mgmt chapter 1

8/17/2019 MGMT Chapter 1

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INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

Industrial Engineering is concerned with the design, improvement and

installation of integrated vstem of man, materials and machines involved in

production and distribution of products. "

f j

/. 1 Indust rial Engineering

1.2 Fields of Industrial Engineering

1.3 Functions of Industrial Engineering

1.4 Origin and Development of Factory System

. ' • ■ ' ■ > • ' • - ' • . - : ' • . i i ' ' i'l . . . .

1.5 His torica l Deve lopm ent of Industria l Engineering

- 1 - . t I • i, ' „ i't •• , . - '

/• !ioneers of Scientif ic "anagement

#uestions

1.1 INDUSTRIAL ENGINEERING

Industr ial engineering is concerned wi th br inging toge ther and e ffec t ive u t i l iza t ion of var ious

resources or inputs to fac i l i ta te ecient production/operation. In o the r w ords , w e ma sa

that industrial engineering is an engineering approach to detailed analsis of the use and cost of the

various resources of an organiza t ion . !he main resources a re people "men, mater ia ls , informat ion,

e#uipment and mone which a re to be used in r ight manner so tha t the const i tu te an in tegra ted

combinat ion to achieve the product ion ob$ec t ives % to improve product iv i t or prof i ts e tc .& and

po li ci es of the or ga ni za ti on . f fi ci en t pr od uct io n" op er at io n ss tem s ar e tho se ss tem s wh ic h sco re

high on actual performance standards.

I t i s impor t an t t o no te t ha t i ndus tr i al e ngine er ing i s r e l at e d no t me rel w i th the ss t e m o f

e #uipmen t , p roce sses a nd ma te r ia l s bu t a l so w i th pe op le w ho in t e ra ct w i th th i s s s te m. !husindustr ial engineering techni#ues go beond the mechanica l cost fac tor. !hese a re assoc ia ted wi th

organiza t ional s t ruc ture , administ ra t ive techni#ues and human problems( and a t the same t ime

re la t ionship be tween the e ff ic ienc and consent of the wor)ing group is a lso considered for be t te r

coordination.

In simple words, i t is related with the improvement of whatever has been designed and"or evaluated.If i t is human wor), the industrial engineer would tr to ma)e it more efficient, more productive, lesstiring, and causing minimum wastage of materials, t ime and energ thus least costing. If i t is concerned

Chapter,*


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U INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

with handling ta*) he would trv to reduce %he amount of movement involved through change in load

M+C a nd re a r ra nge me n t o f t he l a ou t u se d . I f i t i s a ma nufa c tu r ing t a s) i t w ou ld t r e i the r b

redesigning or b using di f!erent input mater ia ls so tha t be t te r or newer product ion tcchn.#ues

could be u t i l ized and provide be t te r in tegra t ion and ow among processing steps. !hus, i t ma be

concluded tha t indust r ia l enc ineering is not re la ted mere l wi th the sstem of mater ia ls , methods

and e#uipment but a lso wi th the men who in te rac t wi th th is sstem. !he impact of people on the

operating sstem is both from within and out side. en who operate a machine, who handle material

or who plan the method" process a re wi th in the opcra tina sstem. !hus wor) stud t ime and mot ion

stud, wage incent ive p lans mom a t ion and ergonomics a re in tegra l par t of indust r ia l engineering.

/imila r l , the people who are ootside the opera t ion svstem a lso p la important ro le . 0onsumers

ou ts ide the p roduct ion ss t e m de te rmine the de ma nd o f p roduct . !h i s de ma nd i s de pe nde n t on

pr od uc t de sign , #u al it an d sal es pr ic e et c. !h us in du st ri al en gi ne er s ar e re #u ired to wo r) for

pr od uc t an d pr oc es s im pr ove men t.

1nother important aspec t of indust r ia l engineering is i t s genera l i t. Indust r ia l engineering is not

confined onls to manufac tur ing ac t iv i t ies . I t inc ludes service sec tors l i)e ban)ing, t ransporta t ion ,

watte management, distribution and health care etc. !hus, the scope of industrial engineering is #uite

b ig an d ce rt ai nl no t co ns t ra ine d wi th in th e bo un da r of in dus t r ia l un i t .

1.1.1 Concept of Industrial Engineering

I! ii s t e rm Indust r i al nc inc cr inc i s c omposed o!tw o w ords w h ich g ive the ba s ic c onc e pt o f

Industrial ngineering %I..&

Industr ial means re la ted to indust r , which means a process of product ion or a comple te process

of convert ing input resources in to useful products or se rvices %depending upon na ture of indust r& .

1s 3 sstem, it ma be represented as follows:

Input 2223 0onversion !echni#ue'l 'roduction 4seful 5rod uct

6 es ou rc es o r 5 ro ce ss in g #u ip me nt ----------------> %7 ut pu t&

!echnolog In formal ion 8ata

ngineering ma be defined as:

!he profusion in »hich a hnu»lej£e uj Sftithemuiical. h#sical and social sciences obtained byexperience and practice in utitncil emnumually fur the conversion of materials into useful products

Jur the ben efi t u j maul in J

ad ii been the manufacturing of a product, the application of principles of Industrial ngineering

% I9 . & w ou ld a t t e mp t t o r e de s ign o r t o u t i l i z e d i f fe re n t ma te r i a l s i n o rde r t o u se ne w e r o r be t t e r

pro du ct io n me th od s an d pr ov id e be lt er in teg ra ti on be twe en va r io us pr oce ssing step s. In se rv ice

sector li)e hospitals, and teaching Industrial ngineering leads to productivit improvement.

