seven) members

3. Maximum number of

members

50 (fifty) members No restriction of maximum

number of members.

4. Transerferability of shares Complete restriction on the

transferability of the shares

No restriction on the transferability

of the shares

5 .Issue of Prospectus No need to issue Prospectus Compulsory issue a Prospectus.

6. Number of Directors 2 directors At least 3 directors

7. Commencement of Business Commence business immediately Start its business only after getting


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after its incorporation Certificate to commencement

12. Statutory meeting No obligation to call the Statutory

Meeting of the member

Must call its statutory Meeting and

file Statutory Report with the

Register of Companies.

13. Quorum for meeting TWO members present personally FIVE members must be present

personally to constitute quorum.

CO-OPERATIVE SECTOR ENTERPRISES (OR) SOCIETY

A co-operative society is a voluntary association of persons started with the objective serving its members. It

is primarily designed for promotion of economic interest of its members with co-operation principles. It is

based on an important philosophy known as all for each and each for all.

Features:

The membership of a co-operative organization is voluntary and open to all adult persons.

It is a self governing institution.

Capital is raised from members in the form of share capital.

It managed democratically.

These are subject to government control as these are registered under Co-operative Societies Act,

1919.

Each member has one vote irrespective of shareholdings.

Advantages:

It is easy to form as no legal formalities are required for formation.

It is managed democratically as it is based on the principles of one man one vote.

Its membership is open to each and every person irrespective of caste and creed.

It has economical operation and as such management cost is less.

The liability of members is limited up to the extent of shares purchased.

Limitations:

Lack of adequate capital as capital is collected from members.

It is operated on cash trading basis.

There is a lot of political interference.

It is difficult to maintain business secrecy.

Every bodys responsibility becomes no ones responsibility.

Lack of unity among the members.


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Types of co-operative:

1. consumers cooperative societyThe purpose of consumers cooperative society (or store) is to eliminate the middleman between consumers

and producers. Second purpose is to ensure a steady and regular supply of goods and services which the

consumers need. Any profit of the cooperative societies is to be shared among members in the form ofdividend.

2. Industrial Cooperative SocietyIt is formed to help small-scale producers or artisans to face competition and to increase productivity. Raw

materials, tools and equipments are generally supplied by these societies. In some of these societies, goods

are collectively produced and sold. Income is distributed among members on the basis of the proportion of

goods sold by each member to the society.

3. Cooperative Credit SocietyThe objective of this society is to promote the habit of saving among its members. It provides financial

assistance or credit to its members when they need. The advantage of credit society is to save the members

from the exploitation of money lenders.

4. Cooperative Housing SocietyIt is formed to provide residential accommodation to its members on ownership basis on a fair price. The

cooperative buys land from municipal authority and constructs flats for its members. Payment is charged

from members on instalments, which is very convenient.

PUBLIC SECTOR ENTERPRISES

The business units owned, managed and controlled by the central, state or local government are termed as

public sector enterprises or public enterprises. These are also known as public sector undertakings. A public

sector enterprise may be defined as any commercial or industrial undertaking owned and managed by the

government or any other public authority with a view to maximise social welfare and uphold the public

interest. The main aim to such enterprises is not to earn profit but to prevent unbalanced growth of industries

and ultimately self reliance. They are accountable for their result to parliament and state legislature. So it is

an undertaking owned and controlled by the local or state or central government.

Characteristics

Autonomous or semi-autonomous organisation: Public enterprise is an autonomous or semi-

autonomous organisation because some enterprises work under the direct control of the government

and some organisations are established under statutes and companies act.


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government control: The public enterprises are financed, owned and managed by the government

may be a central or state government.

Rendering service: The primary objective of the establishment of public enterprises is to serve the

public at large by supplying the essential goods at a reasonable price and creating employment

opportunities.

Useful to various sectors: The state enterprises serve all sectors of the people of the company. They

do not serve a particular section of the people in the community.

Monopoly Enterprises: In some specific cases private sectors are not allowed and as such the public

enterprises enjoy monopoly in operation. The state enterprises enjoy monopoly in Railways, Post and

Telegraph and Energy production.

A direct channel for use of Foreign money: Sometimes the government receive foreign assistance

from industrially advanced countries for the development of industries. These advances received are

spent through public enterprises.

Public accountability: The state enterprises are liable to the general public for their performances

because they are responsible for the nation.

Agent for implementing government plans: The public enterprises run as per the whims of the

government and as such the economic policies and plans of the government are implemented through

public enterprises.

Financial Independence: Though investment in government undertaking are done by the

government, they become financially independent by arranging finance for day-to-day operation.

