BAHIRDAR INSTITUTE OF TECHNOLOGY

SCHOOL OF MECHANICAL AND INDUSTRIAL ENGINEERING

INDUSTRIAL MANAGEMENT AND

ENGINEERING ECONOMICS

Instructor : Meseret A.

OBJECTIVES OF THE COURSE

1.To know the principles and applications of Industrial management.2.Understand the basic concept of engineering economics to make various decisions in industrial environment. 3.To know how to estimate cost of various resource utilizations of industrial operations.

CHAPTER 1

NATURE AND SCOPE OF INDUSTRIAL

MANAGEMENT

DEFINITION OF MANAGEMENT All organizations establish a variety of goals and direct their

energies and resources to achieving them. A profit oriented business firm, for example, might have return on

investment goal; a hospital would have goals centred around patient care; and an educational institution would establish goals for teaching research, and community service.

All organizations also have resources that can be used to meet these objectives.

Such resources can be classified into two categories: human and human and non-human resources. non-human resources. Nonhuman resources include plants and equipment, land, and financial resources. Human resources are employees’ skills and knowledge

Therefore management is the force that unifies these resources

How Do You Understand Management?

Management as a Unifying Force

Management

Financial Resources

Plant &

EquipmentEmployees

Land

Management is the process of bringing

human and nonhuman resources together and coordinating them to

accomplish organizational goals.

ResourcesHuman

Skills Knowledge

Non-Human Capital Land Plant and Equipment Technology Time

Management in all business and organizational activities is

the act of getting people together to accomplish desired

goals and objectives using available resources efficiently

and effectively.Management comprises planning, organizing, staffing,

leading or directing, and controlling an organization.Resourcing encompasses the deployment and manipulation

of human resources, financial resources, technological

resources, and natural resources.

How Do You Understand Management?

Management is both science and art. Management is a science in the sense, that it adopts a

systematic approach through knowledge acquired by

continuous and vigorous efforts.

Management is an art, as it is an application of some

skills to achieve the desired results. It is an art because it

utilize the talent of the people and also because it

manages the human beings.

Management Science is concerned with developing and applying models and concepts that help to illuminate management issues and solve managerial problems.

Management science is the application of statistical or mathematical methods and principles to business decision-making and problem-solving processes.

Management science is also a branch of traditional operations research used in business management.

Operations research applies mathematical or quantitative techniques to the decision-making process. Eg simulation, queuing model, linear programming, etc.

What is industrial management? Industrial management deals with the creation and management

of systems that integrate people, materials , and energy in

productive ways for the production of an economic good or

service.

Industries can be classified on the basis of raw materials,

size and ownership.• Raw Materials: Industries may be agriculture based, Marine based, Mineral

based, Forest based, etc.

• Size: It refers to the amount of capital invested, number of people employed

and the volume of production.

• Ownership: Industries can be classified into private sector, state owned or

public sector, joint sector and co-operative sector.

Industry is also often classified into three sectors:

primary or extractive, secondary or manufacturing,

and tertiary or services.

What are the managerial abilities? Ability to plan Integrity Technical skill Intelligence Initiative Resourcefulness Judgment Ability to organize Tactfulness Reliability (consistency)

Management, Resources and Organization

Managers use resources to attain organizational goals. Management is the use of people and other resources to

accomplish objectives.The objective is to: Maximize the potential of their people and coordinate their

efforts to attain some predetermined goal.Organization An organization is a stable, formal social structure that

takes resources from the environment and processes them to produce outputs.

Organizational GoalsProfit-oriented organization

Return on investmentNon-Profit-oriented organization

Hospitals Patient Care

Educational Institutions Teaching – providing quality education Research Community Services

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Management applies to:

Importance of Manager

Manager Puts together the factors of production to

produce goods and services Make business decisions Takes risks for which the reward is profit Acts as an innovator by introducing new

products, new technology and new ways of organizing business

Manager’s Interactions with Other Groups of People

Creditors & Suppliers Superiors Customers

Peers co-workersManager

Government AgenciessubordinatesCommunity

Functions of Management

Planning

ControllingLeading

Organizing

Staffi

ng Functions of Management

Planning is the process of specific setting objectives for the future and developing courses of action to accomplish them. Top-level managers set plans for the entire

company Lower level managers prepare plans for their

immediate areas of responsibility. Planning doesn’t occur in a vacuum. It is done in

light of budgetary constraints, personnel requirements, competition and other factors

Planning involves: the predetermining of the course of action to be taken in

relation to the known event. (Plan A)

It also includes anticipating the possibilities of future problems that might appear (Plan B or Contingency Plan)

• It is a systematic activity which determines when, how and who is going to perform a specific job.

