INDUSTRIAL ORGANIZATION AND Secondary Industry

MANAGEMENT -The secondary industry includes that

manufacture of produce a finished, usable
Transformation process product or are involve in construction
-Processes that transform resources (inputs) Tertiary Industry
into finished goods or services for customers or The third sector is the tertiary sector=it sells the
clients(outputs) finished product or uses the finished product to
Transforming Goods provide a service. The tertiary industries can be
-for goods. Transformation means there will be tricky to classify because they often also include
physical changes. The outputs will be tangible. processes that fall into the secondary and
-The operation process will b highly automated quaternary sectors too.
and mechanised Examples:
-for example:Samsung takes electronic parts,  Entertainment
glass, plastic and changes them into mobile  Hospitality
phone  Mass media
Transforming service  Healthcare/hospital
-For services, transformation means there will  Public health
be no physical changes. The output will be  Information technology
intangible.  Waste disposal
-the process will rely heavily on staff-human  Consulting
-for example: fed uses its input of staffs,  Gambling
vehicles and delivers delivery services to the
 Retail sales and franchising
consumers as output
 Real estate
Value Adding
 Education
-It costs the business money to transform an
 Financial services(banking, insurance,
input into an output
investment management)
-as a result value is added
 Fast moving consumer goods (FMCG)
-Example: there is more value in burger than in
 Professional services(accounting, legal
the inputs such as bread, sauce, meat
services)
M’S of Process
 Management consulting
 Method
Quaternary industry
 Mother nature
The quarternary sector of economy is a way to
 Man
describe a knowledge based part of the
 Measurement
economy. This includes services such as:
 Machines
 Information technology
 Materials
 Information general and sharing
INDUSTRY OF CLASSIFICATION
 Media
Primary Industry
 Research and development
The primary sector of the economy is the sector
 Consultation
of an economy making direct use of natural
resources, or raw materials  Education
This includes agriculture, forestry, fishing, and  Financial planning
mining  Blogging
 Designing
QUINARY INDUSTRY QUATERNARY
-Quinary activities are services that focus on the -Information-based services
creation, re-arrangement and interpretation of -examples
new and existing ideas, data interpretation and  Teaching,
the use and evaluation of new technologies  journalism,
-Has been referred to as a “gold collar”  banking
professions
Includes: QUINARY
 Health -Decision making: Household services
 Hospitality -Example:
 Recreation  Carpet cleaning,
 Senior business executives, government  child care,
officials, research scientists, financial  restaurants
and legal consultant DEFINITION OF TERMS INDUSTRIAL
 The quinary sector also includes MANAGEMENT
domestic activities such as those
performed by stay-at-home parents or Industrial management
homemakers. These activities are not -the term industrial management is composed
measured by monetary amounts but of Industry and management
make a considerable contribution to the Management as process
economy -management refers to a series of interrelated
INDUSTRY SECTOR BREAKDOWN INDUSTRY functions or elements to achieve stated
PRIMARY objectives through the effective utilization of
-Exploit natural resources and produce raw resources
materials -it involves five functions
-Examples 1. planning
 Mining 2. organising
 Farming 3. staffing
SECONDARY 4. directing
-Process raw materials and manufacture 5. controlling
finished goods Resources
-example  man
 production of cars,  money
 food and;  machines
 clothes  materials
TERTIARY  methods
-Distribute goods and provide services  markets
-examples Managerial functions
 Supermarkets, Sequence of management functions
 hairdressing,  Planning- to take decisions and prepare
 travel agents plans, policies and procedure etc.
 organising- to divide work among
individuals and to create authority and
responsibility
  staffing- to employ people or to man serve customers and customer service staff to
various positions in the organisations answer queries.
and to provide them necessary training
-Functional areas in business
 directing- to give instructions to the
In a large organisation, it is usually easier to
subordinates
identify separate functional areas because e
 controlling- to compare actual
people work together in departments. Each
performance with the predetermined
department carries out the task that relate to
standards and to take corrective actions
its particular are. The main ones you are likely
Objectives
to meet in business are shown below:
 goods and services
 Administration
 Customer service
Industry Management
 Distribution
Inputs
 Finance
 men  Human resource
 materials  ICT
 machines  Marketing
 technology  Sales
 information  Production
Transformation process  Research and development
 system design The purposes of functional areas
 production planning and control The main purpose of functional areas is to
 operation management and control ensure that all important business activities are
Output carried out efficiently. This is essential if the
 Growth and expansion business is to achieve its aims and objectives. In
 Goods and services addition, specific areas will be responsibility for
 Social responsibility supporting specific types of aims and objectives,
Objectives of industrial Management for example:
 Customer service  sales and marketing will be involved in
 Efficient utilisation of resources achieving targets linked to developing
 Coordination new markets or increasing sales
 Product quality  human resources will be involved in
 Human relations arranging staff training activities and
THE MAIN FUNCTIONAL AREAS WITHIN supporting the continuous professional
BUSINESS ORGANISATIONS development of all staff
- Even in the smallest business a number of key  finance will be expected to monitor and
tasks, or functions, must be done regularly. support aims and objectives linked to
Stock must be bought, bills must be paid, keeping costs low to improve
customers must be served and customer profitability
enquiries must be answered. In a small firm all  production will be set targets relating to
these jobs may be done by one or two people. quality or meeting planned production
In a large organisation, people specialise in schedules.
different tasks. Tesco and Sainsbury's, for The administration function
example, have buyers to purchase the stock, -Administration is a support function required
accounts staff to pay the bills, checkout staff to by all businesses - and this does not mean just
doing keyboarding or filing. Senior and committed to the aims of the business, the
administrators carry out a wide range of tasks, organisation is more likely to be successful. HR
from monitoring budgets to interviewing new is responsible for recruiting new employees and
staff for their departments. ensuring that each vacancy is filled by the best
The customer service function person for the job. This is important because
-All businesses must look after customers or the recruitment process is expensive and time-
clients who have an enquiry, concern or consuming. Hiring the wrong person can be
complaint. Today, customer expectations are costly and cause problems both for the
high. When people contact a business they individual and the firm.
expect a prompt, polite and knowledgeable The ICT function
response. Unless they get a high level of service -Today, even the smallest businesses need
they are likely to take their business elsewhere someone who understands ICT and what to do
in the future. If something goes wrong. This is vital, because
The distribution function the number of crucial business tasks now
-Distribution means ensuring that goods are carried out on computer and the importance of
delivered to the right place on time and in the the data stored in the system mean that any
right condition. Some companies, such as system failure can be catastrophic.
Amazon and Debenhams, deliver direct to the The marketing function