1.1. Acti!ities of Industrial Engineering

!he field of Industrial ngineering %I& represents an area that is toda undergoing rapid epansion

a nd d i ve rs i fi c at i on . v er a ct i s i t o f a n i nd u st r ia l s s t em i nv o lv es a n e le m en t t ha t b r in g

c oord ina t ion o t va rious a c t iv it i e s a nd w i thout w h ic h a l l a c ts w ould be ine ffe ct ive a nd non-

pro du ct iv e. !h is el em en t of co or di nat io n wh ic h inf lue nc es pl an s an d ob $ec t iv es ma be te rm edmanagement . !herefore, management consists of ge t t ing the th ings done b others and a manager is

one who achieves goals or a ccompl i shes ob$ectives bv directing the efforts of others.

1. 5lanning

2. 7rganizing

3. Directing

asicall, the industrial managers have to perform following:

___________________INDUSTRIAL ENGINEERING AND DEELOPMENT O! !ACTOR" S SSTEM ________________ 3J


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4. 0ontrolling

5. /taffing

1 plan is an organized schemc of doing something which is d i rec ted to achievei nd us t ri al o b $e ct i ve s u nd er c er t ai n c on s tr ai n ts . 1 n h om og en e ou s w or ) in g

environment is deve loped to br ing coordina t ion among the var ious e lements of p lan

for the eecution of organized scheme. /ome activities are listed below:

; !o a id in the deve lopment of sound si te se lec t ion and phsica l laout for the

eecution of organized wor).

2. !o analse and plan production schedules and inventories.

3. 8evise techni#ues to improve productivit and moral of men at wor).

4. !o stud the e#uipment replacement feasibili t.

5. !o a id in t he de t e rmina t ion o f e c onomic lo t s i z e a nd the w or) in p roc c ss

re#uirements for each phase of operation.

6. !o a id in the prepara t ion of de ta i led spec if ica t ions for ever wor) and to eva lua tethem.

7. !o a id in the deve lopment of #ua l i t spec if ica t ions and #uant i t needed for

various inputs materials.

; ; i ' f

8. !o diagnose and rectif causes of poor product #ualit.

9. !o eva lua te the e ffec t iveness of mar)e t ing, d ist r ibut ion and advert is ing pol ic ies of

the organization

10. !o design, deve lop and eva luate the comple man-machine sstems involved

in production process.

11. !o aid in the development of non-financial incentives to maintain interest and

enthusiasm among the various people of the organization.

12. !o evolve better methods of production b using operation research techni#ues.

13. ! o a i d i n a na l s i s a nd s ch ed ul e o f b i g p r o $e ct s b u t il iz i ng 0 5 a nd 5 6 !

techni#ues.

14. !o a id in deve lopment and maintenance of s tandards governing administ ra t ive and

sales budget

15. !o a id in the deve lopment of t ra in ing programmes for t ra in ing of supervisors

and wor)ers to help them in proper performance of their duties.

16. !o aid in the establishment of effective cost control and budgetar control.

1.1." Tec#ni$ues of Industrial Engineering

Important techni#ues which are commonl used b industrial engineers are as follows:

1. /ite selection and plant design, techni#ues

2. 7rganisation and planning techni#ues

3. ethods engineering techni#ues

4. /tatistical techni#ues

5. 0ommercial engineering techni#ues

6. 7perations research techni#ues

1.1.".1 Site Selection and !lant Design $ec%ni&uesIt is ver important decision that the management has to ta)e. 1longwith the industrial polic of /tateand 0entral


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!hus th is fac tor sstem is $odern %#stem of production which satisfies the economic needsor

individua ls , communit ies and countr ies b manufac tur ing products"goods in fac tor ies and which

utilize men, materials, machines and methods to meet the mar)et demands.

1.%.%.1 "erits of Factory System

1. =ualit of products has improved

2. ider product varieties arc manufactured

3. ?eads to lesser material wastage

4. 6esults is more efficienc

5. 4tilization of land, labour and mone is more

6. 4nit cost has decreased

7. /ince the demand of products is increasing rapidl, i t has improved emploment level.

8. It has resulted in cultural and social development of wor)ers due to concentration of most of

the industries at a place.

9. 5roduction rate has increased and training period of man power has been reduced.

10. @o w the pr od uct ion of sub sidi ar it em "p rod uc ts i s po ssib le du e to i el d of bp ro du ct s .11. !he amount of revenue received in the form of taes and duties has increased.

12. I t i s he lpfu l i n t he a dvanc eme nt o f t he c oun t r a s a w hole a nd in t he de ve lopme nt o f

international

trade.

1.%.%. 'imitations of Factory System

A. It creates monopol of wor) B Individuals can avoid the responsibilit of wor)

3. It causes lot of pollution, overgrowing pament of low wages etc.

4. I t g ives r ise to monopol which resul ts in the concentra t ion of weal th in few hands i .e . few

bi g

industrial houses

5. It causes labour eploitation and ma cause class war

6. In view of competition lot of mone is re#uired for advertisements etc.

7. /mall scale and cottage industries ma suffer due to development of factor sstem.

