Unit 1INDUSTRIAL ENGINEERING & MANAGEMENT1 Unit 1: INTRODUCTION: Definition of Industrial Engineering (IE) - Development, Applications, Role of an industrial engineer, Differences between production management and industrial engineering, Quantitative tools of IE and productivity measurement. Concepts of management, importance, functions of management. Scientific Management – Taylor’s principles. Theory X and Theory Y. Fayol’s principles of management. Definition: Industrial Engineering is defined as: “The special field of engineering concerned with the design, improvement and installation of integrated systems of people, materials, equipment and energy.It draws upon specialized knowledge and skill in the mathematical, physical and social sciences together with the principles and methods of engineering analysis and design to specify, predict and evaluate the results to be obtained from such systems.” • • Thus, industrial engineering is an engineering approach to the detailed analysis of the use and cost of the resources of an organization. The main resources are men, money, materials, equipment and machinery. The industrial Engineer carries out such analysis in order to achieve the objectives (to increase productivity, profits etc) and follow the policies of the organization. Essentially, the industrial engineer is engaged in the design of a system and his function is primarily that of management. If an industrial engineer had to focus on only one concept to describe his field of interest and objective, it would have to be productivity improvement. Productivity improvement implies: (i) a more efficient use of resources; (ii) less waste per unit of input supplied; (iii) higher levels of output for fixed level of input supplied etc. The inputs may be: (i) Human efforts; (ii) Energy in any of its numerous forms; (iii) Materials; (iv) Invested capital etc. 1 Prepared by Prof. T.S.Nageswara Rao, Department of Management Studies, DVR & Dr. HS MIC College of Technology, Kanchikacherla as a class notes. Adapted from various sources. 1 Unit 1 HISTORY & DEVELOPMENT OF INDUSTRIAL ENGINEERING • • • • • Industrial engineering had its roots in Industrial Revolution (around 1750). finance. It was nourished by individuals who sought to advance organization and management principles at an early date. It achieved maturity after World War II. industrial relations etc. especially in the textile industry. transportation. the departments utilizing industrial engineering concept are marketing. purchasing. to develop work standards or to formulate production control and wage policies. These led to factories with large number of workers. public utilities. besides production. Later on. In an industry. (2) Advocate/Activist The Industrial Engineer promotes a process or approach actively. ROLES OF AN INDUSTRIAL ENGINEER The following are the different types of roles and functions an industrial engineer may need to take on. Before 1940. (3) Analyst The Industrial Engineer separates a whole into parts and examines them to explore for insights and characteristics. then steam engine. With the growth in the size of industries. The important steps and mile stones in the development of Industrial Engineering are : (a) Division of Labour (Adam Smith) (b) Scientific Management (Frederick Taylor) (c) Analytical Calculating Machine (Charles Babbage) (d) Method Study (Frank and Lillian Gilbreth) (e) Operations Research (f) Value Engineering & Systems Analysis (g) Human Engineering (or) Ergonomics. and to review it. industrial engineering finds major applications in manufacturing plants and industries. It emerged as a separate discipline and was formalized in the late 19 th and early 20 th centuries. Even today. The Industrial Revolution resulted from the advent of new inventions. advances in metal cutting and the production of machine tools. (4) Boundary Spanner 2 . (1) Advisor/Consultant The Industrial Engineer is available to others for interpretation of data. government and military operations. air-line operations and maintenance. the use of industrial engineering spread to nonmanufacturing activities such as construction. industrial engineering was applied mainly to manufacturing industries for improving methods of production. came the beginning of management and management thinking.. 3 . (12) Project Manager The Industrial Engineer operates.Unit 1 The Industrial Engineer bridges the information gap between industrial engineering and user. supervises and evaluates projects. (14) Negotiator The Industrial Engineer helps the management in the negotiations with workers. (6) Decision-maker The Industrial Engineer selects a preference from among many alternatives for the topic of concern. (5) Motivator The Industrial Engineer provides stimulus and skill availability to a group or an individual. (9) Coordinator and Integrator The Industrial Engineer coordinates the activities of various personnel. (7) Designer/Planner The Industrial Engineer produces the solution specifications. (13) Trainer/Educator The Industrial Engineer trains employees with the skills and knowledge of industrial engineering. (11) Measurer The Industrial Engineer obtains data and facts about the existing conditions. skill and experience on a specific topic. (8) Expert The Industrial Engineer provides a high level of knowledge. (10) Innovator/Inventor The Industrial Engineer seeks to produce a creative or advanced technology solution. (8) Inventory Models • Used for inventory control problems to decide the optimal order quantity that will minimize the annual inventory cost. (4) Network Models • Family of tools designed for the purpose of planning and controlling complex projects. • Linear Programming. consumers change their preference for certain brands of products). • The best known models are PERT and CPM.. and Integer Programming are examples. (5) Dynamic Programming • An approach to decisions that are sequential in nature or can be reformulated so as to be considered sequential. (9) Queuing Models • Used to predict the performance of service systems involving queues. 