MANAGEMENT

SCIENCE
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JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY ANANTAPUR
L T P C
B. Tech III-II Sem. (EEE) 3 1 0 3
15A52601 MANAGEMENT SCIENCE

Course Objective: The objective of the course is to equip the student the fundamental
knowledge of management science and its application for effective management of
human resource, materials and operation of an organization. It also aims to expose the
students about the latest and contemporary developments in the field of management.

UNIT –I:
Introduction to Management: Concept-Nature and Importance of Management,
Functions-Evaluation of Scientific Management, Modern management-Motivation
Theories-Leadership Styles-Decision MakingProcess-Designing Organization Structure-
Principles and Types of Organization.

UNIT- II:
Operations Management: Plant location and Layout, Methods of production, Work-
Study-Statistical Quality Control through Control Charts, Objectives of Inventory
Management, Need for Inventory Control-EOQ&ABC Analysis(Simple
Problems)Marketing Management:
Meaning,Nature, Functions of Marketing, Marketing Mix, Channels of distribution-
Advertisement and sales promotion-Marketing strategies-Product Life Cycle.

UNIT -III:
Human Resource Management(HRM): Significant and Basic functions of HRM-
Human Resource Planning(HRP), Job evaluation, Recruitment and Selection,
Placement and Induction-Wage and Salary administration. Employee Training and
development-Methods-Performance Appraisal-Employee Grievances-techniques of
handling Grievances.

UNIT –IV:
Strategic Management: Vision, Mission, Goals and Strategy- Corporate Planning
Process-Environmental Scanning-SWOT analysis-Different Steps in Strateg
Formulation, Implementation and Evaluation. Project Management: Network Analysis-
PERT, CPM, Identifying Critical Path-Probability-Project Cost Analysis, Project
Crashing (Simple Problems).

UNIT-V:
Contemporary Management Practices: Basic concepts of MIS-Materials Requirement
Planning(MRP),Just-In-Time(JIT)System, Total Quality Management(TQM)-Six Sigma
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and Capability Maturity Models(CMM) evies, Supply Chain Management, Enterprise
Resource Planning(ERP),Performance Management, Business Process
Outsourcing(BPO), Business Process Re-Engineering and Bench Marking, Balance
Score Card.

Course Outcome: This course enables the student to know the principles and
applications of management knowledge and exposure to the latest developments in the
field. This helps to take effective and efficient management decisions on physical and
human resources of an organization. Beside the knowledge of Management Science
facilitates for his/her personal and professional development.

TEXT BOOKS:
1. A.R Aryasri: Management Science, TMH, 2013
2. Kumar /Rao/Chalill ‘Introduction to Management Science’ Cengage, Delhi, 2012.

REFERENCE BOOKS:
1. A.K.Gupta “Engineering Management”,S.CHAND, New Delhi, 2016.
2. Stoner, Freeman, Gilbert, Management, Pearson Education,New Delhi, 2012.
3. Kotler Philip & Keller Kevin Lane: Marketing Mangement , PHI,2013.
5. Koontz & Weihrich: Essentials of Management, 6/e, TMH, 2005.
6. Kanishka Bedi, Production and Operations Management, Oxford University Press,
2004.
7. Memoria & S.V.Gauker, Personnel Management, Himalaya, 25/e, 2005
8. Parnell: Strategic Management, Biztantra, 2003.
9. L.S.Srinath: PERT/CPM,Affiliated East-West Press, 2005.

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 UNIT-1

INTRODUCTION TO MANAGEMENT

Meaning and Definition

Management is what managers do. It also refers to people at the top level, in the organisation,
concerned with decision-making.
Management is a universal phenomenon. It is a very popular and widely used term. All
organizations - business, political, cultural or social are involved in management because it is the
management which helps and directs the various efforts towards a definite purpose.

Definitions:

According to F.W. Taylor "Management is an art of knowing what is to be done and seeing that it is done in the best
possible manner."

Mary Parker defines the term management as “the art of getting things done through others.”

"To manage is to forecast and to plan, to organise, to command, to co-ordinate and to control." – Henry
Fayol

"Management is an operational process that can be dissected into five essential managerial functions. They
are: planning, organising, staffing, directing and controlling - Koontz and O'Donneli

peters. T He feels that management holds a solution to the day-to-day problems in our chaotic.
world. According to Tom Peters, management explains
(a) how effectively managers can respond to customers' requirements
(b) now innovation can be constantly pursued in all areas of the firm
(c) how the people in an organisation can participation as partners in progress
(d) how leaders adopt better to changes than fighting against them, instill, and share an inspiring vision

Management is the art of securing maximum results with minimum effort so as to secure maximum
prosperity and happiness for both employer and employee and give the public the best possible service‖
--- John Mee.
Management is the accomplishment of results through the efforts of other people‖ -- Lawrence
Nature and Features of Management:

The study and application of management techniques in managing the affairs of the organization
have changed its nature over the period of time.

1.Multidisciplinary: Management is basically multidisciplinary. This implies that, although management

has been developed as a separate discipline, it draws knowledge and concepts from various disciplines. It
draws freely ideas and concepts from such disciplines as psychology, sociology, anthropology, economics,
ecology, statistics, operations research, etc. Management integrates the ideas and concepts taken from these
disciplines and present newer concepts which can be put into practice for managing the organization.

2.Dynamic nature of principle: Based on integration and supported by practical evidences, management
has formed certain principles. However, these principles are flexible in nature and change with the changes
in the environment in which an organization exists.

3.Relative, not absolute principles: Management principles are relative, not absolute, and they should be
applied according to the need of the organization. Each organization may be different from others. The
difference may exist because of time, place, socio-cultural factors, etc.

4.Management - Science or Art: We should know what is science and what is a before discussing whether
management is a science or an art?
What is science? Science is a body of knowledge developed systematically, based on observation,
measurement, and experimentation and drawing inferences based on data. The knowledge can be verified
through cause- effect relationship. The knowledge provides principles, theory and laws. Management
satisfies the characteristics of science like.
What is an art? Art an understands how a particular activity can be done. Art can be acquired by conscious
effort and practice. Management is getting things done by and through other people. They have to
continuously analyze the environment and formulate the plans and strategies. They have to modify the
strategies based on environmental changes. The principles of management cannot be implemented as learn,
in the real world. They are to be applied after making necessary modifications based on the real life
situations.

There is a controversy whether management is science or art. However, management is both a science and
art.
5.Management as profession: Management has been regarded as profession by many while many have
suggested that it has not achieved the status of a profession.