customer, particularly when goods are bought -Marketing is all about identifying and meeting
online. Other businesses, including B & Q and customer needs. Many businesses consider this
Sainsbury's, hold stocks in giant regional so important that they are said to be marketing-
warehouses, for delivery to stores around the led. In this case, everyone in the organisation is
area. Superstores may use special vehicles, trained to put the customer first - from the
which can also carry chilled or frozen items. production worker, who has to produce high
Other businesses have to move more quality goods, to the accounts clerk, who must
The finance function respond to a customer enquiry promptly and
-Most entrepreneurs consider this is the most accurately.
important function in the business. This is Another way to understand marketing is
because all businesses need a regular stream of through the marketing mix which consists of
income to pay the bills. Finance staff record all four Ps.
the money earned and spent so that the senior  Product - Who are our customers?
managers always know how much profit (or loss) What do they want to buy? Are their
is being made by each product or each part of needs changing? Which products are
the business and how much money is currently we offering and how many are we
held by the business. This enables critical selling? What new products are we
decisions to be made rapidly and accurately planning in which areas are sales
because they are based on accurate information. growing - and how can we sustain this?
In some cases, this can mean the difference For which products are sales static - and
between the success or failure of the business how can we renew interest? Which
as a whole, as you will see in Unit 3, sales are falling and what If anything,
The human resources (HR) function can we do?
-The human resources of a business are its  Price - How much should we charge?
employees. Wise organisations look after their Should we reduce the price at the start
staff on the basis that if they are well trained to attract more customers - or charge as
 much as we can when we can? Can we and/or demonstrate their products and link
charge different prices to different these to the customer's specific needs.
types of customers? What discounts The production function
can we give? What services or products -Production refers to the manufacture or
should we give away or sell very assembly of goods. Production staff must
cheaply - and what benefits would this ensure that goods are produced on time and
bring? – are of the right quality. Quality requirements
 Promotion - How can we tell people can vary considerably. Whilst an error of 0.5
about our products? Should we have mm would not matter much for a chair or table,
specialist sales staff? Where should we for an iPod or DVD player it would be critical.
advertise to attract the attention of our The production function also includes all the
key customers? How else can we following aspects of production: -
promote the product - should we give  Production planning involves deciding
free samples or run a competition? what will be made, when, and which
Where and how can we obtain free machines and operators will be used. A
publicity? Should we send direct mail realistic timescale must be predicted,
shots and, if so, what information bearing in mind other jobs that are in
should we include? progress
 Place - How can we distribute our  Production control means constantly
product(s)? Should we sell direct to the checking progress to make sure that
customer or through retailers? Do we production plans are met - and taking
need specialist wholesalers or overseas remedial action if problems occur. This
agents to sell for us? What can we sell could be because of machinery
over the telephone? How can the breakdown, substandard raw materials
Internet help us to sell more? or labour shortages.
The sales function  Machine utilisation control is
-Sales is a crucial function for all businesses. It is concerned with minimising problems by
pointless having superb products or services if keeping all the equipment and
no one buys them. For that reason, most machinery in good working order. This
businesses have sales targets as part of their involves checking to ensure none is
aims and objectives. Meeting these is the overloaded or overused, without being
responsibility of the sales staff or sales team. routinely checked and maintained. This
The job of the sales staff varies, depending is important because if a machine
upon the industry. Shops that sell basic malfunctions it may produce damaged
products, such as chocolates or magazines do goods. If it breaks down altogether then
not need to do much selling. Most customers production of that product will cease.
call in to buy something choose the goods they Because this aspect is so important,
want, pay and leave. Customers expect more many organisations have a maintenance
help and advice if they want to buy a complex plan, which shows the dates on which
or expensive item, such as a television or car. machines will be out of operation for
Stores which sell these types of products inspection and servicing. These dates
therefore need trained sales staff who are are then taken into consideration when
friendly, knowledgeable and can describe production plans are made.
  Staff utilisation control concentrates on solved by asking everyone in the office for
making sure all the staff are working advice.
effectively and efficiently and
concentrating their efforts on key ORGANIZATIONAL FUNCTIONS (SLIDE 59- di
production areas and targets. This is koalampaanoitatype)
very important in industries which are
labour-intensive and use more people
than machines, such as assembling DEPARTMENTALIZATION
circuit boards or sewing jeans. -Grouping related functions into manageable
 Final quality checks make certain that units to achieve the objectives of the enterprise
the product is of the correct standard. in the most efficient and effective manner is
This can be done in several ways. Each departmentalization. A variety of means can be
item may be examined by hand - or utilized for this purpose. The primary forms of
passed through a machine which checks departmentalization are by function, process,
that the size and tolerance is correct. product, market, customer, geographic area,
Alternatively, items may be selected for and even matrix (also called project
inspection on a random sampling basis. organization). In many organizations, a
This would be the case if a large combination of these forms is used.
number of identical items is being
FUNCTION
produced, such as cups or biros.
-Perhaps the oldest and most common method
The research and development (R&D) function
of grouping related functions is by specialized
-This function is concerned with new product
function, such as marketing, finance, and
developments as well as improvements to
existing products or product lines. In many
industries, it also involves product design as
well. Improvements to existing products are
often ongoing as a result of market research or
customer feedback (see page 00). You can see
these improvements around you all the time -
such as ring-pull cans, microwavable containers
production (or operations). Sometimes this
for ready meals, transparent jug kettles and
form of departmentalization may create
memory sticks for computers
problems if individuals with specialized
functions become more concerned with their
Relationships between different functional
own specialized area than with the overall
areas No functional area in a business
business. An example of departmentalization by
organisation can work in isolation. In a small
function appears in Figure 11-1 below.
firm, links and interactions between people
PROCESS
responsible for different functions are usually
Departmentalization can also take place by
informal and continuous. Sales people know
process. This type of departmentalization,
which customers still owe money and must not
which often exists in manufacturing companies,
be sold any more goods on credit until a bill has
is illustrated in Figure 11-2 below
been paid; the manager knows which members
of staff are keen and hardworking, without
being told, and a customer query can quickly be
MARKET GEOGRAPHIC AREA