4 . (6) Markov Chains • Used for predicting the outcome of processes where systems or units change their condition over time (e.Unit 1 QUANTITATIVE TOOLS USED IN INDUSTRIAL ENGINEERING (1) Decision Matrices • Allocation and investment problems involving a relatively small number of possible solutions (2) Decision Trees • Allocation and investment problems involving several decision periods (3) Mathematical Programming • Attempts to maximize the attainment level of one goal subject to a set of requirements and limitations. Assignment model.g. (7) Game Theory • Provides a systematic approach to decision-making in competitive environments and a frame work for the study of conflict. Transportation Problem. Productivity Measures (a) Labour Productivity The inputs are aggregated in terms of labour hours. Similarly.000 buses and the daily revenue is Rs 2 crores. If by using 200 workers. land and building. the company is able to produce goods worth Rs 20 lakhs daily.. if there are 10. e. Output means the amount produced or the number of items produced. The Motivation to Increase Productivity (A) For Management (i) To earn good profits (ii) To repay the debts acquired from different sources (iii) To sell more and (iv)To stand better in the market.000. equipment and machinery.000. the daily labour productivity is Rs 10. (b) Direct Labour Cost Productivity The inputs are aggregated in terms of direct labour costs. in APSRTC. Inputs are the various resources employed. labour etc. (B) For Workers (i) Higher wages (ii) Better working conditions (iii) Higher standard of living and (iv)Job security and satisfaction (C) For Customers Reduced prices of articles.g. PRODUCTIVITY Productivity is defined as the ratio between output and input.Unit 1 (10) Simulation Models • Used for the analysis of complex systems when all other models fail. (c) Capital Productivity 5 . materials. the daily productivity of a bus is Rs 2. Every organization (whether manufacturing or service) is interested in determining and increasing its labour productivity and productivity of machinery. (e) Energy Productivity The input is the amount of energy consumed. (d) Direct Cost Productivity The inputs are all items of direct cost associated with resources aggregated on a monetary value basis. Productivity of materials can also be increased by using correct process. the denominator is the weight of raw material consumed.Unit 1 The inputs may be the charges during the period to depreciation or the book value of capital investment. (f) Raw Material Productivity In this formulation. Equipment and Machinery Productivity can be increased through the use of improved tools. (2) Labour A little change in the design of component parts so as to facilitate final assembly can increase the number of products assembled per day with the same amount of labour. Sometimes. by reducing scrap.e. suitable material handling and storage facilities and proper packaging. (1) Material Industries in which the cost of raw material is a big percentage of the cost of finished goods. 6 . and by proper maintenance of the machinery. higher productivity can be achieved through proper use of materials i. properly trained workers. simple attachments and other devices. the numerators are usually weights of product. Total production times can be reduced considerably by improving machine setting up methods. Increasing Productivity of Resources • Increasing productivity implies getting more output from the same amount of input.. (3) Plant. a little change in the design of the component or component layout may save a lot of material. . plant. production schedules and productivity. construction and inside conditions of a building definitely increase productivity. Example: Training of a pilot Example: Designing an aircraft 7 . It tells how to manage. design and control of productive systems.e. i. Industrial engineering deals with the analysis. Proper orientation. Differences between Production Management and Industrial Engineering Production Management Industrial Engineering Production management attempts to familiarize a person with concepts and techniques specific to the analysis and management of a production activity. product quality. PRODUCTION MANAGEMENT Production management centers on two major areas: (1) Design of the production system (which includes product. process. how to direct It does not focus on how to manage but human efforts in a production environment focuses only on designing the system.Unit 1 (4) Land and Buildings A suitable plant layout can accommodate more machinery in the same space and thus raise productivity. (A productive system is any system that produces either a good or service). equipment etc. The functions of production management also include consideration of control