6.Setting goals for organizations: Goals differ from organization to organization in business, the basic
economic goal is to earn maximum profit, while in service organization like hospital and educational
institution for the basic goal is to provide better service and better education.
7.Awareness of opportunities and resources: Management have awareness of opportunities and resources
like men, materials, money which assembles and integrates by management.
8.Management is transformation process: Management is a transformation process consisting of
planning, organizing, staffing, directing and controlling.
9.Management is universal: The principles and techniques of management are universally applicable to all
group activities performed at any level of organization.
10.System of authority: System of authority means a hierarchy of command and control. Managers at
different levels possess varying degrees of authority.
11.Management is decision making: The managers are decision makers, for example, the marketing
managers decides about how to market, when to market, where to market how to collect funds for
organization.
Importance of Management
Management has been important to the daily lives of people and to the organisations. The importance
of management may be traces with the following.
1) Effective utilisation of Resources: Management tries to make effective utilisation of various resources.
The resources are scarce in nature and to meet the demand of the society, their contribution should be more
for the general interests of the society. Management not only decides in which particular alternative a
particular resource should be used, but also takes actions to utilize it in that particular alternative in the best
way.
2) Development of Resources: Management develops various resources. This is true with human as well as
non-human factors. Most of the researchers for resource development are carried on in an organized way
and management is involved in these organized activities.
3) It ensures continuity in the organization: Continuity is very important in the organisations. Where there
are no proper guidelines for decision making continuity can not be guaranteed. It is quite natural that new
people join while some others retire or leave the organization. It is only management that keeps the
organization continuing.
4) Integrating various interest groups: In the organized efforts, there are various interest groups and they
put pressure over other groups for maximum share in the combined output. For example, in case of a
business organization, there are various pressure groups such as shareholders, employees, govt. etc. these
interest groups have pressure on an organization. Management has to balance these pressures from various
interest groups.
5) Stability in the society: Management provides stability in the society by changing and modifying the
resources in accordance with the changing environment of the society. In the modern age, more emphasis is
on new inventions for the betterment of human beings. These inventions make old systems and factors
mostly obsolete and inefficient. Management provides integration between traditions and new inventions,
and safeguards society from the unfavourable impact of these inventions so that continuity in social process
is maintained.
Challenges to Management
Managers may have to face many challenges in the years to come in doing their job. These challenges
involve complex issues to deal with. The following is an inclusive list of the challenges the manager has to
face.
 Increasing opportunities as a result of all round globalisation, privatisation, and liberalisation
 The changing lifestyles and changing values
 Increasing life expectancy
 More expectations of customers and employees in particular, and society as a whole ,in general
 Conflicting interests among different segments of the society
 Eroding business ethics
 Decreasing financial and non financial resources
 Changing Technology
 Poor basic infrastructure
 Environmental degradation through pollution

Functions of Management:
To achieve the organisational objectives managers at all levels of organization should perform
different functions in a logical sequence. A function is a group of similar activities.
The list of management functions varies from author to author with the number of functions varying
from three to eight. They are as follows

Writers Management Management Functions

Henry Fayol Planning, Organizing, Commanding,
Coordinating, Controlling

Luther Gullick POSDCORD- Planning, Organising, Staffing,

Directing, Coordinating, Reporting, Directing

R. Davis Planning , Organising, Controlling

E.F.L. Breech Planning, Organising, Motivating,

Coordinating, Controlling

Koontz Planning, Organising, Staffing, Leading,

Controlling
 Different authors presented different variations. By combining some of functions, these are broadly
grouped into Planning, Organising, Staffing, Directing, and Controlling

1.Planning: It refers to deciding now what is to be done in the future. It bridges the gap between the present
and the future. Involves selecting the objectives and actions to achieves them planning stage involves
decision making and choosing future courses of action from the various alternatives.
According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how to do.
2.Organizing: Role of each person in any organization is fixed. The concept of role is who will be doing
what should be known, to achieve organizational targets efficiently. It is intended that all the tasks necessary
to achieve targets are assigned to people who can do the best.
3.Staffing: Staffing is a process which includes recruitment, selection, training, placement, appraisal,
promotion, and career planning. Staffing function includes keeping the various organizational position fixed.
This activity is done by identifying work force requirements, keeping the records of the performance of
people working with the organization. So that suitable people can be prompted and at the same time people
performing not up to the mark could be send for training. If all the above activities are taking place in nice
way in any organization, it will give rise minimum work force turnover.
4.Directing: The important function of management at any level is directing the people by motivating,
commanding, communicating, leading and activating them. The willing and effective cooperation of
employees for the attainment of organizational goals is possible through direction. Tapping the maximum
potentialities of the people is possible through and command. Thus, direction is an important managerial
function in securing employee’s contribution.
5.Controlling: After planning, organizing, staffing and directing the various activities, the performance is to be
verified in order to know whether the activities are performed in conformity with the plans and objectives or not.
Controlling also involves checking, verifying and comparing of actual performance with the plans, identification
of deviations, if any and correcting of identified deviations. Thus, actions and operations are adjusted to
predetermined plans and standards through control.
Levels of Management and their functions:

The term “Levels of Management‟ refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of the business
and work force increases and vice versa. The level of management determines a chain of command, the
amount of authority & status enjoyed by any managerial position. The levels of management can be
classified in three broad categories:
1. Top level / Administrative level
2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers

Managers at all these levels perform different functions. The role of managers at all the three levels is
discussed below:

1. Top Level of Management

It consists of board of directors, chief executive or managing director. The top management is the
ultimate source of authority and it manages goals and policies for an enterprise. It devotes more time on
planning and coordinating functions.
The role of the top management can be summarized as follows -
a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets, procedures, schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.
g. It provides guidance and direction.
h. The top management is also responsible towards the shareholders for the performance of the enterprise.
 2. Middle Level of Management
The branch managers and departmental managers constitute middle level. They are responsible to the
top management for the functioning of their department. They devote more time to organizational and
directional functions. In small organization, there is only one layer of middle level of management but in big
enterprises, there may be senior and junior middle level management.
Their role can be emphasized as -
a. They execute the plans of the organization in accordance with the policies and directives of the top
management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or department.
f. It also sends important reports and other important data to top level management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower level managers towards better performance.
3. Lower Level of Management
Lower level is also known as supervisory / operative level of management. It consists of supervisors,
foreman, section officers, superintendent etc. According to R.C. Davis, “Supervisory management refers to
those executives whose work has to be largely with personal oversight and direction of operative
employees”. In other words, they are concerned with direction and controlling function of management.
Their activities include -
a) Assigning of jobs and tasks to various workers.
b) They guide and instruct workers for day to day activities.
c) They are responsible for the quality as well as quantity of production.
d) They are also entrusted with the responsibility of maintaining good relation in the organization.
e) They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level
and higher level goals and objectives to the workers.
f) They help to solve the grievances of the workers.
g) They supervise & guide the sub-ordinates.
h) They are responsible for providing training to the workers.
i) They arrange necessary materials, machines, tools etc for getting the things done.
j) They prepare periodical reports about the performance of the workers.
k) They ensure discipline in the enterprise.
l) They motivate workers.
 CONCEPT OF ORGANISATION
'Organisation' refers to a social group designed to achieve certain goals. Organisation involves
creating a structure of relationships among people working for the desired results.
The following definitions give more insight into the concept of organisation.
Argyris (1960) "Organisations are intricate human strategies designed to achieve certain objectives."
Brech (1965) "Organisation is the framework of the management process."
Simon (1976) "Organisations are systems of behaviour created for better results. So organisation form
must be a joint function of human characteristics and the nature of the task environment."
Pugh (1990) "Organisations are systems of interdependent human beings."
Stewart (1994) Organisations facilitate cohesive performance directed towards achievement of goals.
Organisations are more known for their complexity
Organisation can be viewed in different ways. It can be seen as a social entity or as a process.
Organisation as a process is discussed later. Here, the concept of organisation as a social entity is discussed.
These views reveal that
(a) organisation is a social group designed to achieve certain goals
(b) people form the backbone of the organisation. The human needs must be considered first before the
organisational issues such as structure, authority levels, and so on
(c) it is run through a defined structure, supported by organisation charts and organisation manuals
(d) organisations have to consider a wide variety of both internal and external factors to strike a balanced .
strategy to achieve their goals. The internal factors include formal and informal organisations, span of
control. degree of centralisation or decentralisation, and so on. The external factors include competitors,
government, creditors, impact of technology, and others.
CONCEPT OF ADMINISTRATION:

