BAHIRDAR INSTITUTE OF TECHNOLOGY

Faculty of Mechanical and Industrial Engineering

INDUSTRIAL MANAGEMENT AND

ENGINEERING ECONOMICS

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

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 CHAPTER 1
INTRODUCTION TO INDUSTRIAL
MANAGEMENT

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 How Do You Understand
DEFINITION Management?
OF MANAGEMENT
 All organizations establish a variety of goals and direct their
energies and resources to achieving them.
 A profit oriented business firm, for example, might have return on
investment goal; a hospital would have goals centred around
patient care; and an educational institution would establish goals
for teaching research, and community service.
 All organizations also have resources that can be used to meet
these objectives.
 Such resources can be classified into two categories: human and
non-human resources. Nonhuman resources include plants and
equipment, land, and financial resources. Human resources are
employees’ skills and knowledge
 Therefore management is the force that unifies these resources

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Management as a Unifying Force

Financial
Resources

Plant
&
Employees Management
Equipment

Management is the process of

bringing human and nonhuman
Land resources together and
coordinating them to
accomplish organizational
goals.

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 Resources
Human
 Skills
 Knowledge
Non-Human
 Capital
 Land
 Plant and Equipment
 Technology
 Time
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 How Do You Understand Management?

Management in all business and organizational activities

is the act of getting people together to accomplish desired
goals and objectives using available resources efficiently
and effectively.
Management comprises planning, organizing, staffing,
leading or directing, and controlling an organization.
Resourcing encompasses the deployment and manipulation
of human resources, financial resources, technological
resources, and natural resources.
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Management is both science and art.
Management is a science in the sense, that it adopts a
systematic approach through knowledge acquired by
continuous and vigorous efforts.
Management is an art, as it is an application of some
skills to achieve the desired results. It is an art because it
utilize the talent of the people and also because it
manages the human beings.

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Management Science is concerned with developing and
applying models and concepts that help to illuminate
management issues and solve managerial problems.
Management science is the application of statistical or
mathematical methods and principles to business
decision-making and problem-solving processes.
Management science is also a branch of traditional
operations research used in business management.
 Operations research applies mathematical or
quantitative techniques to the decision-making process.
Eg simulation, queuing model, linear programming, etc.
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 What is industrial management?
 Industrial management deals with the creation and management
of systems that integrate people, materials , and energy in
productive ways for the production of an economic good or
service.

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Industries can be classified on the basis of raw materials,
size and ownership.
• Raw Materials: Industries may be agriculture based, Marine based, Mineral
based, Forest based, etc.
• Size: It refers to the amount of capital invested, number of people employed and
the volume of production.
• Ownership: Industries can be classified into private sector, state owned or
public sector, joint sector and co-operative sector.

Industry is also often classified into three sectors:

primary or extractive, secondary or manufacturing,
and tertiary or services.
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 What are the managerial abilities?
 Ability to plan
 Integrity
 Technical skill
 Intelligence
 Initiative
 Resourcefulness
 Judgment
 Ability to organize
 Tactfulness
 Reliability (consistency)
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 Management, Resources and Organization

 Managers use resources to attain organizational goals.

 Management is the use of people and other resources to
accomplish objectives.
The objective is to:
 Maximize the potential of their people and coordinate
their efforts to attain some predetermined goal.
Organization
 An organization is a stable, formal social structure that
takes resources from the environment and processes them
to produce outputs.
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 Organizational Goals
Profit-oriented organization
 Return on investment
Non-Profit-oriented organization
Hospitals
 Patient Care
Educational Institutions
 Teaching – providing quality education
 Research
 Community Services
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Management applies to:

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 Importance of Manager

Manager
 Puts together the factors of production to
produce goods and services
 Make business decisions
 Takes risks for which the reward is profit
 Acts as an innovator by introducing new
products, new technology and new ways of
organizing business

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Manager’s Interactions with Other Groups of People

Creditors &
Suppliers Superiors Customers

Manager co-workers
Peers

Government
Community subordinates Agencies

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Functions of Management

Functions of
Management

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 Planning is the process of specific setting objectives for
the future and developing courses of action to accomplish
them.
 Top-level managers set plans for the entire company
 Lower level managers prepare plans for their
immediate areas of responsibility.
 Planning doesn’t occur in a vacuum. It is done in light
of budgetary constraints, personnel requirements,
competition and other factors

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 Planning involves:

 the predetermining of the course of action to be taken in

relation to the known event. (Plan A)

 It also includes anticipating the possibilities of future

problems that might appear (Plan B or Contingency Plan)

• It is a systematic activity which determines when, how

and who is going to perform a specific job.

• It is rightly said :-

“Well plan is half done”

“Failing to plan means planning to fail”

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

 When goals have been established, a manager must

create a way to accomplish them.