1.& 'IST(RICAL DE)EL(*+ENT (, INDUSTRIAL ENGINEERING-E,,ECTS (,

INDUSTRIAL RE)(LUTI(N AND (RLD AR/II (N +ANU,ACTURING

TEC'NI0UES AND +ANAGE+ENT

Industr ia l ngineering had i t s roots in the Industr ia l 6evolut ion, i t was the resul t of cont inuous

a ppl i c at ion o f s) i l l a nd inven t ions fo r t he incre ase in p roduc t ion . odern e ra o f i ndus t ri a l

engineering is assumed to have sta r ted from industr ia l revolut ion. !he f i rs t impact of Indust r ia l

6evolut ion was on ri t i sh 0ot ton !et i le Indust r where the deve lopment had been made on the

convent iona l methods in order to improve the product iv i t . In ACDB r. 6ichard 1r)wright had

invented the spinning 9rames which had improved the productivit of the sstem and #ualit of the

pr od uc t .

In ACEF r. G ames att deve loped steam engine which inst iga ted man to use i t as a source of

po we r. !h e inv en ti on of s tea m po we r ha d bro ug ht a re vo lut io n in ind us tr ie s at th at ti me . 5eo pl e

sta r ted th in)ing of u t i l iz ing steam power for running the machines. !hus steam power brought

revolution in industries b wa of useful replacement of manpower with steam power.

!he second phase of inventions which brought this revolution are:

;e's 9ling /huttle %ACHD& #uic)ened weaving.

argreaves /pinning Genn %ACC& accelerated spinning process.

$


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• w 3 . 22222222 ■ -,v 22222 J .....

&

U# ____________ $ %% INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

0artwright 's power loom speeded up weaving.

8av 's lamp ehaust fan and wire cable a l l made wor)ing in mines less dangerous. at ts

steam engine %ACKB& which wor)ed on a new princ iple of t ime ro ta r"mot ion ushered ' age of

speed. L

'n t h

@e lson 's ho t bl as t % I KB K& gr eat l inc rea sed th e pr od uc t io n of i ro n. 8e rb an d hi s son

smelted iron with coal. enr count perfected the puddling and rolling of iron.

In the second phase of indust r ia l revolut ion which is s t i l l cont inuing, convent iona l mach '

changed into automatic machiner li)e:

(0 0 om p le a ut o ma ti c m ac hi n e t o ol s t ha t p er f or m o n e o pe r at i on f o r p r od uc in g aproduct \vh' could earlier be produced b a long series of separate machine tools individuall

operat %u& 1utomat ic feed bac) devices tha t watch wor) and ac t upon these observa t ions in

automati

ad$usting the operation so that i t will not change from the present specifications. 0a L (in)

lectronic devices to record store process, summarize and interpret information.

/team power changed to hdraul ic and nuc lear power. In automat ic nuc lear power p lants I

pr od uc ed b at om ic ch ai n rea ct io ns , wh ic h pr od uc es ste am th at ru n tu rbi nes wh ich in tu rn ! L

electrical power re#uired to run the machines. 0onventional office machiner changed into e M n

da ta processing machines"e#uipment , tpewri te rs and ca lcula t ing machines to computers RN 0

organiza t ion changed to boards and corpora t ions. !hus i t was be ing etended to man 's th inh

organiza t ion and management pr inc iples and methods. !he c lassic wri te rs of tha t t ime l i)e

1dam / - l ACCE& who dea l t wi th the topics of conomic /c iences and anagement /c ience

h!defO 3 thin)ing of even 9. . !alor, who was concerned primaril with concepts of produc i

v t

!alor initiations, the people of that t ime had developed a preference or interest for m3h

things and sc.entific bent to solve their difficulties in scientific manner 5eopl ted a p + '

De!elop2ent

GJ -- be 3

/ome of the si gni fi cant -achi ev em ents of wor ) donp hv • '

as follows: r ) d n e b v a n o u s industrial engineers can be outlined

1. 9rederic) 1. alse, the father of the a4ev L..........

views on wage pament is motivation (P 5 r e :m , u m 5lan of wage pament presented his


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labour and machines. ei?o /l!!'/f 5 ' K n D / t i m 5 r Q e 33 o f pr od uct iv it wi th wo r) for ce .L p ot ne si s o f s ha ri ng t he b en ef it s o f

improved

2. 9. . Ta3lor4 probabl the most often #uoted and 3 recognising the potential improvements

to be acllv ! 3 i n v e s t iR a t o r i s c r e d i t e d w i , h $o b" tas ) an d des ign ing th e tas ) for ma i mu m eS P

T f '3 T f ) 0 ' l t e n t 3 el em en ts . ! he co nc ep t o f !i me -s tu d ap pl ie d t o n l n e li mi na ti ng it s no n

p ro duc t ive 5 5L e d t o 5A= duction operations was initiated b him. e

2 9r an ) .


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(d) Industr ial engineering and computers

%*e& Qalue engineering

%G& uman factors or ergonomics.

sci3cet / co teltr8re r'!3 3 from a n on # ua nt i ta ti v eempirical

/ T ph , / t ic a ti n vi r l l, e of which it can be considered a hard science.


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( INDUSTRIAL ENGINEERING AND DEELOPMENT O!

!ACTOR" S"STEM A)*tools to anvse3h4 nlh 5 m e AAA s > the industr ia l engineer of toda has man moresophisticated tools to analse his problems and to design new and improved

sstems INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT4i----------- -------------- J-----------------------------------------------------------------------: --------------------------------------

1.9 *I(NEERS (, SCIENTI,IC +ANAGE+ENT

!he following are the pioneers of scientif ic management:

A . 9 . . !alor %AKHE-AFAH&

B. . ?. < an tt .

D. erringt+n merson %AKHD-AFDA&

X. . .


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and improve the #ualit of output"wor).