The administration is a systematic process of administering the management of a business

organization, an educational institution like school or college, government office or any non profit
organization. The main function of administration is the formation of plans, policies, and procedures, setting
up of goals and objectives, enforcing rules and regulations, etc.

Administration lays down the fundamental framework of an organization, within which the
management of the organization functions.

The nature of administration is bureaucratic. It is a broader term as it involves forecasting, planning,

organizing and decision-making functions at the highest level of the enterprise.

It is common to find that the term ‘administration’ is used to refer to higher executive function in
government circles, while the term ‘management’ is used for the same function in the business world.
 BASIS FOR
MANAGEMENT ADMINISTRATION
COMPARISON

Meaning An organized way of managing The process of administering an

people and things of a business organization by a group of people is
organization is called the known as the Administration.
Management.

Authority Middle and Lower Level Top level

Role Executive Decisive

Concerned with Policy Implementation Policy Formulation

Area of operation It works under administration. It has full control over the activities
of the organization.

Applicable to Profit making organizations, i.e. Government offices, military, clubs,

business organizations. business enterprises, hospitals,
religious and educational
organizations.

Decides Who will do the work? And How What should be done? And When is
will it be done? should be done?

Work Putting plans and policies into Formulation of plans, framing

actions. policies and setting objectives

Focus on Managing work Making best possible allocation of

limited resources.

Key person Manager Administrator

Represents Employees, who work for Owners, who get a return on the
remuneration capital invested by them.

Function Executive and Governing Legislative and Determinative

 EVOLUTION OF MANGEMENT

The development of management thought could be traced to over 2000 years BC. However, the
significant contributions that came up during the last three centuries could be grouped under the following
four periods:

I) Period of management awakening

II) Scientific management period
III) The human relations period (this is also called as the behavioural sciences period)
IV) Modern management period

I)PERIOD OF MANAGEMENT AWAKENING

This was the period of the Industrial Revolution, which paved the way for large growth and
diversification of business enterprises. Some of the chief features of the industrial revolution were:

(a) Automation (muscle power is transferred to machines)

(b) New inventions increased demand
(c) The number of commercial establishments expanded

II)SCIENTIFIC MANAGEMENT PERIOD

The scientific management period holds prominently two greatest exponents of classical theories-
Henry Fayol (1841-1925), who was a French industrialist (a mining engineer), and FW Taylor (1856-
1915), who started his career as an apprentice in engineering and later rose to the levei of a shop
superintendent.
A clear distinction is visible in the contributions of both Fayol and Taylor. While Fayol's
contribution was enterprise-oriented, Taylor's focus was work-oriented.
In other words, Fayol tried to understand' organisations from the top to the bottom. On the contrary,
Taylor analysed organisations from the bottom to the top.
FAYOL’S ADMNISTRATIVE MANAGEMENT

Henry Fayol is a French Industrialist and the father of modern operational management theory. Fayol
recognized the following organizational activities.

Organizational Activities: Fayol divided the activities of organization into six groups---
Technical (related to production)
Commercial ( buying, selling and exchange)
Financial ( search for capital and its optimum use)
Security ( protection of property and person )
Accounting
Managerial ( planning, organizing, commanding, coordinating and controlling)

GENERAL PRINCIPLES OF MANAGEMENT ( FAYOL’S 14 PRINCIPLES OF MANAGEMENT)

Fayol has given 14 principles of management. It is also called as administrative management
theory. He has made distinction between management principles and management elements. While
management principles is a fundamental truth and establishes cause effect relationship, elements of
management denotes the function performed by a manager. While giving the management principles, Fayol
has emphasized two things.
1. The list of management principles is not exhaustive but suggestive and has discussed only those principles
which he followed on most occasions.
2. principles of management are not rigid but flexible

Principles:-
1. Division of work : Here, the work is divided among the members of the group based on the employee's
skills and talents, It also provides an opportunity to specialise in different problem areas.
2. Authority : It refers to the right or power to give orders. It must also be adequately supported by
responsibility.
3. Discipline : Both the employer and employees should respect each other by observing the rules.
4. Unity of command : An employee should receive instructions from only one superior.
5. Unity of direction Where the objectives are similar, the action plans also should be similar. In other
words, similar activities should be grouped together, placed under one manager and there should be one
action plan.
6. Subordination of individual interest to group interest : Group interests or goals of organisation must
prevail any time over the individual interests or personal goals.
7. Remuneration :The wages and salaries must be fair and bring out the best possible commitment in
the employees to achieve the organisational goals.
8. Centralisation of authority : Authority is said to be centralised when decision-making powers are
retained at the top level. The degree of centralisation or decentralisation is determined by the needs
of the company.
9. Scalar chain : It indicates how the authority flows from top to bottom.
10. Order: It means keeping the right man or a right thing in the right place.
11. Equity : This implies that the dealings with the employees should be so fair and so open that they will .
reinforce their commitment to the organisation. Be kind and fair to them.
12. Stability of tenure of personnel :This indicates avoiding frequent transfers of the employees much
before they settle in their jobs. .
13. Initiative: The staff should be encouraged to show initiative, within the limits of authority and
discipline.
14. Espirit de corps: This means team work; implying that there is unity in strength.

TAYLOR’S SCIENTIFIC MANAGEMENT:

The utility of scientific methods to problems of management was first introduced by F.W.Taylor
Definition: Scientific management may be defined as the “Art of knowing exactly what is to be done and
the best way of doing it”.
Scientific management is the result of applying scientific knowledge and scientific methods to the
various aspects of management and the problems that arise form them.