When a need exists to provide better service to -When organizations are spread throughout the
different types of markets, departmentalization world or have territories in many parts of a
by market may be the appropriate form. An country, departmentalization by geographic
example of a business serving non-profit area may provide better service to customers
markets, which uses the market form of and be more
departmentalization, is shown in Figure 11-4 cost effective.
below. A typical
example for
this form of
PROD departmentali
UCT zation is
shown in Figure 11-6 below.
Whenever specialized knowledge of certain
products or services is needed,
departmentalization by product may be best.
COMBINATION APPROACH
This usually occurs in large diversified
companies. This form of departmentalization is -Many organizations, particularly large,
illustrated in Figure 11-3 below. physically dispersed and diversified
organizations, utilize several different forms of
departmentalization. Figure 11-8 is an
organizational chart showing the use of several
forms of departmentalization.

CUSTOMER

Sometimes key or major customers warrant

YOU SHOULD REMEMBER

Determining the functions to be performed in

an organization involves consideration of
division of labor: this is usually accomplished by
a process of departmentalization. The primary
departmentalization by customer. This is often forms of departmentalization are by function,
the case in banks. See Figure 11-5 below. process, product, market, customer,
geographical area, matrix (project) or some
combination of these forms.
 Types of management structures
ORGANIZATIONAL STRUCTURES: DELEGATION
-to facilitate effective management,businesses
THE ART OF MANAGING
are organized in two ways:
The process of managing begins with the
 Vertically
establishment of objectives
Vertical Organization
 Ususually in large,traditional
companies.
 Manager look up to higher level
of management or down to
employees all within a single
department
 Their goal is to perform a
particular department function
well

There are three levels of management in

vertically organized company:

 Top management
These are people who make
planning decisions that affect
Authority is delegated along with the the whole company. They are
responsibility. The manager, however, is still the persons with the greatest
ultimately responsible.Assigning some of his or responsibility.
her responsibilities, the manager transfers or Top management job titles
creates accountability. include:
 Chief executive officer
Authority is the power or right to give orders,  President
make decisions and enforce obedience.  Chief operating officer
Responsibility the state or fact of having a duty  Vice president
to deal with something or of having control over  Middle management
someone. These managers implement the
decisions of top management
ORGANIZATIONAL STRUCTURE They are the link between the
Management structure top and supervisory-level of
management
 Vertical organization  Supervisory-level management
 Top management They supervise the activities of
 Middle management employees who carry out the
 Supervisory-level management tasks determined by the plans
 Horizontal organization of middle and top management
 Empowerment
  Self managing teams
Instead of reporting up a chain
of command. Employees are
organized into teams that
They assign duties and evaluate manage themselves.
the work of production or Each team has an “owner” who
service employees has ultimate responsibility for
Management that interacts ensuring the team meets its
directly with employees on the goals. He or she acts like a
job. coach.
The team shares responsibility
for the consequences of its
 Horizontally decisions
Horizontal Organization Empowerment
 This type of organizational structure Encourage team members to contribute to and
involves self managing teams that set take responsibility for management process is
their own goals and make their own known as empowerment.
 Organization by process
Teams of people with different
specializations are organized
around processes, such as
developing new products or
providing customer support.
Team members share opinions,
decisions, and responsibility for
the team’s success or failure.

 Customer orientation
Where teams get their direction
from the customer, rather than
from management.
decisions. In vertical companies the
 This type of management structure is sources of direction is
organized by process instead of management
function and is customer-oriented In horizontal companies, it is
 A newer method of management the customers.
brought about by downsizing in the late Customers satisfaction should
1980s and 1990s, to make companies produce large profits, high
more efficient and productive. productivity, and satisfied
investors

There are three characteristics of horizontal

Organization
 RESOURCE PLANNING (RESEARCH &
DEVELOPMENT, PRODUCT DEVELOPMENT)
PRODUCT DEVELOPMENT PROCESS
It is process that describes the basic steps
needed to design a product. This process
represents the basic sequence of steps or
activities that a firm employs to conceive,
OPERATIONS ANALYSIS OPERATIONAL design and bring a product to market which
STRATEGY suits the customer demand.
PHASES OF PRODUCT DEVELOPMENT
Operation Strategy
B. Content  Planning
1. Structural Decision- often  Concept Development
involves major capital  System-Level design
investment decisions  Design Detail
a. Facilities  Testing and Refinement
b. Capacity  Production Ramp-up
c. Process technology
d. Supply network 0. PLANNING:
2. Infrastractural decisions  Referred as a phase ‘zero’
a. Planning and control  Begins with corporate strategy,
b. Quality assessment of technology
c. Work organization
development and market objectives.
d. Human resources
 This phase specifies the target
e. New product
market for the product, business
development
goal, key assumption and various
f. Performance
different constraints.
measurement
Conclusion
1. CONCEPT DEVELOPMENT:
A well defines and a robust operations would
 The need of target market is
manifest the following functions:
specified,
 Actively manage the planning and
 Product concept are generated,
budget aggregate findings into a
evaluated and compared,
cohesive strategic plan
 One or more product concept are
 Provide highly effective tactical
selected for further development
execution or program management for
and testing
all major initiatives
.
2. SYSTEM LEVEL DESIGN:
 Product architecture,
 The decomposition of the product  A product that opens an entirely
into subsystem and components, new market
 Geometric layout of the product,  A product that adopts or replaces an
 Functional specification of each of existing product
the product subsystem,  A product that significantly broadens
 Preliminary process flow diagram for the market for an existing product
the final assembly process.  An old product introduced in a new
market
3. DESIGN DETAIL:  An old product packaged in a
Output of this phase are— different way
 Drawing or computer file describing  An old product marketed in a
the geometry and its production different way
tooling.
 Specification of purchased part,, TYPES OF NEW PRODUCT
 Process plan for the fabrication and
 Innovative products
assembly of the product
 New product lines- to allow the firm
to enter an existing market
4. TESTINGA ND REFINEMENT:
 Construction & evaluation of  Addition to product line – to
multiple preproduction versions of supplement the firm’s existing
the products, product line
 Prototypes are made with same  Improvements and revisions of
geometry and material properties as existing product
per the final product but not  Repositioned products – existing
necessary the same fabrication, products targets at new market
 Prototypes are tested whether the  Cost reduction new product that
product will work as designed and provide similar performance at
satisfy consumer demand. lower cost