1.6.1.2 Division of 'a*our or Functional "anagement

! a lo r i n tr od u ce d t he c on c ep t o f f un ct i on al o rg an i sa t io n. 4 nd e r f un ct i on almanagement everv production

prt ipl!of o , e ' g L b !/ - 0 a 0 h T f t h E m T 4 l d g i Q e T r d e r / i n h i s f u n c t i o n Z I

super!tion > 9&&9514"1 aU S*#eres of acti!ities as ?ell as in ?or@

1.6.1.3 +se of $ime, "otion and Fatigue Study

fnvolve n s0 t hl! , i e / T 4 t t h 0 b 0 / t D o f d o i L/ a Gob- !he bes t wa of doing a tas) is

that which

hl wor) Y !!+ t / ' t l m 0 ' f a t i g 4 0 D n d 0 / t ! a >L r undertoo) s tudies on fatigue incurred bv a te

!hewor) nf3 IZ the $ob. e suggested that for

improvtoW production

m thld ? !5

r /

TL/

T4 l d b e 5 l a

Ln e d i n a d v a n c e

Zd

wor)er should use predeterminedmethod and given tune for a def inite wor).

1.6.1.4 Standardisation of "et%ods, "ac%ines, $oo ls and !rocedures

/hove l ling wor) a nd s hove l loads r e ve a led the impor tanc e o f s t anda rd i s at ion o f

m et h od s a nd t a s) s / t an da rd i sa ti o n h el p i n r ed u ci n g, t i me , l ab ou r a nd c os t o f

product ion. !he success of scient i f ic management ,-' r e la ted with s tandard isa t ion of

sstem i.e . techni#ues of production, machines and tools uti l ized, - .1. Scientific

Selection and $raining of (or )ers

Fo r maintaining p r oduct ion e f fi c ienc , i t i- essential t.at t h e w o r )e rs s ho ul d b e

phs ical l and technical l -+/nd for the tas) the are re#uired t+ perform.

Galor suggested tha t proper care should be ta)en whi le se lec t ing wor) force and

due consideration -.+/0d be given to their education aptitude and wor) eperience etc .

! h us s ci e nt i fi c p ro ce du re s n ee d t o b e d ev i se d t o s el ec t w o r) er s b es t s ui t ed t o

perform specific tas)s and then to t rain them within the industr in order to meet the

ob$ectives of the enterpr ise .

1.6.1.6 Diff erential !iece ate System

!a lo r a dvoc ate d 8i ff e re n t ia l 5 iec e 6a te /s te m o f pa me n t wh ich p r ov ides a n

incent ive for a wor)er to achieve h igh leve l of opt imum output . I t d is t inguishes the

mor e e f f i cie nt wor)e rs f r om the l e s s e f f i cie n t wor)e r s a nd mo t iva tes to p r oduc e

more.

1.6.1.7 Econo my and !rofit

Scienti1c m a na ge me nt l a s m o re s t re ss o n t he e co no m ic a sp ec t o f p ro d uc ti o n.

a imum ou tpu t c a n be a c hie ved on l b op t imum u t i l iz a tion o f r e sou r ce s a nd

e l imina t ion o f wa s ta ge in a l l f o r ms in o r de r to min imiz e c os t . 0os t c on t r ol a nd

econom will result in higher wages for wor)ers .

Scanned by CamScanner


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!ACTOR" S"STEM A)*1.6.1.8 0ooperation *eteen 'a*our and "anagement

ental revolution is the most important feature of scientif ic management as i t would

crea te a congenia l and favourable a tmosphere "environment leading to harmon and

coopera t ion . !he ob$ec t ive of maimum prosper i t of emploees and emploers can

be achieved onl i f there is perfect mutual cooperat ion between the management and

the wor) force.

0riticism to Scientific "anagement

% "& I t f ai ls t o a pp re ci at e t he s oc ia l c on te t o f w or )e rs a nd h ig he r

re#uirements of wor)ers . % " "& anagers feel i t unwarranted interference in

manageria l pre roga t ives , % " " i f & !alor ' s concept tha t un ions a re rea l l not

ne ede d wa s r e si s t ed b wor)e rs . 1iv2 9a i ls to recognize the sugges t ions

and ideas of wor) force.

1.9. 'enr3 L. Gantt


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• : ' A INDUSTRIAL ENGINEERING &

OPERATIONS MANAGEMENT

__________________________________________________________________________

__________________________________________________________________________

AE

!hus the workers received bonus as a result of the introduction of this sstem.

(c)


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!ACTOR" S"STEM A)*

e a dvoc ate d the L? ine a nd s taf f o r ga n iza t ionL in ste a d o f f unc t iona l

foremanship . 1s to rewards for e f f ic ienc, he sugges ted the d if fe ren t ra tes

of eff icienc besides a guaranteed minimum wage e was mainl concerned

with improving the eff icienc of the wor)ers . !hat is wh he is of ten called

the Lhigh pr iest of eff ic iencL.