Taylor’s Experiment:
Taylor demonstrated the benefits of increased productivity and earnings through an experiment at
Bethlehem Steel Works.
This experiment dealt with the study of the efforts of two first class shovelers: Each man had his own
personal shovel (a traditional tool) with which he used to shift coal. This shovel was used to shift every type
of ore or coal. Earlier, the average shovel load was about 38 pounds and at this rate, each handled about 25
tonnes of material a day. As a part of the experiment, each worker-was given a smaller shovel to study the
Impact of size of the shovel on productivity. Amazing!The daily tonnage went up to 30 tonnes! In due
course, the workers' output was observed with several different sizes of shovel. There was a rise in the daily
output, averaging about 21 pounds per load, whether he was working with heavy ores or light ores. The
workers who could achieve these standards were promised an increase in wages by 60 per cent. Those who
were not able to reach these standards were further trained in handling the ore with smaller shovels. After a
three years, Taylor reviewed the extent of the success at a Bethleharn Works. The results were encouraging:
the workers earned higher wages (60 per cent on an average more than their counterparts), there was saving
in handling costs per ton by 50 per cent, and the workers became highly productive. With the result, a
workforce of 140 could take care of the entire work '(which was earlier done by 400 – 600 workers)
Principles of Scientific Management: ( Taylor’s Principles)
Taylor through his principles of scientific management initiated a system in which there would be an
effective and fruitful coordination and cooperation between the management and the workers.
1.Development of Science for each element of work: Analyze the work scientifically, rather than using
thumb rule. It means that an attempt is made to find out what is to be done by a particular worker, how he is
to do it, what equipment will be necessary to do it. This information is provided to the worker, so as to
reduce wastage of tie, material etc. and improve the quality work
2. Scientific selection, placement and training of workers: This principle states that select the workers
best suited to perform the specific task, and then train tem within the industry in order to attain the
objectives of the enterprise workers should also be trained from time to time to keep them informed of latest
development in the techniques of production
3.Division of Labour: division of work in smaller tasks and separation of thinking element of job from
doing element of the job, this is the principle of specialization. It is essential for efficiency in all sphere of
activities as well as in supervision work
4.Standardization of methods, procedures, tools and equipment: Standardization helps in reducing time,
labour and cost of production. The success of scientific management largely depends upon standardization
of system, depends upon standardization of system, tools, equipments and techniques of production
5.Use of time and motion study: Taylor’s introduced time and motion study to determine standard work.
Taylor’s undertook studies on fatigue, incurred by the workers and the time necessary to complete task.
6.Differential wage system: Taylor’s differential piece rate scheme provides an incentive for a worker to
achieve high level of optimum output. It distinguishes the more productive workers from less productive
workers and motivates them to produce more.
7.Cooperation between labour and management: Mutual respect and cooperation between the workers
and management helps in providing proper and effective leadership. The labour starts thinking that it is their
work and they must put their heart in the work assigned to him.
8.Principle of Management by Exception: Taylor suggested that only major or significant deviations
between the actual performance and standard performance should be brought to the notice of top
management. Top management should pay more attention to those areas of work where standards and
procedures could not be established and where there is a significant variation between standard
performance and actual performance.
III)HUMAN RELATIONS PERIOD ( Behavioural Sciences Period )
Human relations period is characterised by the focus on the human factor in dealing with business
and production issues. The researchers and practising executives concentrate more on issues such as human
behaviour at the work place, motivation, group relationships, and leadership. The contribution of selected
behavioural scientists is outlined below.

MOTIVATION
Motivation is the word derived from the word ‟motive‟ which means needs, desires, wants or drives
within the individuals. It is the process of stimulating people to actions to accomplish the goals. In the work
goal context the psychological factors stimulating the people’s behaviour can be -desire for money
success
recognition
job-satisfaction
team work, etc
One of the most important functions of management is to create willingness amongst the employees
to perform in the best of their abilities. Therefore the role of a leader is to arouse interest in performance of
employees in their jobs. The process of motivation consists of three stages:-
1. A felt need or drive
2. A stimulus in which needs have to be aroused
3. When needs are satisfied, the satisfaction or accomplishment of goals.
Therefore, we can say that motivation is a psychological phenomenon which means needs and wants
of the individuals have to be tackled by framing an incentive plan.

Hawthorne experiments:

George Elton Mayo was known for his famous experiment at the Hawthorne Plant of the Western
Electric Company, Chicago, USA; for evaluating the attitudes and psychological reaction of workers on the
job situations. The study focussed on the influence of social attitudes and relationships of workgroups on
performance. The experiment started as a study into physical conditions and productivity. It ended as a
series of studies into social factors: membership of work groups, informal relationship with the supervisors,
and so on. It revealed that workers valued most the social relations at work and these were viewed as
important as-monetary incentives and good physical working conditions. The study demonstrated that the
influence of groups in determining behaviour at work can be very powerful.
 In one of the hawthrone experiments, mayo's research team examined changes in the amount of light
available in the work area. The results were confusing at first. When the lighting was increased, output rose;
on the other hand, when the light was decreased, output still rose. An analysis of this and other such
puzzling results showed that the workers were highly motivated more for the importance given to them .The
reduction in light did not affect their work. What mattered to them was that they were really making a
contribution to company operations and this fact is being recognised by the top management.

The research team also examined other effects of change in the work environment. They varied the
working conditions such as rest periods, hot lunches, and working hours used interviews to determine
attitudes; and analysed the social organisation among workers. During the studies, it was found that changes
in the work environment had little long-term effect upon worker productivity.

The reasons for this phenomenon were very interesting. The workers started feeling that they were
being recognised. Since management had asked for their opinions on-working conditions, the workers felt
that their relationships with management were no longer impersonal. When the workers were being
informed the reasons for the management decisions, 'they felt that they had achieved a status and some
degree of respect.
The Hawthorne studies revealed that recognising the emotions of workers, in this way, could
enhance the productivity and physical well being of the employees. .
The following were the conclusions from the Hawthorne researches:
 Individual workers must be seen as members of a group.
• The sense of belongingness and effective management were the two secrets unfolded by the Hawthorne
experiments. The workers enjoyed more the sense of belongingness, as evident from their high morale
and functional interrelationships among the members of a group. The management was effective in terms
of understanding human relationships among workers, particularly groups. The way' the workers were
motivated, counselled, led, and communicated proved very effective. This highlights {he recognition of
the human factor and constitutes the essence of the 'Hawthorne effect'.
.• Need for status and belongingness to a group were viewed as more-important than monetary incentives
or good physical working conditions.
• Informal or personal groups influenced the behaviour of workers on the job.
• To seek workers' cooperation, the management should be aware of their social needs and cater to them.
Otherwise, there is every danger that the workers ignore and turn against the interests of the organisation.
Maslow’s Hierarchy of Needs Theory
Abraham Maslow was a psychologist. He identified human needs in the form of a hierarchy
ascending from the lowest to the highest. He concluded that when one set of needs was satisfied, this kind of
need cannot be motivator anymore.
The hierarchy theory is based on the assumption that most people are motivated by the desire to
satisfy specific groups of needs, as outlined in below Figure

• Physiological needs ( Basic needs) Include need for food, sleep, warmth, shelter and others. These are
basic needs and if these are not satisfied, one does not think of needs. at the higher level.
• Safety needs: Safety needs are also called security needs. These cover security, protection, job security,
safety of property. availability of food or shelter on a continuing basis, and so on.
• Affiliation or acceptance needs or social needs : Man cannot live in isolation. He wants to live in society
as a member of society. He wants to love and be loved by others. He feels great when others recognise his
efforts and accept him as a member of their group. Affiliation or acceptance needs include desire to seek or
show affection and recognition, need for companionship, identification with a group, and so on.
 Esteem needs Maslow states that one does not stop with affiliation or acceptance needs One goes one
step beyond. One wants to be respected and garlanded. To satisfy the esteem needs, people want to feel
more prestigious, politically very strong and powerful, or enjoy better status
 Self-actualisation needs .These needs indicate the strong desire to achieve something, particularly in
view of the potential one has. Suppose a trader is confident of his business acumen and it can bring
him an international focus. He strives hard for it. The passion to go international with his products and
services keeps him working all the time. Finally, when he is successful in the exports, he feels that he has
achieved what he is capable of achieving. What he has achieved is the self actualisation need.
Theory X and Theory Y
In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of human
behaviour at work, or in other words, two different views of individuals (employees): one of which is negative,
called as Theory X and the other is positive, so called as Theory Y. According to McGregor, the perception of
managers on the nature of individuals is based on various assumptions.