• It is rightly said :-“Well plan is half done”

“Failing to plan means planning to fail”

Organizing is the process of arranging people and physical resources to carry out plans and accomplish organizational objectives.

When goals have been established, a manager must create a way to accomplish them.

In other words, through organizing, managers must develop a system in which people can perform tasks that lead to the desired results.

Organizing Initially , organizing by top-level executives includes the

following activities:A.Creating job position with defined duties, responsibilities, requirements and salary ranges based on job requirementsB.Arranging positions into a hierarchy by establishing authority-reporting relationships.C.Determining the number of subordinates each managers should have reporting( span of control or span of management), the number of hierarchical levels in the organization, and the most appropriate way to set up departments.

Each position in the organization is accountable for identified tasks that contribute to its overall purpose

Organizing is ongoing process. Because jobs may be enlarged, diminished or eliminated; additional positions may be created; new production methods may be instituted; new management skills may be required; reporting relationships may be altered.

Staffing is the process of matching jobs and people. Involves the recruitment, selection, development, and retention of

employees with appropriate qualifications for positions created by the manager.

Staffing is one of the managers most important duties because the success of any organization depends on the quality of its employees. Most managers therefore choose their new employees very carefully.

Staffing usually is systematic and includes many of the following activities: human resource planning, announcing and advertising vacant positions, receiving applications, preliminary and final interviewing, testing, medical examination, and final selection and orientation.

Leading is the act of motivating or causing people to perform certain tasks intended to achieve specific objectives. It is the act of making things happen.

To be effective leaders, managers need to understand individual and group behaviour, techniques of motivation, and effective styles of leadership.

Managers must develop relationships that ensure adequate communication with their subordinates.

Leading also includes managing personal conflict, helping employees deal with changing conditions, and disciplining employees.

Leading involves developing a climate of individual integrity, corporate honesty, and high productivity.

Manager to be effective leader: Making certain that everyone in the unit knows

exactly what is expected in terms of performance Objectives must be identifiable, measurable and

individually attainable Must recognize and reward outstanding

performance Must surround themselves with competent

employees and ask their advice when making decisions that affect them. In other words, a manager should use all the organizational resources available-especially people.

Controlling is the process by which managers determine whether organizational objectives are achieved and whether actual operations are consistent with plans.

In controlling, a manager continually compares the performance of organization with its goals and takes corrective action, if needed.

Actual results may differ from the desired results in any area, but the three that require the most attention are product quality, worker performance, and cost control.

The quality of the company’s product may not measure up for a number of reasons: poor quality of raw materials used in the manufacturing, improper blending/mix of raw materials, malfunctions of manufacturing process/machine breakdown.

Control also is required when employees fail to meet desired performance standards and can be achieved by establishing standards, measuring worker output and comparing it with standards and taking corrective action when necessary.

Employee performance standards are formulated through experience, judgment and observation.

In appraisal interview, the employee is told which area need improvement and how to bring it about.

In some cases, additional training and instruction are needed, in other cases, disciplinary action is required.

Cost control involves comparing expenditures with budgeted funds.

Variation from the standards helps managers find problems areas and can lead to cost-reduction programs.

Management Roles

Carrying out management functions requires a manager to behave in a certain way- to fill certain management roles.

1.Interpersonal Roles

1.1. Figurehead: All social, inspiration, legal and ceremonial obligations. In this light, the manager is seen as a symbol of status and authority.

Management Roles1.2. Leader: Duties are at the heart of the manager-

subordinate relationship and include structuring and motivating subordinates,

overseeing their progress, promoting and encouraging their development, and balancing effectiveness.

As a leader, the manager hires, trains, evaluate, motivate and promotes subordinates.

1.3. Liaison: Describes the role of managers in representing their organization in different occasions.

Maintain information links both inside and outside organization; use mail , phone calls , meetings.

2. Informational RolesA second set of managerial activities relates to receiving and transmitting information.These informational roles require managers to serve as monitor, disseminator and spokespersons.2.1. Monitor: Duties include assessing internal operations, a department’s success and the problems and opportunities which may arise. All the information gained in this capacity must be stored and maintained. As a monitor, the managers tries to keep informed about what is happening in the organization or group by gathering information.

2.2. Disseminator: Highlights factual or value based external views into the organization and to subordinates. This requires both filtering and delegation skills.

As a disseminator, a manger sends outside information into the organization and internal information from subordinate to another.

2.3. Spokesman: Serves in a public relations capacity by informing and lobbying others to keep key stakeholders updated about the operations of the organization.

represents the company or its position to other groups, including the press government agencies, customers, and trade organizations.