1.6.4 ,ran@ . Gil6ret# :1;9;/1


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(,c) Collection of relevant data on theproblem (cf) Interpretation and analysis of data (e) Consideration of availablealternatives

(J) Formulation of tentative conclusions about ac!ing the problem() Initiating or starting selected action on the basis of conclusions

and veryfying the results (",) #evie$ing and evaluating the results

and incorporating any corrective action if essential and needed%

% " & 9 r a ming r u le s to s e r ve a s gu ide to p la nn ing a nd e e c u t ion . /ome impor ta n t

contr ibutions of


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!ACTOR" S"STEM A)*

was not through domina t ion and compromise on the p lea tha t domina t ion g ives the

f e e l ing o f lo s s a nd s u r r e nde r to bo th the s ide s . /he wa s in f a vou r o f in te g r a t ion

whereb the par t ies themselves eamined toge ther the new was of achieving the ir

conflic ting desires s ince, this gives a more s table solution to problem of conflic ts .

1 c co rd i ng t o h er , d i ff er en t s i tu at i on s r e# ui r e d i ff er en t t p e s o f l e ad er sh i p

meaning thereb tha t leaders a re produc ts of the ir t imes and the leadersh ip fea tures

are a function of the par ticular or specif ic s ituation. !he success of a leader does not

mere l depend on the t ra in ing he possesses but on the spec if ic s i tuat ion a t a t ime in

which he util izes his leadership.

/ h e w a s o f t h e o p i ni o n t h a t f or a ch i ev i ng g oo d r es ul t s v a ri o us l i mb s o f t h e

o r ga n iz ing bod s hou ld be we l l c oo r d ina te d a nd c lo s e l a c t toge the r s o tha t the

wor) as a s ingle entit.

/ h e a ls o a dv o ca t ed f or i n te gr at i on o f i nt e re st s o f i nv es t or s, c on su m er s a nd

wor)ers . ar par)er 9ol le t p leaded for the appl ica t ion of sc ien t i f i tmethod 's to ' the

solution of personnel problems.



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$nm*. 2I 4 INDUSTRIAL ENGINEERING 5t OPERATIONSMANAGEMENT

1.6.6 'enri ,n3ol :1;%1/1


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human and social factors in industr ia l re lationships. e led the team which conducted

the awthrone

inves t iga t ion a t 1larvard in the 4ni ted /ta tes wi th the co l labora t ion of the es te rn

lectr ic 0ompan

between AFBC to AFDE and financial support of the 6oc) 9eller 9oundation. ao and

his associates

s tudies revea led tha t an organiza t ion is no t onl a formal a r rangement of men and

function but a lso a

s ocia l s ste m wh ich c a n be oper a te d s uc ce s sf u ll b u t i li z ing the p r inc iple s o f pscholog and o ther behaviour sciences.

ao was of the opin ion tha t cause of increase in produc t iv i t of the wor)ers is

not a s ingle fac tor of changing wor)ing per iod and condi t ions but a combina t ion of

several other factors such as:

% " & ?ess res t r ic t ive techni#ues of superv is ion

% " " & 5 r ov id ing a u tonom to wor)e rs

% I "7 5ermit t ing the format ion of smal l cohes ive sub groups of wor)ers

% "v& 0rea t ing condi t ions which encourage and suppor t the growth and development

of these groups

%v& 0ooperat ion be tween wor)ers and management

:!5 7pportunit to be heard

:!5 5articipation in decis ion ma)ing etc .

a o w as t he f ir st p er so n t o a dv oc at e f or t he u nd er st an di ng o f w or )e rs

diff iculties in view of growth of science and technolog. e desired the management

to unders tand the problems of wor) force and ma)e e f for ts to redress them. e and

his associates pointed out:

t 6&&&&&&&&&&&&&&&&&&&#*C+I, #*C+I-I+. / 0*1I211 #/I4/+I &&&&&&&&&&& 356

H . ? imita t ions a nd r e st r i ct ions pu t f o r th b the


17/32

%[ & Indiv idua l ownership or /ole 5ropr ietorsh ip

% \& 5 a rt n er sh i p

%c& Goint s toc) companies

%cf& 0ooperative sector enterpr ises .

2. 5ublic /ector nterpr ises %/tate 7wnership ^ 0ontrol&

%a&


18/32

3. = ui c ) 8 e ci s io ns a nd 5 ro m pt 1 ct i on s: / in ce t h e w h ol e b us i ne ss i s

c ont r o ll e d b one ma n , the re f or e , he c a n t a )e de ci s ions #u ic) l a nd

implement them in r ight t ipie .

4. =uali t 5roduc t ion: 5ersona l a t ten t ion and superv is ion of the owner leads to

#ualit production.



19/32

I 37 ___________________________INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

5. e t ter ?a bour 6e lat ions h ip: I n v iew o f s mal l busine ss a nd c lo s e c onta c t

between owner a wor)ers good emploee-emploe r relat ionships are

maintained.6. 5ersona l 1t ten t ion to 0us tomer 0ompla in ts : I t i s poss ib le to pa persona l

a tt en ti on t o c us to r a nd t he ir r e# ui re me nt s a nd t o g iv e t he m e nt ir e

sa t is fac t ion regard ing the ir compla in ts a bo ut ! product as the business is

smal l .

7. /ma l l 0a p i ta l : !a le n te d me n o f a s ma l l me a ns c a n s t a r t bus ine s s a s s ma l lcapital i s r e#u i r

8. I t is eas to maintain business secrets as i t is one man show.

'imitations

!his tpe of organization has the following limitations:

1. 1mount of capital that is re#uired for investment is small , therefore, modern

factor can start ed with this sstem of organizat ion.