Assumptions of Theory X
• employees are inherently lazy
 they require constant guidance and support
• some times they require even coercion and control
• given an opportunity, they would like to avoid 'responsibility
• they do not show up any ambition but always seek security
To explain theory X, McGregor elaborated Taylor's observations about workers using the rule of
thumb approach.
Assumptions of Theory Y
Theory Y focuses a .totally different set of assumptions about the employees. Theory Y states that
• some employees consider work as natural as play or rest
 these employees are capable of directing and controlling performance on their own. They are much
committed to the objectives of the organisation
 higher rewards make these employees more committed to organisation
• given an opportunity, they not only accept responsibility but also look for opportunities to outperform
others .
• most of them are highly imaginative, creative, and display ingenuity in handling organisational issues

Herzberg’s Two-factors Theory of Motivation

Frederick Herzberg developed a two-factor theory of motivation-hygiene factors (also called
dissatisfies) and motivators.
Hygiene factors are the basic requirements such as company policies and procedures, salary,
security, supervision, working conditions, personal and social life, and so on. If these are provided, it may
not lead to happiness. But if these are not provided, it may lead to ..unhappiness. In other words, hygiene
factors do not motivate. These-set minimum criteria for normal functioning of the organisation. If these are
provided, people can work in the organisation in the normal way. But if these are not provided, it results in
dissatisfaction.
The other set comprising motivators refers to the higher order needs such as-recognition on the job
front, awards and rewards, challenging assignments, promotion, and so forth. All these. needs are built
around the nature and content of the job. Where these, at least a few, are taken care of, it leads to
satisfaction. If not, it may not result in satisfaction. But it does not definitely end up in dissatisfaction.
The Expectancy Theory
Victor H Vroom developed the expectancy theory of motivation. According to this theory,
motivation of any individual depends on the desired goal and strength of his expectation of achieving goal.
On the other hand, it suggests that individuals are motivated to act in a certain way because they strongly
expect that a particular action will lead to a desirable result.
According to this theory, Force =valence x expectancy,
where
force is due strength of a person's motivation,
valence is the strength of an individual's desire for a particular outcome and
expectancy is the probability that a particular action will lead to a desired result.
If the probability is zero, Force also will be zero.' In other words, what is required is a relatively high
degree of probability to achieve the goal. One gets strongly motivated to get into action to reach a goal, if
he perceives that he can make it, or he can see that what he is doing will help him in emerging successful.
This theory focuses on the relationship between efforts, performance, and rewards.

IV) MODERN MANAGEMENT PERIOD

Systems Approach to Management:

Modern approaches to understand management is the systems approach. Here the organization is
viewed as a system. System approach helps to study the basic feature and functions of the organization in its
minutest details.
Ex: Every part of the study such as the eyes, brain, and heart can also be viewed as a sub-system, a study of
each of the parts of the body in necessary to understand the whole body.
From the system point of view, the functions of management are
a) Interlinked
b) Interdependent
c) Complex and intertwined that each function of management can be found in other functions
Key concepts of Systems Approach
1. Subsystem: - Subsystems are those parts which make up the whole system. Each system in turn may be a
subsystem of a still larger system. Thus, a department is a subsystem of a factory, which is a subsystem of a
firm, which is a subsystem of industry.

2. Synergy: - It is a situation in which the whole is greater than the sum of its parts. In organizational terms,
synergy means those departments that interact co-operatively are more productivity than they would be.

3. Open system: - It is a system that interacts with its environment. All organizations interact with their
environment, but the extent to which they do so varies.
4. Closed system: - It is a system that does not interact with its environment.

5. System boundary: - It is the boundary that separates each system from its environment. It is rigid in a
closed system while flexible in an open system.
Flows: - A System has flows of information, materials, and energy. These enter the system from the
environment as inputs [Like raw materials].

Contingency Approach:
This Approach is also called as situational Approach.
This Approach was developed by managers, consultancies, researchers who tried to apply concepts
of major schools to real life situation. They got different results from different methods. They want to know
the causes for the success of methods in one situation and failure in one situation. They found that the results
are differ, as such a technique that works effectively in one situation will not necessarily work in all cases.
Hence Managers should change the technique according to situation to reach the goal of the
management.

EVOLUTION OF MANAGEMENT
STAGES OR PHASES THEORY CONTRIBUTOR
I PERIOD OF MANAGEMENT AWAKENING
1) Principles of Management Henry Fayol
2) Principles of Scientific
II SCIENTIFIC MANAGEMENT PERIOD F.W Taylor
Management
1) Hawthrone Experiments Elton Mayo
2) Hierarchy of Need Theory Abraham Maslow
3) Theory X Theory Y Douglas Mc gregor
III HUMAN RELATIONS PERIOD
4) Two Factor Theory of
Herzberg
Motivation
5) Expectancy Theory Victor H Vroom
1)Systems Approach
IV MODERN MANAGEMENT PERIOD
2) Contingency Approach
 LEADERSHIP AND LEADERSHIP STYLES
Leader:
CONCEPT: Leadership is the process of influencing the behavior of other to work willingly an
enthusiastically for achieving predetermined goals.
DEFINITION:
―Leadership is interpersonal influence exercised in a situation and directed through communication
process, towards the attainment of a specified goal or goals. – Tennenbaum.
―Leadership is the process of influencing and supporting others to work enthusiastically toward achieving
objectives‖. – Barnard Key.

 One who leads a given group or team of people is called leader. If you can influence people to
perform better in a given organizational setting, that means you are a leader.
 Leadership is ability to influence people to achieve the given goals in an organization.
 A true leader is one who shares success with followers and absorbs all failures.
 A manager has to be a mini-leader. he has to inspire his subordinates and get work done) and leader
to be a mega-leader (otherwise he does not understand the ground realities of functioning)
Leadership Styles: Leader has to ensure that people under his guidance are comfortable and their good
work is recognized. A good leader has to adopt such a style of working that takes care of people around him.
There are also some leader who do not care for people and who care more for the task completion.