EXAMPLES OF NEW PRODUCTS

5. PRODUCTION RAMP-UP:
 Production is made by using the  New to the worls – high definition
intended production system, TV, ipod, flat screen Tv, Probaiotic
 Purpose of the ramp up is to train Ice Cream
the workforce and to work out any  Product improvement &
remaining problems to the replacement : SPEED by BPCL
production process,  Cost reduction new product: Moser
 Products produced during product Baer
ramp up are send to preferred
customers and careful evaluation is New product can be used to
done to checkout remaining flaws.  Increase/defend market share by
What is a new product? offering more choice or updating
older products
 Appeal to new segments
  Diversity into new markets  Idea Screening
 Improve relationship with  Concept development and testing
distributors  Market strategy development
 Maintain the firm’s reputation a  Business Analysis
leading edge company  Test marketing
 Even out peaks and troughs in  Commercialization
demand
 Make better use of the Idea Generation
organization’s resources  Idea Generation is continuous,
Why develop New product? systematic search for new product
opportunities. It involves delineating
 To create starts and cash cows for sources of new ideas and methods
the future for generating them.
 To replace declining product  Ideas for new products can be
 To take advantage of new obtained from basic research using
technology SWOT Analysis (OPPORTUNITY
 To defeat rivals ANALYSIS), Market and consumer
 To maintain/ increase market share trends, company’s R&D department,
 To keep up with rivals competitors, focus groups,
 To maintain competitive advantage employees, salespeople, corporate
 To fill gap in the market spies

New product planning IDEA SCREENING

 This is the strategic stage  The object is to eliminate unsound

 The firm assesses concepts prior to devoting resources
 It current product portfolio to them.
 Opportunities and threats  The screeners must ask these
 The firm then determines the type questions:
of product which would best fit in  Will the customer in the
with the corporate strategy target market benefit from
the product?
New product development  What is the size and growth
forecasts of the market
 New product development is a
segment/target market?
process which is designed to
 What is the current or
develop, test and consider the
expected competitive
viability of products which are new
pressure for the product idea?
to the market in order to ensure the
 What are the industry sales
Growth or survival of the
and market trends the
organisation.
product idea is based on?
Stages in New product development  Is it technically feasible to
manufacture the product?
 Idea Generation
  Will the product be actual performance under the
profitable when proposed marketing plan.
manufactured and delivered
to the customer at the target Commercialization
price?  Commercialization involves
CONCEPT TESTING implementing a total marketing plan
and full production
 Concept testing present the  Launch the product
consumer with a proposed product  Produce and place
and measure attitudes and intention advertisements and other
at this early stage of development. promotions
 Concept testing of prototypes can  Fill the distribution pipeline
help avoid costly mistakes. with product
 Critical path analysis is most
MARKET STRATEGY DEVELOPMENT useful at this age
Includes development of three part strategy RESOURCE PLANNING (FACILITIES AND
plan PLANT LAYOUT)
1. Describe the market’s size, structure, Locating an Industry
and behaviour, the planned product
positioning, and the sales, market Factors in Selecting Location of an Industry:
share, and profit goals for first few
1. Material
years.
2. Market
 Outlines the planned price,
3. Man
distribution strategy, and marketing
4. Transportation
budget for the first year.
5. Climate
 Describes the long-run sales and
6. Money Market
profit goals and marketing-mix
7. Sales Market
strategy over time.
MATERIAL
Business & financial Analysis
 If the materials required are but few
 Estimate likely selling price based
and bulky, it is quite likely that
upon competition and customer
nearness to Supplies of cheap raw
feedback.
materials will be an important factor.
 Estimate sales volume based upon
 Where the raw materials are not so
size of market
bulky, nearness to raw materials is
 Estimate profitability and breakeven not so important.
point
POWER
Test Marketing
Power is an important factor in the steel,
 Test marketing involves placing a glass, brick, tile, pottery, iron, and forging
product for sale in one or more lines of business.
selected areas and observing its
CLIMATE  Used in problem analysis and
decision analysis
Prior to the perfection of mechanical
methods of humidifying, dehumidifying, Kepner Tregoe Decision Analysis
heating, and cooling local bodies of air in
factories, warehouses, kilns, etc., the  Based in decision making criteria,
natural climate played an important part in choices are made to arrive at
the selection of sites for certain factories potential problem resolution

TRANSPORTATION FACILITIES Kepner Tregoe Decision Analysis

 Where the raw materials and 1. Prepare decision statement

finished product are bulky and heavy, 2. Identify strategic requirements
the cost of transportation is an 3. Rank the objectives and assign
important factor. relative weights
 From consideration of 4. List Alternatives
transportation costs, that location is 5. Score each alternative
most advantageous which minimizes 6. Give recommendation
the combination costs of freight and
MANUFACTURING PLANTS AND
express on incoming materials and
EQUIPMENT
on outgoing finished goods.
Importance of Arrangement and
LABOR SUPPLY Equipment
 An industry requiring a large number  Many successful industries had their
of unskilled labourers is preferably beginnings in rented quarters or in
located near a source of that kind of small buildings not planned with any
labor. particular reference to production.
MONEY MARKET Principles Considered in Plant Layout
 Any thriving industry depends very (1) Processes
largely on local or near-by banks for (a) The general process-mapping of
occasional advances of money on the industry;
the securities it has to offer.. (b) The routing of the separate
SALES MARKET classes of material or parts
through the establishment as a
 A large number of important whole and through each distinct
industries made their start in the department;
best sales market. (c) Machinery and fixtures involved
 Nearness to other establishments in in industrial processes
similar lines is also often advantage. (d) Departmental arrangement by
processes, under the heading of
Kepner Tregoe service
 Developed by Charles Kepner and Principles Considered in Plant Layout
Benjamin Tregoe
 (2) Service  Denotes time spent when no
(a) Power; processing is taking place
(b) Heat;
(c) Ventilation; THE HAND OFF
(d) Light;  Denotes where the documents or
(e) Sanitation; calls are transferred from one
(f) Transportation; person to another
(g) Storage of  Or are copied from one machine to
(1) Raw materials, (2) work in another, or entered in a separate
process, (3) finished book etc
individual parts, (4)  An opportunities for error or further
assembled groups, and (5) delay
completely finished product;
(h) Receiving and shipping;
(i) Tool rooms;
(j) Wash rooms;
(k) Supervisors offices;
(l) Spaces for planning department,
bulletin boards, time clocks, cost
and stores records, etc.; (m)
inspectors’ quarters;
(m) Fire-prevention, safety, and
welfare arrangements;
(n) Drafting and designing space; (o)
commercial, administrative, and
supervisional official’s offices