' b e

2. or ) s uf fe rs s i nc e t h e o w ne r c an no t b e m a st e r o f a ll t e ch ni # ue s l i )emanagement engineer ing processes .' s a n , A

3. 7wne r c a nno t t a )e r i s ) to s t a r t b ig bus ine s s due to un l imi te d l i a b i l i t i e s .

3.14.1.3 !artners%ip Organi6ation

/ome drawbac)s of pr iva te companies a re removed in th is tpe of organiza t ion to aconsidera6le

r n ( ir :h i 5 i / t h e r e G a t i n / h i p b e t w e e n t h e 5 e o5 l e i n t e r e s t e d dar ting a business and the comb, togethe.

to increase the.r resources i .e . capital , labour , abili t and s)ill . !he success o f oar I

--rrng c++8erati+n rad,/-tment 95 t.e :mber- 6 ;5artn I t _ _ 33 / hT 4 , d 7 r ) h a r d t o e a r n and grea te r

prof i t5a rtne rs h ip bus ,ne s s i s owne d b two o r more % upto B & who s har e the powe r sr es po ns ib i it i. p ro fi ts a cc ord in g t o a n a gr ee me nt r ea ch ed am on g t he m

responsibili t ies a

1 person ma possess ecept iona l bus iness ab i l i t eper ience and ta len t bu t no

canir . l h have a f inanc ia l par tner . / imila r l a f inanc ie r ma re#uire a manager ia l



20/32

epert a ` , ' ' LL epert and all of them ma form a par tnership enterpr ise . 5

L D t e c h n '0 a l

$ypes of !artners

' • p D ' 5 a r ' L e , / : 1L 5 a r , n e r / h a r e , h e p a r t n e r s h i 5 U

)nown as genen,

B' o1f 0 po,tcieasr,nerY: 1 0 ' i Qe 5 a m e r / W h / e h T , a ) 0 a 0 , i Q 0 i n t h '

and fPr m u ,a , iU

and the get their share in the prof it of the f irma /

1 ; . . ........ ru l u me il l I I I .

LL r3 r , e ++ ' , L e i r r e p m e d n a m e f o r , h e 33 3

O Y , e , a 0 , I Q e p a L i n t h e l n a n a gement. @ominal par tners

n, r

/ , 5 ar BO 'Q t! C , a f , e r a / 0 e r , a i m L l h e or

the business .

appear . 5 L T p a r ' , h e s ec re t l b ut

nowhere their name,

X //f **nr L , o se w h o se a s e i s b ci o w A K N N U J a J W

5dvantages

A n+uch f !elAr r l l i r ln e r /! 3 e a / ' e r D H 0 T m p a ie d t o i o i ,A t s t * W c om p an i es . I t d oe s n ot

i nv ol ve muc h le gal f o rma l it i e s a nd he a v e pe ndi tu re o f r e gi s t ra t ion a ndstamp dut.

!his tpe of organization en$os more freedom and is not sub$ect to s tr ic t


21/32

'imitations

1. 8ue to unl imited l iab i l i t , r is) involved is more . !his f r igh tens awa

monelenders .

2. 1fter the dea th or re t i rement of a par tner , the par tnersh ip ma come to

an end.

3. I t c a n r a i s e muc h l e s s c a p i t a l a s c ompa r e d to $o in t s toc ) c ompa n .

!herefore, i t is unsuitable for modern industr ies re#uir ing huge capital

and a large number of managerial abili t ies .

4. 1 partner ma withdraw from the f irm and establish his own enterpr ise

with the )nowledge of the secret of the business .

5. 1ll the pa r tne r s a r e $o in t l a nd s e ve r a l l l i a b le f o r the a c t s o f the

par tner, who is incharge of management . !hus mista)e of one partner

ma cause a big loss to all the par tners .

6. !he prof its are shared b the par tners . /o there is no incentive for hard

wor). /ometimes, i t encourages lavish ependiture.

Formation of !artners%ip

5artnership can be formed either verball or b written agreement but to avoid

the poss ib i l i t of conf l ic t a t la te r s tage , i t i s des i rab le to en te r in to wr i t ten

a gr ee me nt . ! he w ri tt en a gr ee me nt i s c al le d L 5a rt ne rs hi p 8 ee dL . ! he

par tnersh ip deed contains the terms and condi t ions relat ing to par tnership and

the r e gula t ions gove r ning i t s in ter na l ma na geme n t. !he pa rtner s hip de ed

should have the following details :

1. @ame of the fi rm

2. @ature of the business

3. 8ate of s tar ting par tnership4. 8uration of par tnership

5. one contr ibuted b each par tner

6. 1llotment of managerial functions among the par tners

7. /hare of prof it and losses

8. /alar if an allowed to managing par tners

9. 6ate of interest on capital investment, if an

10. !he amount which can be withdrawn b each par tner

11. !he basis for inclusion of an new partner .

12. 1 c co un t s o f t h e f ir m a nd a ut h or it f or s i gn i ng c h e# ue s, b i ll s o f echange etc .

13. ! h e a i m o f p a r tn e rs hi p a s w e l l a s t h e m a nn er i n w hi c h i t c an b e

dissolved.

14. ?oans and advances plus interest on them b par tners , if an.