Types:
1) Autocratic leadership: Here, leader command the followers and expects compliance from them for all
the instructions given, leaders are more dogmatic and positive. They lead by his ability to withhold or give
rewards or punishments. Here, no suggestions from the followers are entertained and almost to-down
approach is seen. They direct others. They do not allow any participation.
Advantages:-
1. It provides strong motivation and reward to manager.
2. It permits very quick decisions.
3. Less competent subordinates also have scope to work in the organization.
Disadvantages:-
1. People in the organization dislike it specially when it is strict and the motivational style is negative.
2. Employees lack motivation frustration, low morale and conflict develops in the organization.
3.There is more dependence and less individuality in the organization.
2)Democratic leadership: Here leaders consult subordinates and involve them in decision making. They
encourage discussion with the group leaders believes in two-way communication. They listen to followers;
try to facilitate the decision making.

Advantages:-
1. Employees are highly motivated.
2. The productivity of employees is very high.
3. Subordinates share the responsibility with the superior and try to safeguard them also.
Disadvantages:-
1. Complex nature of organisation requires as through understanding of its
Problems which lower-level employees may not be able to do.
2. Some people in the organisation want minimum interaction with their superior.
3.Some leaders may use this style as a way of avoiding responsibility.
3)Free – Rein leadership: Free – Rein leaders exercises little authority and give maximum freedom to
subordinates while making decisions. It is a bottom-up approach. Suggestions from the followers are
encourage and rewarded. They give high degree of independence subordinates in their operations.
 Decision making process

Decision- making is the process of choosing the best from among the alternative solutions under a given
set of circumstances.
Now we shall discuss the meaning of decision – making based on this analysis.
Decision making is the process of choosing the best among the available alternatives with a purpose under a
given set of circumstances.
The analyses of these definitions present the following facts.

Identify the purpose or goal, based on which decision has to be made.

Analyse the set of circumstances, conditions or ground realities which set the norms for decision- making.
Decision – making is a process of identifying the issues, collecting information and data, analyze the, and
generate or develop necessary inputs for developing alternative solutions.
Develop alternative solutions to solve the problem or ways to deal with the situation.
Evaluate the alternative solutions and choose the best solution.
Implement the selected solution.

Importance of Decision- Making

Managers perform all their functions and activities through decision- making.
In addition, making the decision in right time values much to the organisation rather than making a right
decision in the wrong time.
Managers in the business world, often fail to make a decision in the right time and allow the competitors to
grab the opportunities.
As such, managers have to make not only the right decisions but make them in right time.
Otherwise, the problems remain or magnify and culminate into a crisis.
Decision- making process helps the management to procure necessary data and information.
Decision- making further helps in the formulation of strategies and implement them.
Steps in the Decision-making Process
Rational decision-making process contains the following steps:

Define the problem

Analyze the problem

Develop Alternatives

Evaluate Alternatives

Select and implement the decisions

Follow up and Feedback

a. Define the Problem

Problem definition is the most crucial step in the entire decision making process. As the saying goes,
“a problem well defined is a problem half-solved,” utmost care has to be exercised in this stage. Wrong
definition of the problem leads to wrong solutions. This is also called diagnostic stage.
Jumping to conclusions on the basis of certain symptoms has to be avoided. The problem has to be
examined from different angles so as to identify the exact causes. Unless exact causes are identified, right
decisions cannot be taken.
b. Analyze the problem
The problem has to be thoroughly analyzed. The past events that contributed to the problem, the
present situation and the impact of the problem on the future have to be examined. Problems do no crop up
overnight. The genesis of the problem and the various contributing factors need to be analyzed.
In analyzing the problem, personal prejudices have to be avoided. As far as possible, an objective
assessment of the situation is useful to arrive at right decisions. Proper analysis of the problem helps the
manager to assess the scope and importance of the problem.
If the problem is of minor nature, he can authorize his subordinates to solve it. If it is a major
problem requiring the involvement of many people, he can initiate the necessary steps.
 Interestingly, at times some of the problems may not warrant any decision. Leaving the problem as it
is could be the better option.
c. Develop Alternatives
There are hardly few problems for which there are not many alternatives. Effective decision-making
depends on the development of as many alternative solutions as possible. The underlying assumption is that
a decision selected from among many alternatives tends to be a better one.
The ability to identify and develop alternative courses of action depends on the manager’s creativity
and imagination. As the thinking of two people may not be similar, the skills and abilities in developing
alternatives significantly vary from one manager to the other.
d. Evaluate Alternatives
The next step in the decision-making process involves evaluation of the alternative courses or
solutions identified to solve the problem. Alternatives have to be evaluated in the light of the objectives to
be achieved and the resources required.
Evaluation involves a through scrutiny of the relative merits and demerits of each of the alternatives
in relation to the objectives sought to be achieved by solving the problem.
e. Select and Implement the Decision
Scientific evaluation of the alternatives reveals the acceptability of various alternatives. After
weighing the pros and cons in detail, the best alternative has to be selected and implemented.
It may not always be possible to select the best alternative for a given problem for want of complete
information, time and resources. In such a case, the manager has to satisfy with limited information and
optimize the yields under a given set of circumstances.
Once an alternative is selected that becomes the decision and it has to be implemented in a
systematic way. The required resources for the implementation and the necessary cooperation from the
people concerned with or affected by the decision have to be ensured. Otherwise, however good the decision
may be, it may encounter stiff resistance in the implementation stage.
f. Follow-up and Feed back
Once the decision is implemented, it has to be closely monitored. Adequate follow-up measures have
to be taken. In the course of implementation, so many unexpected events may render the decision
ineffective. The decision may not yield the desired results. Constant follow-up helps to take corrective
measures as and when necessary. Further, such a follow-up enables to identify the shortcomings or negative
consequences of the decision. It provides valuable feed-back on which the decision may be reviewed or
reconsidered.
 DESIGNING ORGANISATIONAL STRUCTURES

Organisation is a group of two or more people who are working together in a coordinated manner to attain a
common objective.

Any organisation will have three common features.

 It is composed of people.
 It exists to achieve goals.
 It has some degree of structure.

The term organisation is used in management literature in two ways.

 Organisation as a process.
 Organisation as a structure.

 Organisation as a process:-
As the process the term organisation refers to certain dynamic aspects like
 What task is to be done?
 Who has to do?
 How the task is grouped?
 When it is to be done?
 Who is to report?
 Whom to report?
 Where decisions are to be made?
 Organisation as a structure:-
It refers to the network of relationships among people operating at different levels.

Organisation structure should help to achieve 3 objectives.

 Define the positions of the persons and units with the organisation.
 Facilities the flow of information and decision making.
 Achieve desired level of co-ordination.

Organisational structure:-
Is the network of relationships among individuals and positions in the organisation.
or
“ The pattern of relationships among various components” are part of organisation.

The success or the failure of a organisation is revealed by its results, if it is able to achieve its desired
objectives.

The process of designing organisational structure involves.

 Identifying the activities.