PROCESS MAPPING
BASIC PROCESSING MAPPING SYMBOLS
1. Start/finish symbol
 Denotes the initial boundary of the
process
2. An activity
 denotes a ‘doing’ task. It must
include a verb and a noun
3. A decision point
 Denotes where the chart will split
dependant on the outcome
4. A connector
 Used to connect boxes & should not
be used diagonally
5. A delay point
 4. Know the floor area required by
each department processing
machine or device and its
dimensions together with space
required around it for operators and
storage.

PRODUCTION PLANNING ECONOMIC

ANALYSIS
PRODUCTION PLANNING AND CONTROL
 PPC is aimed to achieving the
efficient utilization of resources
(material, men, facility) in the
manufacturing organizations
through planning, coordinating and
control the production activities that
transform the raw materials in to
finished product.
 PPC = Production Planning +
Production Control

PDCA CYCLE

Selection and Arrangement of Machinery

and Fixtures
1. After process mapping, its important
to determine the prevalent routes of
materials, parts in process and
supplies and waste. OBJECTIVES OF PPC
2. Know the capacity of output
 To design the production system
3. Determine how many units of
to meet with minimum cost and
processing machinery or devices are
quality standard
to be placed in the department
  To ensure maximum utilization 5. To achieve coordination among
of resources various departments relating to
 To ensure production of quality production.
products 6. To make all arrangements to remove
 To maintain inventory controls possible obstacles in the way of
 To maintain flexibility in smooth production.
manufacturing operations 7. To achieve economy in production
 To plan the plant capacities for cost and time.
future requirements 8. To operate plant at planned level of
 To establish targets and checking efficiency.
them against performance 9. Making efforts to achieve
 To ensure effective cost production targets in time.
reduction and cost control 10. Providing for adequate stocks for
meeting contingencies.
PRODUCTION PLANNING
LEVELS OF PRODUCTION PLANNING
Meaning:
1. Factory planning (Availability of
Production Planning involves management machines, buildings, and goods)
decisions on the resources that the firm will 2. Process planning (Operations
require for its manufacturing operations involved)
and the selection of these resources to 3. Operation planning (Tools required)
produce the desired goods at the
appropriate time and at the least possible FACTORS DETERMINING PRODUCTION
cost. PLANNING

Definition: 1. Volume of production

2. Nature of production process
“The planning of industrial operations 3. Nature of operations
involves four considerations, namely, what
work shall be done, how the work shall be PRODUCTION CONTROL
done and lastly, when the work shall be
Meaning:
done.”
Production control guides and directs flow
OBJECTIVES OF PRODUCTION PLANNING
of production so that products are
1. To determine the requirements of manufactured in a best way and conform to
men, material, and equipment. a planned schedule and are of the right
2. Arranging production schedules quality. Control facilities the task of
according to the needs of marketing manufacturing and see that every theme
demand. goes as per the plan.
3. Arranging various inputs at a right
Definition:
time and in right quantity.
4. Making most economical use of “Production control refers to ensuring that
various inputs. all which occurs is in accordance with the
rules established and instructions issued.
Henri Fayol – French Engineer 5. Control of material handling
6. Control of information
Henri Fayol was a French mining engineer,
7. Control of quantity
mining executive , author and director of
8. Control of due dates
mines who developed a general theory of
9. Control of quality
business administration that is often called
10. Control of manufacturing capacity
Fayolism. He and his colleagues developed
this theory independently of scientific PRODUCTION PLANNING AND CONTROL
management but roughly
contemporaneously. Meaning:

ESSENTIAL STEPS FOR CONTROL PROCESS Production planning and control is

concerned with directing production along
1. Initiation the production the lines set by the planning department.
2. Progressing
3. Corrective action based up on the Definition:
feed back “ Production planning and control is the co-
ordination of series of functions according
OBJECTIVES OF PRODUCTION CONTROL
to a plan which will economically utilize the
1. To implement production plans by plant facilities and regulate the orderly
issuing orders to those who are movement of goods through the entire
supposed to implement them. manufacturing cycle from the procurement
2. To ensure that various inputs like of all materials to the shipping of finished
men, machine, materials etc. are goods at a predetermined rate.”
available in the required quantity
PHASES OF PRODUCTION PLANNING AND
and quality
CONTROL
3. Making efforts to adhere to the
production schedules 1. Pre-planning phase
4. To ensure that goods are produced 2. Planning phase
according to the prescribed 3. Control phase
standards and quality norms.
5. To undertake the best and most PRE-PLANNING CONTENTS
economic production policies. 1. Product development and design
6. To introduce a proper system of 2. Process design
quality control 3. Work station design
7. To ensure rapid turnover of 4. Sales forecasting
production and minimizing of 5. Estimating
inventories of raw materials and 6. Factory outlet and location
finished products. 7. Equipment policy
SCOPE OF PRODUCTION CONTROL 8. Pre-planning production