3. Decision RolesThe third set of managerial activities involves decision making, or decisional roles.As decision maker, the manager becomes an entrepreneur, disturbance handler, resource allocator and negotiator.3.1. Entrepreneur: Roles encourage managers to create improvement projects and work to delegate, empower and supervise teams in the development process.The manager as entrepreneur may create new projects, change organizational structure, and institute other important programs for improving the company’s performance.

3.2. Disturbance handler: A role that takes charge when an organization is unexpectedly upset or transformed and requires calming and support.

As a disturbance handler, the manager deals with situations over which he or she has little control.

These may involve conflict between people or groups, or unexpected events outside the company may affect the firm’s operations.

In either case, immediate attention usually is needed and the managers must rearrange schedule to take care of the emergency.

3.3. Resource Allocator: Describes the responsibility of allocating and overseeing financial, material and personnel resources.

As a resource allocator, the manager must divide the company’s resources as well as personal time among the various demands on them.

This involves assigning work to subordinates, scheduling meetings, approving budgets, deciding on pay increases, making purchasing decisions, and other matters related to firms human, financial and material resources.

3.4. Negotiator: Is a specific task which is integral for the spokesman, figurehead and resource allocator roles.

The manager acting as negotiator represents the firms in financial matters. For example, the manager is a negotiator when the company tries to buy another firms.

Management Hierarchy Although all managers may perform the same basic

duties and play similar roles, the nature and scope of their activities differ.

Hence, three distinct levels of management are available.

Top Management

Middle Management

Supervisory Management

1. Top ManagementMade up of individuals who have the possibility

of making the decisions and formulating policies that affect all aspect of the firm’s operations.

PresidentVice PresidentChief Executive OfficersExecutive Vice President

A manager’s assigned job duties and the authority needed to fulfill those duties are what determine management level.

2. Middle Management

Includes all managers above the supervisory level but below the level where overall company policy is determined.

Middle managers manage supervisors.

Regional Sales ManagerAcademic Deans (Universities)Production Manager( in an Industry)

3. Supervisory ManagementAt the base of the pyramid is supervisory managementSupervisors manage workers who perform the most basic job

duties required in the business.Supervisors manage workers who perform the most basic job

duties required in the business.Technically, supervisors are managers. As such, they must reflect

the company’s view to their subordinates.Because of the expectations placed on supervisors from above

and below, many people contend that the person on the firing line-the supervisor-has the toughest job in management.

Eg. Sales Manager, Academic Department Chairperson (Universities)

Management and productivity Management is concerned with productivity i.e. the

effectiveness and efficiency. Productivity can be measured as the Output to Input ratios

within a time period with due consideration for quality. Productivity = O P/I P(within time period & considering

quality)

Productivity can be improved by: a. By increasing O/P with same I/P. b. By decreasing I/P but maintaining same O/P. c. By Increasing O/P and decreasing I/P to change the ratio

favorably. The I/P can be labour, material capital etc. In the past productivity improvement program were mostly

aimed at workers level but now it is for the management also.

Management Skills

Management success depends both on a fundamental understanding of the principles of management and on the application of technical, human and conceptual skills.

Modern business organizations are dynamics and complex, and competition in the market place is fierce. Consequently, managers must be highly skilled to succeed.

The skills managers need can be classified as technical, human relations and conceptual

Management Skills1. Technical Skills

Are the specialized knowledge and abilities that can be applied to specific tasks.

Most important at lower level of management. In most cases, technical skills are important at this

level because supervisory managers should train their subordinates in the proper use of work-related tools, machines , equipment and Standard Operation Procedure(SOP).

Management Skills2. Human relations skills

Human relations skills are the abilities needed to resolve conflict, motivate, lead, and communicate effectively with other workers.

Because all work is done when people work together, human relations skills equally important at all levels of management.

it is cooperative effort; it is teamwork; it is the creation of an environment in which people feel secure and free to express their opinions.

3. Conceptual Skills

Conceptual skills are the abilities needed to view the organization from a broad perspective and to see the interrelations among its components.

Conceptual skills are most important in strategic (long-range) planning, therefore they are more important at top level executives.

Management Skills

Conceptual Skills

Human Relations Skills

Top management

Middle management

Supervisory management

Management Styles  Description Advantages Disadvantages Autocratic Senior managers

take all the important decisions with no involvement from workers

Quick decision making Effective when employing many low skilled workers

No two-way communication so can be de-motivating Creates “them and us” attitude between managers and workers

Paternalistic

Managers make decisions in best interests of workers after consultation

More two-way communication so motivating Workers feel their social needs are being met

-Slows down decision making Still quite a dictatorial or autocratic style of management

Democratic

Workers allowed to make own decisions. Some businesses run on the basis of majority decisions

Authority is delegated to workers which is motivatingUseful when complex decisions are required that need specialist skills

Mistakes or errors can be made if workers are not skilled or experienced enough