 In other words, through organizing, managers must

develop a system in which people can perform tasks that
lead to the desired results.

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Organizing

Initially , organizing by top-level executives includes the

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

 Organizing is ongoing process. Because jobs may be enlarged,

diminished or eliminated; additional positions may be
created; new production methods may be instituted; new
management skills may be required; reporting relationships
may be altered.

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 Staffing is the process of matching jobs and people.
 Involves the recruitment, selection, development, and retention of
employees with appropriate qualifications for positions created by
the manager.
 Staffing is one of the managers most important duties because the
success of any organization depends on the quality of its
employees. Most managers therefore choose their new employees
very carefully.
 Staffing usually is systematic and includes many of the following
activities: human resource planning, announcing and advertising
vacant positions, receiving applications, preliminary and final
interviewing, testing, medical examination, and final selection and
orientation. 24
 Leading is the act of motivating or causing people to perform
certain tasks intended to achieve specific objectives. It is the act
of making things happen.
 To be effective leaders, managers need to understand individual
and group behaviour, techniques of motivation, and effective
styles of leadership.
 Managers must develop relationships that ensure adequate
communication with their subordinates.
 Leading also includes managing personal conflict, helping
employees deal with changing conditions, and disciplining
employees.
 Leading involves developing a climate of individual integrity,
corporate honesty, and high productivity.

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 Manager to be effective leader:
 Making certain that everyone in the unit knows exactly
what is expected in terms of performance
 Objectives must be identifiable, measurable and
individually attainable
 Must recognize and reward outstanding performance
 Must surround themselves with competent employees
and ask their advice when making decisions that affect
them. In other words, a manager should use all the
organizational resources available-especially people.

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 Controlling is the process by which managers determine whether
organizational objectives are achieved and whether actual operations
are consistent with plans.
 In controlling, a manager continually compares the performance of
organization with its goals and takes corrective action, if needed.
 Actual results may differ from the desired results in any area, but
the three that require the most attention are product quality, worker
performance, and cost control.
 The quality of the company’s product may not measure up for a
number of reasons: poor quality of raw materials used in the
manufacturing, improper blending/mix of raw materials,
malfunctions of manufacturing process/machine breakdown.
 Control also is required when employees fail to meet desired
performance standards and can be achieved by establishing
standards, measuring worker output and comparing it with standards
and taking corrective action when necessary. 27
 Employee performance standards are formulated through
experience, judgment and observation.

 In appraisal interview, the employee is told which area need

improvement and how to bring it about.

 In some cases, additional training and instruction are

needed, in other cases, disciplinary action is required.

 Cost control involves comparing expenditures with budgeted

funds.

 Variation from the standards helps managers find problems

areas and can lead to cost-reduction programs.
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 Management Roles

Carrying out management functions requires a manager to

behave in a certain way- to fill certain management roles.

1. Interpersonal Roles

1.1. Figurehead: All social, inspiration, legal and ceremonial

obligations. In this light, the manager is seen as a symbol
of status and authority.

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 Management Roles
1.2. Leader: Duties are at the heart of the manager-
subordinate relationship and
 include structuring and motivating subordinates,
overseeing their progress, promoting and encouraging
their development, and balancing effectiveness.
 As a leader, the manager hires, trains, evaluate,
motivate and promotes subordinates.

1.3. Liaison: Describes the role of managers in representing

their organization in different occasions.
 Maintain information links both inside and outside
organization; use mail , phone calls , meetings.
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2. Informational Roles
A second set of managerial activities relates to receiving
and transmitting information.
These informational roles require managers to serve as
monitor, disseminator and spokespersons.
2.1. Monitor: Duties include assessing internal operations, a
department’s success and the problems and opportunities
which may arise. All the information gained in this
capacity must be stored and maintained.
 As a monitor, the managers tries to keep informed about
what is happening in the organization or group by
gathering information.
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2.2. Disseminator: Highlights factual or value based external
views into the organization and to subordinates. This
requires both filtering and delegation skills.
 As a disseminator, a manger sends outside information
into the organization and internal information from
subordinate to another.
2.3. Spokesman: Serves in a public relations capacity by
informing and lobbying others to keep key stakeholders
updated about the operations of the organization.
 represents the company or its position to other groups,
including the press government agencies, customers,
and trade organizations. 32
3. Decision Roles
 The third set of managerial activities involves decision
making, or decisional roles.