1. Control of planning PLANNING PHASE

2. Control of tooling
3. Control of materials
4. Control of activities
  Analysis of 4’M’S (Material,  PRODUCTION- sequence of
Machine, Methods, Manpower) to operations
undertake the above “M”s  Transform given materials to desired
 Phase for Planning, Estimating & products.
Scheduling  Combination of different
 Short-term planning manufacturing process.
 Long-term planning  SYSTEM- logical arrangements of
components according to the plan.
CONTROL PHASE  PRODUCTION SYSTEM- inputs to
 This involves Dispatching, Inspection, outputs.
Expediting, and evaluation
TYPES OF PRODUCTION SYSTEMS
 Control of scrap, control of
transportation 1. Job shop production (units of
 Feed back information for the customer orders)
corrective actions. 2. Batch production (Small batched in
large variety)
FUNCTIONS OF PPC 3. Mass production (Large quantities of
 MATERIAL PLANNING (Batch, products)
delivery rates, etc.) 4. Process or continuous production
 METHODS PLANNING ( Identify the ( Manufacture the products where
alternate methods and select the the demand is high)
best methods)
 MACHINES AND EQUIPMENT (Tools ECONOMIC ANALYSIS
and machines checking for  Management decision in product
requirements) decision policy.
 PROCESS PLANNING (Sequence of  Capital expenditure in terms of
operation in the production) fixed and variable costs
 ESTIMATING (Production orders and  Production cost per price
detailed root sheets)  Price (Cost+profit)
 SCHEDULING AND LOADING (Fixing  Quantity manufactures
priorities and machine loading)  Requirements of direct and
 DISPATCHING (Release the orders indirect materials
for customers) PROFIT CONSIDERATION
 EXPEDITING (Tracking of the 1. PURE PRICING STRATEGY
progress of work according to the  Increase the total profit by
planned schedule) increasing the profit by unit
 INSPECTION AND TESTING (Quality price
of the products meet the  Sales volume remain same total
specification) profit would proportional to
 EVALUATION (Link between the increase the margin profit
control and future planning)  Due to the competitors
products profit may shrink.
PRODUCTION SYSTEM 2. MARKETING STRATEGIES
  Through design, advertisement Break even quantity = FIXED COSTS by (SELLING
and pricing PRICE - VARIABLE COSTS)
 More attractive product by THE GRAPHICAL METHOD
reducing roots  It is break even chart Graphical
 Too low margin cause in representation of relationship between
stabilities in market Cost and revenue at given time.
3. REDUCTION IN HOUSE PRODUCTION COSTS: Breakeven Analysis – a decision-making aid that
 Increase the total profit by enables a messenger to determine whether a
reducing the total production particular volume of sales will result in losses or
costs profits.

BREAK-EVEN ANALYSIS (8 MARK) The theory behind the breakeven analysis:

 It is otherwise called as Cost Volume Made up of four basic concepts
Profit Analysis  Fixed Costs –costs that do not
 It deals with the Company’s Sales, profit, change
and costs  Variable Costs – costs that rise
 Simple method of presenting to in propitiation to sales
management the effect of changes in  Revenue- the total income
volume of production received
AIMS OF BREAK EVEN ANLYSIS  Profit – the money you have
 Help to deciding profitable level of after subtracting fixed and
output variable cost from revenue
 To take decision regarding make or buy
 To decide product mix or promotion
mix
 To take plant expansion decisions
 To indicate margin of safety
 To compare a number of business
enterprise
ASSUMPTION OF BREAK EVEN ANALYSIS
 Selling price remain constant for all
sales (no discount)
 Relationship between sales volume and
costs
 Assumes is as Fixed Variable cosys
 Production is equal to sales
DETERMINATION OF BREAK EVEN POINT
1. THE ALGEBRAIC METHOD
2. THE GRAPHICAL METHOD