system such as: (1) (2) (3) (4) (5) (6) (7) Inventory control policies Quality control policies Production-schedule control policies Productivity and cost control policies Constructing control systems Implementing and operating control systems Modifying policies and designs.) and (2) Development of the control systems to manage inventories.. with less attention paid to the analysis and design of productive systems. (7) Management provides stability to the enterprise by changing and modifying the resources in accordance with the changing environment of the society. directing and controlling. direct. (3) Management is a process comprising of functions such as planning. excellent machinery and expert man-power. (4) Management provides new ideas and vision to the organisation to do better.Unit 1 CONCEPT OF MANAGEMENT • Management may be labelled as the art of getting work done through people. with satisfaction for employer. employees and the public. it is necessary to guide. coordinate and control human efforts towards fulfillment of the goals of the enterprise. FUNCTIONS OF MANAGEMENT 8 . (6) Only management can meet the challenge of change. it will be all confusion and nobody will know what to do and when to do it. (2) Management creates a vital. money. • For getting the work done (of an enterprise) through efforts of other people. dynamic and life-giving force to the enterprise. materials and capital. (8) Management helps in personality development thereby raising efficiency and productivity. (4) Management represents a system of authority – a hierarchy of command and control. Managers at various levels possess varying degrees of authority. Importance of Management (1) No enterprise can survive without management. even if it possesses large amount of money. (2) Management works as a catalyst to produce goods using labour. staffing. (6) Management harmonises the individual’s goals with the organizational goals to minimize the conflicts in the organization. because without management. (5) Management is a unifying force. materials and machinery. Characteristics of Management (1) Management is goal-oriented. (5) Management tackles business problems and provides a tool for the best way of doing things. (3) Management coordinates activities of different departments in an enterprise and establishes team spirit among the employees. • The goals of the enterprise are fulfilled through the use of resources like men. It integrates human and other resources to achieve the desired objectives. organising. trained. promoted and compensated. Directing Directing is the process by which performance of subordinates is guided towards the common goals of the organization. what is to be done in the future. Directing involves motivating. Forecasting Forecasting estimates the future work or what should be done in future. Organizing involves determining activities required to achieve the company’s activities. Prior planning is very essential for utilizing the available facilities (men. Some functions are basic to managerial activities and are applicable to all business enterprises. jobs. (i) Leadership 9 . and where it will be done. Organizing means organizing people. (b) Guiding the subordinates to do their work.g. finance.. guiding and supervising subordinates toward company objectives. grouping these activities in a logical basis and finally assigning persons to the job designed. Staffing is a continuous process. (ii) Communication. economic and systematic way of making decisions today which will affect the future e. time etc and establishing a framework in which responsibilities are defined and authorities are laid down. the activities of an organisation will lead to confusion. materials. (ii) Planning. (v) Directing.) to the best advantage. Staffing Staffing is the process by which staff are selected. The functions used to describe the process of management are: (i) Forecasting. Staffing involves the developing and placing of qualified people in various jobs in the organization. Directing thus involves: (a) Giving instructions to the subordinates. Forecasting begins with the sales forecast and is followed by production forecast and forecasts for costs. Without planning. The aim is to have appropriate persons to move in to vacated positions or newly created positions in the organization. (vi) Coordinating. who will do it. (iii) Motivation and (iv) Supervision. materials. (vii) Controlling and (viii) Decision-making.Unit 1 • • • (1) • • • (2) • • • (3) • • • (4) • • • (5) • • • One way to look at the process of management is to identify the basic functions which make up the process. profit etc. Directing involves: (i) Leadership. and (c) Supervising the subordinates to make certain that the work done by them is as per the plan established. Forecasting is a necessary preliminary to planning. machines etc. purchase. Organizing Organizing is the process by which the structure and allocation of jobs is determined. Planning Planning is a rational. (iii) Organising: (iv) Staffing. instructions etc. administration can ruin the enterprise. rules are not violated and objectives have not been unknowingly shifted. and regulate their communications. • Controlling is necessary to ensure that orders are not misunderstood. 