 Grouping the activities.
 Assigning the activities.
 Delegation of authority.
Principles of organisation:

The following are the cardinal principles of a sound organisation:

(a) Align departmental objectives to corporate goals It is to be ensured that the objectives of different
departments in the organisation are unified and aligned to the corporate goals.
(b) Cost-effective operations An organisation is said to' be efficient if it can achieve the goals at the.
" lowest costs and with minimum undesirable consequences.
(c) Optimum number of subordinates In each managerial position, there is a limit to the number of
persons an individual can effectively manage. The optimum number will depend on various factors such'
as efficiency of the superior and subordinates, the nature of work-routine or special, responsibility, and so
on.
(d) Specialisation Similar activities are grouped together to ensure better performance of the work and
efficiency at each level.
(e) Define authority The authority and responsibility relationships underlying each position in the
organisation have to be defined clearly to avoid confusion or misinterpretation.
(f) Flow of authority. This refers to the line of authority from the top management in an enterprise to
other levels, If this is clear, then the terms of responsibility also can be understood. Further, this will
strengthen the flow of communication to different levels in the organisation.
(g) Manage via exceptional cases An organisation should be geared in such a way that manager's
attention is drawn only to exceptional problems. In other words, a system (such as organisation
manuals) should be developed to take care of routine administration.
(h) Ensure one employee, one superior Each subordinate should have only one superior. There should
not be any room for conflict of command.
·(i) One head and one plan Every group of activities with common objective should be handled by one
person and one plan. If handled by different persons, the organisation may lose direction
(j) Define responsibility A superior is responsible for the omissions and commissions of his subordinates
and at the same time the subordinates must be held responsible to their superiors for the performance
of the work assigned.
(k) Commensurate authority and responsibility Authority is the right instituted in a position jo
exercise discretion. in making decisions affecting others. The manager occupying that position
exercises the authority, Responsibility is the willingness on the part of the employee to be bound by the
results.
The authority and responsibility should always be commensurate and coextensive with each other. In
other words, if the authority is less. than the responsibility, the manager cannot deliver performance
of the task and similarly, if the responsibility is less than the authority, the employee may go berserk
and unchecked. In other words, the manager cannot discharge his responsibility-for want of necessary
authority to execute the work assigned.
(I) Attain balance Every organisation needs to be a balanced one. There are several factors such as
decentralization 6f authority, delegation of authority, departmentation, span of control, and others, that
have to be balanced to ensure the overall effectiveness of the structure in meeting the organisational
objectives.
m) Ensure flexibility The more the flexible structures, the better is the scope to be successful. The
principle of contingency endorses this. Where the organisation procedures are cumbersome or rigid,
it is necessary to develop an in-built mechanism to forecast any type ofconstraint,
(n) Provide for continuity The organisation structure should provide for the continuation of activities.
There cannot be any breakdown in the activities of the organisation for the reasons such as a change
in the policies or retirement or death of any key employee in the organisation.

Process of Organization:

Determination of objectives, strategies, plans and policies: Objectives should be clear and precise,
because the entire organization is to be built around the objectives of the enterprises.
Determination of activities: Determine activities needed to execute these plans and policies and
accomplish the objectives. The work load is broken into component activities that are to be performed by all
the employees. The activities are so split to determine the job which can be performed by an individual.
Separation and grouping of activities: To attain the benefits of specialization and division of labour, every
company, will separate its activities on the basis of primary functions like finance, engineering, purchasing,
production, sales and industrial relations. All the similar or directly related activities are grouped together in
the form of departments.
Delegation of authority: Authority is necessary for the performance of the job and therefore authority is
delegated to the subordinates for enabling them to carry out their work smoothly and efficiently.
Delegation of responsibility: Responsibility may be described as the obligation and accountability for the
performance of delegated duties. A superior is always accountable for the acts of his subordinate. Therefore,
responsibility always flows from subordinates to superiors.
Establish inter-relationships: The grouped activities are placed in the overall organization structure at
appropriate level. It is necessary to integrate or the these groups of activities through.
a) Authority relationship horizontally, vertically and diagonally
b) Organized information or communication system i.e., with the help of effective coordination and
communication.
Providing physical facilities and proper environment: Physical facilities means provide machinery, tools
equipments, infrastructure etc, environment means provide proper lighting, ventilation, heating, cooling
arrangement at the work place, reasonable hours of work, safety devices, job security etc
FORMAL ORGANISATION:-

The formal organisation is deliberately designed to achieve some particular objectives. It refers to the
structure of well defined jobs, each bearing a definite authority, responsibility and accountability.

Characteristics of formal organisations:-

 Organisation is designed by the top management to fulfil certain requirements- performance of

necessarily activities there by achieving organisational goals.
 Organisation structure is based on principles of division of labour and efficiency in organisation.
 Organisation concentrates more on the performance jobs and not on the individual performing the
jobs.
 The authority and responsibility assigned each job have to be ruled by the job holders.
 Co-ordination among members and their control are well specified to process procedure rules.

INFORMAL ORGANISATION :-

The informal organisation means natural grouping of people in work situations.

Characteristics of Informal organisations:-

 In-formal organisation is a natural outcome at the work place. It is not designed and planned
 In-formal organisation is created on the basis of some similarity among its members. The basis of
similarity may be age, place of origin, religion, etc.
 Membership in an informal organisation is voluntary.
 Behaviour of member of the informal organisation is co-ordinated and controlled by group norms of
the formal organisation.
TYPES OF ORGANISATION:-

Types of organisation

Based on Authority Based on departments

BASED ON AUTHORITY:-

LINE, MILITARY OR SCALAR ORGANIZATION:-

 It is the simplest form of organization structure.

 It was called military organization because it resembled to olden military organizations.
 Line organization is based upon relative authority and responsibility rather than on the nature and
kind of operation or activities.
 The authority flows directly from the works manager (WM) to superintendent to Foreman (F/M) and
from them to workers.
 Line organization is direct and people at different levels know to whom they are accountable.
 The immediate superior (or boss) gives orders to the subordinates, assigns duties, dismisses and takes
disciplinary action against them.
 Any enterprise that starts small probably starts with a line type of organization.

ADVANTAGES

(i) it is simple and easy to understand.

(ii) it is flexible, easy to expand and contract.
(iii) It makes clear division of authority.
(iv) There is clear channel of communication, with no confusion at all.
(v) It encourages speedy action.
(vi) It is strong in discipline as it fixes responsibility on an individual.
DISADVANTAGES

(i) It neglects specialists.

(ii) It overloads a few key executives.
(iii) It is limited to very small concerns.
(iv) It encourages dictatorial way of working.
(v) Provisions are seldom made to train, develop and replace top executives.
(vi) Due to lack of specialization perhaps there is more wastage of materials and man hours.

APPLICATIONS:

Line organization is suitable for,

(i) Small concerns free from all complexities; and

(ii) Automatic and continuous process industries such as paper, sugar, textile, etc.