THE ALGEBRAIC METHOD

Total costs=fixed costs + variable costs
 The break-even analysis can be utilised for the
purpose of calculating the volume of sales
necessary to achieve a target profit.
When a firm has some target profit, this
USES OF BREAK EVEN POINT analysis will help in finding out the extent of
 Helpful in deciding the minimum increase in sales by using the following formula:
quantity of sales Target Sales Volume = Fixed Cost + Target Profit
 Helpful in the determination of tender / Contribution Margin per Unit
price -Change in Price:
 Helpful in examining effects upon The management is often faced with a problem
organization’s profitability of whether to reduce prices or not. Before
 helping in deciding about the taking a decision on this question, the
substitution of new plants management will have to consider a profit. A
 Helpful in sales price and quantity reduction in price leads to a reduction in the
 Helpful in determining marginal cost contribution margin. This means that the
MANAGERIAL USES OF BREAK-EVEN ANALYSIS: volume of sales will have to be increased even
 To the management, the utility of to maintain the previous level of profit. The
break-even analysis lies in the fact that higher the reduction in the contribution margin,
it presents a microscopic picture of the the higher is the increase in sales needed to
profit structure of a business enterprise. ensure the previous profit.
The break-even analysis not only The formula for determining the new volume
highlights the area of economic of sales to maintain the same profit, given a
strength and weakness in the firm but reduction in price, will be as follows:
also sharpens the focus on certain New Sales Volume = Total Fixed Cost + Total
leverages which can be operated upon Profit/New Selling Price-Average Variable Cost
to enhance its profitability. -Change in Costs:
 It guides the management to take When costs undergo change, the selling price
effective decision in the context of and the quantity produced and sold also
changes in government policies of undergo changes.
taxation and subsidies. Changes in cost can be in two ways:
The break-even analysis can be uses for the (i) Change in variable cost, and
following purposes: (ii) Change in fixed cost.
-Safety Margin: -Variable Cost Change:
The break-even chart helps the management to An increase in variable cost leads to a reduction
know at a glance the profits generated at the in the contribution margin. This reduction in the
various levels of sales. The safety margin refers contribution margin will shift the break-even
to the extent to which the firm can afford a point downward. Conversely, with the fall in the
decline before it starts incurring losses. proportion of variable costs, contribution
The formula to determine the sales safety margin increase and break-even point moves
margin is: upward.
Safety Margin = (Sales –BEP) / Sales x 100 Under conditions of changing variable costs,
the formula to determine the new quality or
-Target Profit: the new selling price is:
(a) New Quantity or Sales Volume = -Plant Expansion Decisions:
Contribution to Margin/Present Selling Price – The break-even analysis may be adopted to
New Variable Cost per Unit reveal the effect of an actual or proposed
(b) New Selling Price = Present Sale Price + New change in operation condition. This may be
Variable Cost – Present Variable Cost illustrated by showing the impact of a proposed
-Fixed Cost Change: plant or expansion on costs, volume and profits.
An increase in fixed cost of a firm may be Through the break-even analysis, it would be
caused either due to a tax on assets or due to possible to examine the various implications of
an increase in remuneration of management, this proposal.
etc. It will increase the contribution margin and -Plant Shut Down Decisions:
thus push the break-even point upwards. Again In the shut down decisions, a distinction should
to maintain the earlier level profits, a new level be made between out of pocket and sunk costs.
of sales volume or new price has to be found Out of pocket costs include all the variable costs
out. plus the fix cost which do not vary with output.
 New Sales Volume = Present Sale Sunk fixed costs are the expenditures previously
Volume + (New Fixed Cost + Present made but from which benefits still remain to be
Fixed Costs)/(Present Selling Price- obtained e.g. depreciation.
Present Variable Cost) -Decision Regarding Addition or Deletion of
 New Sale Price = Present Sale Price + Product Line:
(New Fixed Costs – Present Fixed If a product has outlive utility in the market
Costs)/Present Sale Volume immediately, the production must be
Decision on Choice of Technique of Production: abandoned by the management and examined
A firm has to decide about the most economical what would be its consequent effect on
production process both at the planning and revenue and cost. Alternatively, the
expansion stages. There are many techniques management may like to add a product to its
available to produce a product. There existing product line because it expects the
techniques will differ in terms of capacity and product as a potential profit spinner. The break-
costs. The breakeven analysis is the most simple even analysis helps in such a decision.
and helpful in the case of decision on a choice -Advertising and Promotion Mix Decisions:
of technique of production. For example, for The main objective of advertisement is to
low levels of output, some conventional stimulate or increase sales to customers-former,
methods may be most probable as they require present and future. If there is keen to undertake
minimum fixed cost. For high levels of output, vigorous campaign of advertisement. The
only automatic machines may be most management has to examine those marketing
profitable. By showing the cost of different activities that stimulate consumer purchasing
alternative techniques at different levels of and dealer effectiveness. The break-even point
output, the break-even analysis helps the concept helps the management to know about
decision of the choice among these techniques. the circumstances. It enables him not only to
-Make or Buy Decision: take appropriate decision but by showing how
Firms often have the option of making certain these additional fixed cost would influence BEPs.
components or for purchasing them from The advertisement pushes up the total cost
outside the concern. Break-even analysis can curve by the amount of advertisement
enable the firm to decide whether to make or expenditure.
buy.
  Demand forecasts made by
management estimate the number &
qualification the firm will need.
 Supply forecasts estimate the
availability and qualifications of current
workers and those in the labor market.
HRM Components
 Components should be consistent with
the others, organization structure and
strategy.
 Recruitment: develop a pool of
qualified applicants.
 Selection: determine relative
qualifications & potential for a job.
 Training & Development: ongoing
PERSONNEL MANAGEMENT (HIRING AND process to develop worker’s
TRAINING) abilities and skills.
 Performance appraisal & feedback:
Human Resource Management provides information about how to
 The process of planning, organizing, train motivate, and reward workers.
directing (motivating), and controlling  Managers can evaluate then give
the procurement, development, feedback to enhance worker
compensation, integration, performance.
maintenance, and separation of  Pay and Benefits: high
organizational human resources to the performing employees should
end that organizational, individual, and be rewarded with raises,
societal needs are satisfied. bonuses.
 Includes all activities used to attract &  Increased pay provides additional
retain employees and to ensure they incentive.
perform at a high level meeting  Benefits, such as health insurance,
organizational goals. reward membership in firm.
These activities are made up of:
 Labor relations: managers need
1. Recruitment & selection
an effective relationship with
2. Training and Development
labor unions that represent
3. Performance appraisal and feedback
workers.
4. Pay and benefits
 Unions help establish pay, and working
5. Labor relations
conditions.
Human Resource Planning
If management moves to a decentralized
 Includes all activities managers do to
structure, HRM should be adjusted as well.
forecast current and future HR needs.
 Must be done prior to recruitment and
selection
RECRUITMENT
  External Recruiting: managers look After a pool of applicants are identified,
outside the firm for people who have qualifications related to the job requirements
not worked at the firm before. are determined:
 Managers advertise in newspapers,  Background Information: includes
hold open houses, recruit in universities, education, poor employment, college
and on the Internet. major, etc.
 External recruitment is difficult since  Interview: almost all firms use one of
many new jobs have specific skill needs. two types:
 A multi-prong approach to external  Structured interview: managers ask
recruiting works best. each person the name job-related
 Internal Recruiting: position filled questions
within the firm.  Unstructured interview: held like a
Internal Recruiting has several benefits: normal conversation
 Workers know the firm’s culture, may  Usually structured interviews preferred;
not have new ideas. bias is possible.
 Managers likely already know the  Paper & Pencil Tests: Either an ability
candidates and personality test.
 Internal advancement can motivate  Ability test: assess if applicant has right
employees. skills for the job.
HRM PLANNING: OUTSOURCING  Personality test: seek traits relevant to
 Outsourcing: managers can job performance
decide to contract with outside  Be sure test is a good predictor of job
workers rather than hiring them. performance.
 Outsourcing is more flexible for  Performance Tests: measure job
the firm. performance
 Outsourcing often provides  Typing speed test is one example
human capital at a lower cost  Assessment Center: candidates
 Outsource problems: managers assessed on a job- related activities over
lose control over output a period of a few days.
 Outsource contractors are not  References: outside people provide
committed to the firm. candid information about candidate.
 Unions typically are against  Can be hard to get accurate information.
outsourcing that has potential
to eliminate member’s jobs. TRAINING & DEVELOPMENT
 Training: teach organizational members
how to perform current jobs.
 Help worker’s acquire skills to perform
effectively.
 Development: build worker’s skills to
enable them to take on new duties.
 Training used more often at lower levels
of firm, development is common with
SELECTION PROCESS managers.
  A Needs Assessment should be taken  Motivation is the driving force behind
first to determine who needs which behaviour. This is the key to
program and what topics should be understanding why it is important for
stressed. business.
Types of Development  As managers/owners we need to drive
 Varied Work Experiences: Top behaviour of our employees.
managers must build expertise in many Understanding what their motivation is
areas. and how to tap into it.
 Workers identifies as possible top Types of Motivation
managers given many different tasks.  Extrinsic Motivation
 Formal Education: tuition 1. Salary
reimbursement is common for 2. Bonuses/Perks
managers taking classes for MBA or 3. Organized Activities
similar. 4. Promotion/Grades
 Long-distance learning can also be used 5. Punishment/Layoffs
to reduce travel.  Intrinsic Motivation
Whatever training and development efforts 1. Learning and Growth opportunity
used, results must be transferred to workplace. 2. Social contact and status
JOB ANALYSIS 3. Curiosity
 Job Analysis – the act of examining 4. Respect and Honour
positions within an organization Psychological Theories of Motivation
 Job Description – narrative explaining 1. Hertzberg’s Two-Factor Theory: was
the scope of a position developed by psychologist Frederick Herzberg in
 Job Characteristics - tasks involved in a the 1950’s, Herzberg found 2 factors that
position influence employee motivation and satisfaction
 Job Requirements – personal
characteristic necessary to fill a position
PERFORMANCE APPRAISAL (cont)
 Self Appraisal
 Peer Appraisal
 360 Degree Appraisal
 Central Tendency Error – everyone
ranked as average
 Leniency – individuals are ranked higher
than they deserve