10 . An ineffective communication leads to confusion. • Ineffective coordination between different functions of a business enterprise such as production.Unit 1 • • • • • • • • Leadership is the quality of the behaviour of the managers whereby they inspire confidence and trust in their subordinates. sales. Communication may include verbal or written orders. • Coordination involves making plans that coordinate the activities of subordinates. (iv) Supervision Supervision is necessary in order to ensure: (a) that the work is going on as per the plan established. praise etc. reports. (ii) Communication Communication is the process by which ideas are transmitted. and (b) Non-financial motivation such as promotion. get maximum cooperation from them and guide their activities in an organized effort. • Controlling involves: (i) the monitoring of programme activities to make sure that end objectives are being met and (ii) the initiation of corrective action as required to overcome problems.. (7) Controlling • Controlling is the process that measures current performance and guides it towards some pre-determined goal. bonus. received and understood by others for the purpose of carrying out desired results. hindering the accomplishment of objectives. extra increments. (iii) Motivation Motivation means inspiring the subordinates to do a work or to achieve company objectives effectively and efficiently. if required. recognition. (6) Coordinating • Coordinating means achieving harmony of individual effort towards the accomplishment of company’s objectives. if any. verifies their conformity with the predetermined plan and takes corrective action. • Controlling is a continuous process which measures the progress of operations. cash awards etc. Leadership is more than personal ability and skill. dissatisfaction and sometimes even strikes. regulate their activities on the job. misunderstanding. Motivation could be classified as: (a) Financial motivation such as salary. (b) that the workers are doing as they were directed to do. Opposition to Scientific Management • Primary resistance to scientific management came from the managements. Basic Approach of Scientific Management (i) Analyse work scientifically. Investigate all aspects of work on a scientific basis rather than using rules of thumb. organizing and controlling his own task performance. 11 . in 1910. Train and develop each workman in the most efficient method for doing the job. Achieve support and cooperation from workmen by arranging better working conditions. • The basic assumption here is that “MAN IS ECONOMIC IN NATURE” • Scientific Management is the result of applying scientific knowledge and the scientific methods to the various aspects of management. service conditions and guidance and by giving them greater economic rewards which in turn are obtained through increased efficiency and productivity. • An outstanding quality of a successful manager is his ability to make sound and logical decisions.Unit 1 (8) Decision-making • Decision making is the process by which a course of action is consciously chosen from available alternatives for the purpose of achieving desired results. THEORY OF SCIENTIFIC MANAGEMENT (Frederic Taylor) • Frederick W Taylor proposed the concept of scientific management. standardizing and improving human effort at the operative level in order to maximizing output with minimum input. (ii) (iii) (iv) (v) (vi) (vii) Scientific Management removed the workers’ judgment in planning. Provide specific guidelines for worker performance. workers do their jobs as per the standards laid down and management does planning. Divide the work so that workmen and management share almost equally in the daily performance of each task. organize and control the workers’ performance. Develop one best way of doing a job (using time and motion studies). who were not prepared to discard the old style of working in favour of scientific approach. • The primary emphasis of scientific management was on planning. Rather. Select workers best suited to perform the specific tasks. it required that management should plan. (iv) The workers are active. problem solving. if the conditions are favourable. THEORY X The assumptions of Theory X are: (i) Employees inherently (= naturally) dislike work and always try to avoid it. they do not want to take any responsibility and do not want to improve the wok through interest but wait for formal directions/instructions.Unit 1 • Another cause for opposition was that the scientific management treated workers like cogs in a well-oiled machine and that the system destroyed humanistic practices in industry. (vi) Workers feel that they are of less importance in an organization. Theory X suggests that workers are to be directed. • McGregor felt that such assumptions exert a heavy influence on how managers operate: The two theories are: (1) Theory X (Traditional Theory) and (2) Theory Y (Modern Theory). (iii) Most people need to be coerced (compelled). They also actively participate in decision-making. They think that they are considered as cogs in the wheel. (ii) Most employees are less ambitious. They are self-controlled and no coercion (= force) is required. THEORY X and THEORY Y (Douglas McGregor) • Management researcher Douglas McGregor’s research suggested that managers’ assumptions about worker motivation tended to fall into one of two categories. (iv) Motivation occurs only at the physiological and safety levels. 