 As decision maker, the manager becomes an entrepreneur,

disturbance handler, resource allocator and negotiator.
3.1. Entrepreneur: Roles encourage managers to create
improvement projects and work to delegate, empower and
supervise teams in the development process.
 The manager as entrepreneur may create new projects,
change organizational structure, and institute other
important programs for improving the company’s
performance.
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3.2. Disturbance handler: A role that takes charge when an
organization is unexpectedly upset or transformed and
requires calming and support.
 As a disturbance handler, the manager deals with
situations over which he or she has little control.
 These may involve conflict between people or groups, or
unexpected events outside the company may affect the
firm’s operations.
 In either case, immediate attention usually is needed and
the managers must rearrange schedule to take care of
the emergency.

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

 As a resource allocator, the manager must divide the

company’s resources as well as personal time among
the various demands on them.

 This involves assigning work to subordinates, scheduling

meetings, approving budgets, deciding on pay
increases, making purchasing decisions, and other
matters related to firms human, financial and material
resources.
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3.4. Negotiator: Is a specific task which is integral for the
spokesman, figurehead and resource allocator roles.
The manager acting as negotiator represents the firms in
financial matters. For example, the manager is a
negotiator when the company tries to buy another firms.

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 Management Hierarchy

 Although all managers may perform the same basic duties

and play similar roles, the nature and scope of their
activities differ.
 Hence, three distinct levels of management are available.

Top Management

Middle Management

Supervisory Management

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1. Top Management
Made up of individuals who have the possibility of
making the decisions and formulating policies that
affect all aspect of the firm’s operations.
President
Vice President
Chief Executive Officers
Executive Vice President

A manager’s assigned job duties and the authority

needed to fulfill those duties are what determine
management level.

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2. Middle Management

Includes all managers above the supervisory

level but below the level where overall
company policy is determined.
Middle managers manage supervisors.

Regional Sales Manager

Academic Deans (Universities)
Production Manager( in an Industry)

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3. Supervisory Management
At the base of the pyramid is supervisory management
Supervisors manage workers who perform the most basic job
duties required in the business.
Supervisors manage workers who perform the most basic job
duties required in the business.
Technically, supervisors are managers. As such, they must
reflect the company’s view to their subordinates.
Because of the expectations placed on supervisors from above
and below, many people contend that the person on the firing
line-the supervisor-has the toughest job in management.
 Eg. Sales Manager, Academic Department Chairperson
(Universities) 40
 Management and productivity
 Management is concerned with productivity i.e. the
effectiveness and efficiency.
 Productivity can be measured as the Output to Input ratios
within a time period with due consideration for quality.
Productivity = O P/I P(within time period & considering
quality)

Productivity can be improved by:

a. By increasing O/P with same I/P.
b. By decreasing I/P but maintaining same O/P.
c. By Increasing O/P and decreasing I/P to change the ratio
favorably.
 The I/P can be labour, material capital etc.
 In the past productivity improvement program were mostly
aimed at workers level but now it is for the management also.
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 Management Skills

 Management success depends both on a fundamental

understanding of the principles of management and on the
application of technical, human and conceptual skills.
 Modern business organizations are dynamics and complex,
and competition in the market place is fierce.
Consequently, managers must be highly skilled to succeed.
 The skills managers need can be classified as technical,
human relations and conceptual

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 Management Skills
1. Technical Skills
 Are the specialized knowledge and abilities that can be
applied to specific tasks.
 Most important at lower level of management.
 In most cases, technical skills are important at this level
because supervisory managers should train their
subordinates in the proper use of work-related tools,
machines , equipment and Standard Operation
Procedure(SOP).

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 Management Skills
2. Human relations skills

 Human relations skills are the abilities needed to resolve

conflict, motivate, lead, and communicate effectively with
other workers.
 Because all work is done when people work together, human
relations skills equally important at all levels of
management.
 it is cooperative effort; it is teamwork; it is the creation of
an environment in which people feel secure and free to
express their opinions.
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3. Conceptual Skills

 Conceptual skills are the abilities needed to view the

organization from a broad perspective and to see the
interrelations among its components.
 Conceptual skills are most important in strategic (long-
range) planning, therefore they are more important at
top level executives.

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 Management Skills

Top
management

Middle
management

Supervisory
management

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 Management Styles
Description Advantages Disadvantages
Autocratic Senior managers Quick decision making No two-way
take all the Effective when communication so can
important employing many low be de-motivating
decisions with no skilled workers Creates “them and us”
involvement from attitude between
workers managers and workers
Paternalistic Managers make More two-way -Slows down decision
decisions in best communication so making
interests of motivating Still quite a
workers after Workers feel their social dictatorial or
consultation needs are being met autocratic style of
management
Democratic Workers allowed Authority is delegated Mistakes or errors can
to make own to workers which is be made if workers are
decisions. motivating not skilled or
Some businesses Useful when complex experienced enough
run on the basis of decisions are required
majority decisions that need specialist skills

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