22/32

.1 .1." 7oint Stoc) 0ompany

ith the change in the scale of production from small scale to large scale and

with the widening of the mar)e t f rom loca l to na t iona l and in te rna t iona l , the

i n di v id ua l o wn er sh i p a nd p ar tn e rs hi p f ir m w i th t h ei r l i mi t ed f in an ci a l

resources , l imited manager ia l s) i l l and unl imited l iab i l i t fa i led to meet there#uirements of $oint s toc) companies . !he have limited liabili t.

In this tpe, capital is contr ibuted b a large number of persons in the form of

shares of different values. !he capital is raised b sell ing shares of different

values. 5ersons who purchase the share are

$$$$$$$$$$$$$$$$$$$



23/32

INDUS?IAL ENG INEERING @ OPERATIONS MANAGEMENT

;nown ns share holders and the managing bod is ca l led Loard of 8irec torsL is

e lc c tc d b the s e s ha r > ho lde r s . !he boa r d o f d i r e c to r i s r e s pons ib le f o r po l i c

mil)ing, ta)ing important f inancial and technical decis ions for eff ic ient wor)ing of

the enterpr ise .

In this form of organization liabili t of the share holder i- l imi ted to t.e etent

of t.e am+/nt %%r s ha r e s he ld b h im a nd l i e i s f r e e f r om the r e s pons ib i l i t o f

debts and claims on the compan bcon i the value of shares . 5eople of all sections

are encouraged to contr ibute for the compan bccan - this benefit . !hese shares arc

transferable .?

$ypes of 7oint Stoc) 0ompanies

!here are two tpes of $oint s toc) companies:

A. 5 r iva te ? imi te d 0ompanB. 5 u bl i c ?i m it ed 0 o mp an

1. 5r iva te ? imi te d 0ompan : !h i s tpe o f c ompan c a n be f o rme d b two o r

more member TI maimum number of membership is l imited to H %ec luding

the emploees& . !he corne l reg is te red under Indian 0ompan 's 1c , AFHE. In

th is the t rans fe r of shares is l imited to m onl and genera l publ ic cannot be

invited lo purchase shares . @ormall, the members of

c+m8any arc 5riend- and re0atie-$0 0L.

In this sstem' persons who want to ma)e use of l imited liabili t and at the

same time )een th 3 , h 0 5 r i Q a l 0 4 d - 0 Tm p a n T / l T f t h e m i d d l c industr iestOt

!he 5r iva te ?td . compan need not c i rcu la te the alance /hee t , 5rof i t and Ioss 1ccount mr ,

s lC l d i , o i d i , s ! m i b 3 4# p '- S /s:

s tatcme,P etc .& in the meeting. !he government does no. interfere in the wor)ing of ,heconO'

2. 5ubl ic ?imited 0ompan: 1s indica ted b i ts name, the mcmbershin ofnuhl i r

lPPYP. , i

is open to general public . !he minimum number re#uired to forn such on n w

!L 'LL : there P no upper l imit . /uch companies can adver t ise , to of fer i t s sh e

to g / o , , ic QL companies a re sub$ec t to grea te r contro l aud superv is ion b

the


24/32

r/n %.c c+m8any:At %.i- %ime%.e

?i#uidation ma be voluntar or compulsor or under the supervis ion of the 0ourt I f the

Jz'id!iiQL , e n , h e a s s e t s T r t h e ■ N U N b ' - s o i d .

Is diOld among t /r3 L Z W LL

amalgamation is a combining loge ther of two bus iness .

I , usuall result , in !onomlls e L c. 3 Tf e 0 o n o m i c s L fa rge sca les , adminis t rate and

nur)enne

wch c o u b Q s e , A 3 a 9!L a m X lUL mN , i N w I LNve some eis ting assets and luhilhu,

e ■ cond PP ? 'L L C , t 4 a n t T % YL f a i ' s l h e

I I

S :: T ' b f n c c c pteble to the proposed partner.


25/32

4. 1dmin is t r a t ion c a n be r un be t t e r a s $o in t s toc ) c ompa n c a n be a r the h igh

salar ies of good managing agents .

5. Go in t s toc) companies a re not a f fec ted b the re t i rement of an of the shareholders .

6. I t possesses great potentiali t ies for epansion.

'imitations

1. ? ac ) o f p er so na l i nt er es t o n t he p ar t o f s al ar ie d m an ag er s l ea ds t oineff icienc and was

2. ith the in t ima te )nowle dge o f f ina nc ia l pos i t ion p f the c ompa n the r e i s

s u ff i cie n t s c ope f o r me mbe r s o f ma nage me n t f o r the ir pe rs onal p r of i t s.

ecause the can sell and purchase shares accordingl.

3. I t re#uires a large number of legal formalit ies to be observed.

4. I t is dif f icult to preserve secrets in the $oint s toc) companies .

.1 .1.% 0ooperative Sector Enterprises

0ooperat ion is a form of organiza t ion , where in persons , i r respec t ive of cas te , c reedand re l ig ion , vo lunta ri l assoc ia te toge ther as human be ings on the bas is of e#ua l i t

to fulf i l their common economic interests ,

In te rnat iona l ?abour 7rganisa t ion % I?7& def ined i t as an assoc iat ion of persons ,

usua l l of l imited means who have volunta r i l $o in ted toge ther to achieve a common

e co no m ic e nd t h ro u gh t he f or m at i on o f a d em o cr at i ca l l c on t ro l le d b us i ne ss

organisa t ion , ma)ing e#ui tab le contr ibut ions to the capi ta re#uired and accept ing a

fair share of r is)s and benefits of the underta)ing.

r. @ . a row de fine d c oope ra t ive s ocie t a s La Qolun ta r 7r ga n iza t ion o f

persons with unrestr ic ted membership and col lect ivel owned funds, consis ting of

wage earners and small producers , united on a democratic basis for the establishmentof en te rpr ises under $o in t management for the purpose of improving the ir house hold

or business economL.