PERSONNEL MANAGEMENT (EMPLOYEE

MOTIVATION)
Motivation – generally defined as the force that
compels us to action. It drives us to work hard
and pushes us to succeed. Motivation
influences our behaviour and our ability to
accomplish goals.
2. Maslow’s Hierarchy of Needs : the hierarchy
is made up of 5 levels:

Challenges of Motivating Employees

 Focus
 Personalities
 Communication QUALITY CONTROL (7 QC CONTROLS)
 Expectations Background and Importance of 7 QC Tools:
 Costs  The 7 QC tools are simple statistical
 Environment tools used for problem solving. These
 Low Self-Confidence tools were either developed in Japan or
 Low Expectation for Success introduces to Japan by the Quality
 Lack of Interest in Subject Gurus such as Deming and Juran-Kaoru
Matter Ishikawa has stated that these 7 tools
 Achievement Anxiety can be used to solve 95% of all
 Fear of Failure problems.
 The 7 Tools of Quality is a designation
given to a fixed set of geographical
techniques identified as being most
helpful in troubleshooting issues related
to quality. They are used to analyze the
production process, identify the major
 problems, control fluctuations of
product quality, and provide solutions
to avoid future defects.

Check Sheet
Purpose:
 Tools for collecting and organizing
measuring or counted data
 Data collected can be used as input
data for other quality tools
 Data Collections are based on
answering the questions of What,
7 Quality Control Tools Where, Who and How
1. Check Sheets When to use a Check Sheet?
2. Stratification  To collect data repeatedly by the same
3. Pareto Chart person or at the same location
4. Cause and effect diagram  To collect data on the frequency or
5. Histogram patterns of events, problems, defects,
6. Control Chart defect location, defect causes, etc.
7. Scatter Diagram  To collect data from a production
process
  Vilfredo Pareto (1848 – 1923) –
Italian economist developed
this principle
- 20% of the population has 80%
of the wealth
 Juran used the term “vital few,
trivial many”. He noted that
Stratification 20% of the quality problems
 Stratification is a system of formation of caused 80% of the dollar loss
layers, classes and categories.  Purpose: The purpose of a
 Data collected using check sheets need Pareto diagram is to separate
to be meaningfully classified. Such the significant aspects of a
classification helps gaining a preliminary problem from the trivial ones
understanding of relevance and
dispersion of data so that further
analysis can be planned to obtain a
meaningful output. Meaningful
classification of data is called
stratification.
 This technique separates the data so
that patterns can be seen.
When to Use Stratification?
 When data come from several sources
or conditions, such as shifts, days of the
week, suppliers or population groups
 When data analysis may acquire
separating different sources or
conditions.

PARETO PRINCIPLE
Fishbone Diagram
- The cause and effect diagram
was first developed by
Professor Kaoru Ishikawa of the
University of the University of
Tokyo in the 1940’s, is also
known as the “Fishbone
Diagram” or the “Ishikawa
Diagram” or the “Cause-and-
Effect Diagram”
Description: The fishbone diagram identifies
many possible causes for an effect of problems. Description: Histogram are graphs of a
It can be used to structure a brainstorming distribution of data designed to show centering
session. It immediately sorts ideas into useful dispersion (spread), and shape (relative
categories. frequency) of the data. They are used to
understand how the output of a process relates
When to use a Fishbone Diagram? to a customer expectations (targets and
- When identifying possible specifications), and help answer the question:
causes for a problem. Especially “Is the process capable of meeting customer
when a team’s thinking tends to requirements?”
fall into ruts. When to use a Histogram?
Fishbone Diagram Procedure: 1. When the data are numerical
1. Brainstorm the major categories of causes of 2. When you want to see the shape of data’s
the problem distribution
2. It can be identify by ‘6M’ techniques: 3. Whether the output of a process is
a. Methods distributed approximately normally.
b. Machines (Equipment) 4. When analyzing whether a process can meet
c. Manpower (People) the customer’s requirements
d. Materials 5. When analyzing what the output from a
e. Measurement supplier’s process looks alike.
f. Management, Environment 6. When seeing whether a process change has
occurred from one time period to another
7. When determining whether the outputs of
two or more processes are different
8. When you wish to communicate the
distribution of data quickly and easily to others.

CONTROL CHART
Purpose: The control chart is a graph used to
study how a process changes over time.
Guidelines:
- A control chart always has a
central line for the average, an
upper line for the upper control
limit and a lower line for the
lower control limit. These lines SCATTER DIAGRAM
are determined from historical Purpose: To identify the correlations that might
data. exist between a quality characteristic and a
- By comparing current data to factor that might be driving it
these lines, you can draw - A scatter diagram shows the
conclusions about whether the correlation between two
process variation is consistent variables in process. These
(in control) or is unpredictable variables could be a Critical To
(out of control, affected by Quality (CTQ) characteristic.
special causes of variation). - If the variables are correlated,
when one changes the other
probably changes.
- Dots that look like they are
trying to form a line are
strongly correlated
- Sometimes the scatter plot may
show a little correlation when
all the data are considered at
once.