Example :-List of PSUs

Maharatna PSUs

Coal India LimitedIndian Oil Corporation Limited

NTPC LimitedOil & Natural Gas Corporation LimitedSteel Authority of India Limited

Navratna PSUs

Bharat Electronics LimitedBharat Heavy Electrical LimitedBharat Petroleum Corporation LimitedGAIL (India) LimitedHindustan Aeronautics LimitedHindustan Petroleum Corporation LimitedMahanagar Telephone Nigam Limited

National Aluminium Company LimitedNMDC LimitedNeyveli Lignite Corporation LimitedOil India LimitedPower Finance Corporation LimitedPower Grid Corporation of India LimitedRashtriya Ispat Nigam LimitedRural Electrification Corporation LimitedShipping Corporation of India Limited

Miniratna Category I PSUs

Airports Authority of IndiaBalmer Lawrie & Co. Limited

Miniratna Category II PSUs

Bharat Pumps & Compressors LimitedBroadcast Engineering Consultants (I) Limited


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Bharat Dynamics LimitedBEML LimitedBharat Sanchar Nigam LimitedBridge & Roof Company (India) LimitedCentral Warehousing CorporationCentral Coalfields LimitedChennai Petroleum Corporation LimitedCochin Shipyard Limited

Container Corporation of India LimitedDredging Corporation of India LimitedEngineers India LimitedEnnore Port LimitedGarden Reach Shipbuilders & Engineers LimitedGoa Shipyard LimitedHindustan Copper LimitedHLL Lifecare LimitedHindustan Newsprint LimitedHindustan Paper Corporation LimitedHousing & Urban Development Corporation Limited

India Tourism Development Corporation LimitedIndian Railway Catering & Tourism CorporationLimitedAirports Authority of IndiaIRCON International LimitedKIOCL LimitedMazagaon Dock LimitedMahanadi Coalfields LimitedManganese Ore (India) LimitedMangalore Refinery & Petrochemical LimitedMishra Dhatu Nigam Limited

MMTC LimitedMSTC Limited

National Fertilizers LimitedNational Seeds Corporation LimitedNHPC LimitedNorthern Coalfields LimitedNumaligarh Refinery LimitedPawan Hans Helicopters LimitedRashtriya Chemicals & Fertilizers LimitedRITES LimitedSJVN LimitedSecurity Printing and Minting Corporation of IndiaLimitedSouth Eastern Coalfields LimitedState Trading Corporation of India LimitedTelecommunications Consultants India LimitedTHDC India LimitedWestern Coalfields Limited

Central Mine Planning & Design Institute LimitedEd.CIL (India) LimitedEngineering Projects (India) LimitedFerro Scrap Nigam LimitedHMT (International) LimitedHSCC (India) LimitedIndia Trade Promotion OrganizationIndian Medicines & Pharmaceuticals Corporation

LimitedM E C O N Limited

National Film Development Corporation LimitedNational Small Industries Corporation LimitedP E C LimitedRajasthan Electronics & Instruments Limited


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partners members unlimited

Profit sharing

It is fixed in the partnership, unless some

changes are introduced in the partnership

deed by common consent of all the partners

It is always liable to change due to

death or birth of any member in the

family.

Parameter Individual ownership Partnership

Membership Individual owner Minimum 2 and maximum 20

Formation No agreement is required for its formation An agreement is required for its

formation.

Capital Limited capital contributed only by the

owner

Comparatively large capital

contributed by number of partners.

Registration Not necessary It is optional here. But registration isdone it is under partnership Act

1932.

Risk/Profit Individual owner has to bear the risk and

enjoy the entire profit.

Risk spread out amongst the

partners. Profit is shared according to

the agreement reached between

themselves.

Secrecy Individual entrepreneur can easily maintain

the secrets of the business.

A partner may withdraw from

business and start his own business

with knowledge and secret of

business.

Management Individual owner has to manage the entire

business .

The management of business is

shared by the partners.

Parameters Partnership firm Joint stock company

Regulating Act

A partnership firm is governed by

the provisions of the Indian

Partnership Act, 1932

Joint stock company is governed by the

provisions of the Companies Act, 1956.

Number of Members

Minimum 2 member

Maximum 20 member

In private limited co. :- minimum 2 maximum

50 AndIn public limited co. :- Minimum 7

members and maximum unlimited

EntityIt has no separate legal entity

distinct from the members.

It is a separate legal entity different from its

members.


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Liability

Each partner has unlimited

liability and is personally liable

for all the debts of the firm

A shareholder has limited liability- limited to

the extent of the unpaid amount on the shares

held by him.

Management

All the partners of a firm are

entitled to take part in the

management of the business

Right to control and manage the business is

vested in the hand of Board of Directors

elected by the shareholders.

Transfer of interest

A partner cannot transfer his

interest in the firm without the

consent of all other partners.

In case of a private company transfer of

restricted. But in the case of a public company

a shareholder can transfer his shares freely

without restriction.

RegistrationA partnership firm may or may

not be registered.

Joint stock company registration is essential

Winding up

A partnership firm can be wound

up at death of any partner or any

time by any partner, if it is at

will, without legal formalities

No one member can wind up at willor

death of any one member, winding up

involves legal formalities

Documents

UNIT 1 of Industrial Management