12 . Based on the above assumptions. and decision making. (v) Most people have little capacity for creativity. controlled and threatened with punishment to get them to work and achieve goals. controlled and punished to achieve the desired results. (iii) The workers feel responsible for the work for which they are appointed. THEORY Y The assumptions of Theory Y are: (i) Work is as natural as play or leisure. creative and have the capability of decision-making. (ii) The workers are committed to the objectives of the organization. (4) Unity of command. the management must create an environment suitable for the employees to excel. (2) Authority & responsibility. when people are being asked to perform tasks they would strongly prefer not to perform. • From McGregor’s point of view. This is applicable to both managerial and technical functions. • On the basis of his experience as a top-level manager. So. (3) Discipline. the average person not only accepts responsibility but also seeks it. self-controlled and are participative in nature. Thus. a French industrialist is known as the ‘father of modern management theory”. • Fayol outlined a number of principles that he found useful in running his large organization. He joined a coal-and-iron company as an apprentice mining engineer and reached the top position of Managing Director.Unit 1 (v) Motivation occurs through self-actualization and satisfaction. (vi) The intellectual potentials of most individuals are only partially utilized in most organizations. (1) DIVISION OF WORK • Division of work or work specialization results in efficient use of resources and increases productivity. (vii) When conditions are favourable. religious. Fayol realized that it is possible to develop theories about management that could be taught to individuals with administrative responsibilities. Here. 13 . (10) Order. • He added that these principles apply not only to business but also to political. (5) Unity of direction. (12) stability of personnel tenure. (11) Equity. military and other organizations. • For example. (8) Centralization. (9) Scalar chain. an effective leader should apply the appropriate theory depending upon the context. (7) Remuneration. (6) Subordination of individual interest to general interest. charitable. PRINCIPLES OF MANAGEMENT (Henri Fayol) • Henri Fayol. (13) Initiative and (14) Espirit de Corps. Theory X is more appropriate. Theory Y suggests that people are self-driven. the work is not ‘as natural as play’. THEORY X (or) THEORY Y? • McGregor felt that in some situations Theory X assumptions may be more appropriate than those of Theory Y. • The fourteen principles are: (1) Division of work. Unit 1 (2) AUTHORITY & RESPONSIBILITY • Authority means the right to give orders or command. it is called decentralization. (8) CENTRALIZATION • If all the powers are vested in the top management. policies and procedures by all employees of the organizations. (3) DISCIPLINE • Discipline means following of rules. it is likely to be misused. The objective here is the optimum utilization of the capabilities of the personnel. • If there is too much authority. it may result in frustration. There must be a clear and fair agreement for observing the rules and regulations. A balance between centralization and decentralization must be achieved. (7) REMUNERATION • Compensation and methods of compensation should be fair to both the employee and the employer. If all the powers are vested in the lower management. Discipline is absolutely necessary for running of an organization. (6) SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST • The interests of one employee or group of employees should not be given importance over the interests of the organization. it is called centralization of authority. regulations. (5) UNITY OF DIRECTION • The activities of an organization should be organized such that there is one plan and one person in charge. (= A worker should not be under the control of more than one supervisor). 14 . (4) UNITY OF COMMAND • An employee should receive orders from one supervisor only to avoid possible confusion and conflict. Authority and responsibility should be commensurate with each other. Responsibility is the obligation to achieve objectives. If there is too much responsibility. (10) ORDER • Order is the principle of arrangement of things and people. (11) EQUITY • Organizations run best when managers are fair with their employees. Harmony and teamwork. • Order leads to the creation of sound organization with efficient management. high turnover of employees should be prevented.Unit 1 (9) SCALAR CHAIN • A scalar chain of authority extends from the highest to the lowest rank of an organization and defines the communication path. planning and in execution. However. • Union is strength. horizontal communication may also be encouraged as long as managers are kept informed. (13) INITIATIVE • Managers should encourage and develop the subordinates to take initiative. the prerequisites for better performance and effective organization. Because time is required to understand the jobs at hand and become effective in new jobs. are essential in every organization. • Initiative is the result of creative thinking and imagination and helps in formulating. (14) ESPIRIT DE CORPS • Espirit de corps means team spirit. (12) STABILITY OF TENURE OF EMPLOYEES • Stability of tenure increases the efficiency of the employees and is a symbol of sound management. • Everything should be in its place and there must be a place for everything. -----------xxxxxxxxxxx------------- 15 .