0%aracteristics of 0ooperative Organisation

1. Qoluntar organizations

2. 7pen membership

3. 0ommon interest of members

F _______________________INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT_______________

l iconomic nnd 8emocratic management

5. 5.olii is not imnonanl bur u is to serve members

6. /eparate legis lative entit: 6egistration needed

7. 8isposa l o l surp lus or prof i t among members in accordance with the ir sharecapital

8. 7b$ective is mutual help and service motive.

$ypes of 0ooperative Societies



26/32

!he var ious tpes of coopera t ive soc ie t ies i n o u r c o u n t r a r e ( I$ 5roducer 's

0ooperative /oc ie t B 0onsumer 's 0ooperative /oc ic t

D . ous ing 0oope ra t ive /oc ic t

X . 0r ed i t 0oope r at ive /ocie t

H . 0oope r at ive 9a rming /ocie t

, , i , Q 0 ,/ 0 i 0 ' : Z / i s l h c r TZ L ' Lopera t ive in which wor)erswish ,P h

their own managers !he G f i l ! , H ' T f A H

s#uired. !he e M e c (

prevents the woc3Im 'beL!3 i/ L3fL D ' H ' K T+ ' 0 , l u l

L 4 ? m e e p lo i t e d a nd t e a c he s the m how to wor ) inteam spir it

( : ' . / W r i d d s p r T n t d i rec t l

at reasonable prices /eco f' i

K

!L

K t he m c mb e rs a

L

d

Lonmember

D ' 3///li• J 7dationto i l s members

cooperat ive 'purchases ̀ Tn t3IO'!! L 'LP3L 3 ........................................................................

member on instalments which is verAonve,Lem a m e n ' b0 h a r s e d f r o m

soce. ,s to save the members f rom the eploitation of mone lenders

c a nno t a f fo r d s c ien t inc t e c hn ic s o f f a r, I g a nd me ch3 3e 3 - 5dvantage of

0ooperative Organi6ations

1 sat ! h e r e s h o u , d - ■ T U•

2 1n person ir respective of caste , creed, se can become the member

: t t//f 3 (L Gm ne i / / *WNU NL adv ertis ement s and pnbl icit etc pr*!v i de honor ar

sei Lv)es for N U N

U

E h3 r / i t / , e m p lC e e s f inable wages and better service conditions

6. iddleman s prof , , ,s e liminated s ince the purchase is directl f rom producer

■ e m o c r a t @ , o r m a i i o , , c UU ™ P334.. , . , .



27/32

F. I t benefits general public .10. I t promotes a sense of cooperations among its members .

11. !he l iab i l i t of an member is l imited to h is contr ibut ion in capi ta l .

9 o r a n d eb t t o t he o rg an iz at i on , m e mb er s d o n ot b ea r p er so na l

liabili t.

'imitations of 0ooperative Organi6ations

1. I ts capac i t to ra ise capi ta l i s l imited as i t s member mos t l come f rom

wor)ing c lass and middle c lass . !herefore , i t i s su i tab le for smal l and

medium sized business .

2. I n v ie w o f l imi te d f ina ncia l r e sou rc e s, s e rv ic es o f h ighl #ual i f ie d pe rs ons

cannot be util ized.

3. os tl i ne ffi ci en t m an ag em en t a nd s om et im es i t i s f ou nd t ha t

management is ineperienced and corrupt.

4. !he eecut ive commit tee and the emploees favour the ir f r iends and

relatives at the cost of others .

5. I t re#uires better and s tr ic t supervis ion.

6. !here is undue govt , in te r ference . 8espi te lac) of suppor t f rom


28/32

3.14.3.1 :overnment Departmental Organi6ations

!hese organiza t ions a re organized l i)e an o ther


29/32

"erits

? ! he e co no m ic al , s oc ia l a nd p ol i ti c al o b $e ct i ve s o f t h e < ov er nm e nt a re

achieved due to government control.

2. / u ch o rg an iz a ti o ns o re s ui t ab l e f or p ub l ic u ti l it s er vi c es a nd d ef en c eindustr ies .

3. 0omple te secrec is poss ib le l i)e in ord inance fac tor ies due to governmentcontrol.

4. 0onsumer 's interests arc properl safeguarded

5.


30/32

2 Inde r ontiirf tl$0 fh 0 r 5 T: a t i n / Z T n l T n p a p e r s - I n r e a , i t iL3ters ,


31/32

managed b e lec ted board of d i rec tors which ma inc lude pr iva te ind iv idua ls !hese

are accountable for i t s wor)ing to the concerned minis t r and i ts annua l repor t i s

re#uired to be p laced ever ear on the tab le of the 5ar l iament or / ta te ?eg .s la t ive

a longwith comments of the concerned department In i ts da to da3 wor)ing i t i s f reef r om


32/32

1. I t promotes social ob$ectives

2. elpful in mobilization of resources

3. 0ontrols the business malpractices

4. 1cts as antidotes to monopol and concentration of economic power

5. 1ccelerates industr ia l growth

6. I t ma)es nationalisation unnecessar


mgmt chapter 1

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