LINE AND STAFF ORGANIZATION:-

 The line organization gradually development to shape as the line and staff organization; Taylor’s
functional organization hastened its development.
 As the industry grew tin size and complexity, the line executives could not perform properly all other
functions (besides looking after production) such as R & D, planning, distribution, legal, public
relations, etc. this necessitated the employing of special executives to assist line executives and they
were known as staff as they were recruited to perform staff or specialist functions.
 The line executives retain supervisory authority and control over the work of their subordinates.
 Whereas the staff executives relieve line executives of certain specialized work and advise them on
matters referred to them.
 The final decisions whether to accept and implement the recommendations of the staff executive
remain in the hands of the line executives.
ADVANTAGES

1. Less wastage of material, man and machine hours.

2. Quality of product is improved.
3. There is no confusion as exists in functional organization.
4. Line and staff organization possesses practically all the advantages of both the line and functional
organizations.
5. Experts advice from specialists staff executives can be made use of.

DISADVANTAGES

1. Product cost will increase because of high salaries of staff executives.

2. The organization may get confusion in case functions are not clear.
3. Frictions and jealousies if developed between line and staff executives may cause harm to the
enterprise.
4. Line executives if they start depending too much on staff executives may lose their initiative, drive
enterprises.

COMMITTEE ORGANIZATION

 A committee is a group of people who work collectively, discuss, decide and recommend solutions
to the problems which possibly cannot be solved by an individual.
 A committee consists of a group of men conversant with a subject, naturally their advice will be
much superior to that of one man.
 Committees work very well in large complex corporate organizations having multifaceted problems
too big and too complex to be dealt effectively by one person.
 In a committee, ideas put forth by several persons are pooled and offered for criticism, the ideas are
developed and thus recommendations are made as regards procedure and policies.

Principles

1. The number of persons in a committee should depend upon the need and be optimum
minimum(about 5 to 10 persons).
2. Responsibility, authority, objectives and duties of the committees should be clearly defined.
3. Agenda of the committee should be prepared and communicated to the committee members at least a
week before they meet for discussions.
4. Problems which can be take care by individual should not be included in the agenda of the
committee.
5. Committee meetings should begin and end on prefixed timings.
6. Problems not related to the subject-matter should not be discussed because it will simply waste time.
7. The operation of the committee should be cooperative development.
8. The recommendations made by the committee should be published and circulated to interested and
concerned persons.
9. A committee must be dissolved after its purpose is over.
Types

(a) A standing or permanent committee is needed in a complex organization experiencing

multifaceted problems almost all the times.
(b) A temporary committee is formed to face and solve problems arising occasionally.
(c) The committee in control has full powers to act and may assume a position that could be manned
by one individual.
(d) The coordination and discussion committee discusses problems and gives its advice. It has no
power to act.
(e) The advisory committee explores various aspects of a problem and suggests courses of action to the
concerned executive, there by helping him to reach the decisions for which he is held responsible.
The committee does not power to act. Advisory committee is used extensively in business.
(f) the educational committee aids in getting information about company problems, policies and
projects to major individual concerned.

Advantages

1. A committee reduces the work load of the management.

2. A committee coordinates the efforts of the departments which are represented (e.g., sales, production
and engineering) in development of a new product.
3. Committees are especially good at innovation or brain storming.
4. A committee helps securing co-operation of various personnel.
5. A committee coordinates the efforts of the department.

Disadvantages

1. Sometimes it turns out to be true that what a committee finishes in a week, a good individual may
complete in a day.
2. It may be said that committee operations are slow and committees tend to hang on for a considerable
time.
3. An executive afraid to stand behind his own decisions may use a rubber – stamp committee and
thereby share his responsibility with others.
4. In a committee, no individual can be held responsible for anything.

FUNCTIONAL ORGANIZATION

- F.w. taylor suggested functional organization because it was difficult to find all-round persons
qualified to work at middle management levels in the lie organization.
- Functional organizational is also a line type of organization with the difference that instead of one
foreman(which being master or specialist of everything and therefore hard to find) there are eight
functional foreman; four of them located on the shop floor and remaining four in office, but everyone
having direct and equal authority over the workers.
- Each functional foreman who is a specialist in an activity is in charge of one function.
 1. Route clerk : the in charge of issuing work orders and routing the jobs.
2. Instruction clerk: would issue specifications and instructions related to jobs to the workers.
3. Time and cost clerk: keeps records pertaining to the time(the workers have spent in doing work and
cost ie., worker’s wages etc.)
4. Disciplinarian: keeps personnel records of the workers and handles cases of insubordination.
5. Gang boss: has the in charge of the preparation of all work up to the time that the work piece is set
in the machine.
6. Speed boss: ensures that proper cutting tools are being used, cut is started at right place in the work
piece, and the optimum speeds, feeds and depths of cut are being employed.
7. Repair boss: is responsible for adequate repairs and maintenance of equipment and machinery.
8. Inspector or inspection boss: looks after and is responsible for the quality of the product.

Advantages

1. Since a foreman is responsible for one function, he can perform his duties in a better manner.
2. Functional organization makes use of specialists to give expert advice to workers.
3. It relives line executives of routine, specialized decisions.
4. It relieves pressure of need to search a large number of all-round executives.
5. Quality of work is improved.

Disadvantages

1. Coordination of the efforts of various functional foreman is difficult.

2. It is difficult to maintain discipline as each worker is responsible to eight foreman.
3. It is very difficult to fix up the responsibility to any one foreman in case of something wrong.
4. Workers always remain confused about the authority and activity of each foreman.
5. It makes industrial relationships more complex.
MATRIX ORGANIZATION:-

- Matrix organization is used when an organization has to handle a variety of projects, ranging from
small to large.
- When a pure project structure is superimposed on a functional structure, the result is a matrix
structure.
In other words, the matrix organization is a project organization plus a functional organization.
The project structure provides a horizontal lateral dimension to the traditional vertical orientation of
the functional organization structure.
- The project teams are composed of persons drawn from the functional departments for the duration
of the project. When their assignment is over, they return to their respective departments.
- During continuation of the project, such persons have two bosses – one, from the functional
department and second of the concerned project.

Advantages

(i) If effectively focuses resources on a single project, permitting better planning and control to meet
deadline.
(ii) It is more flexible than a traditional functional hierarchy.
(iii) Services of specialists are better utilized as more emphasis is placed on the authority of
knowledge than rank of individuals in the organization hierarchy.

Disadvantages

(i) it violates the principle of unity of command as a person works under two bosses.
(ii) Organizational relationships are more complex.
(iii) They create problems of coordination.

Use of matrix organization

- The matrix organization is used in the following industries.

Electronics Aerospace
Chemicals Banking
Industrial products Insurance
Advertising Hospitals etc.
VIRTUAL ORGANIZATION:-

The virtual organization is temporary network of companies that come together quickly to exploit fast
changing opportunities.

In other words the network structures representing several independent companies that form unique
partnership teams to provide customized products or services usually to specific clients for a limited time.

Different from traditional mergers and acquisitions the partners in the virtual organization share cost, skills
and access to international markets.

The following are the key attributes of the virtual organization

1. Technology
Informal networks will help far – flung companies and entrepreneurs link up and work together from
start to finish.
2. Opportunism
Partnership will be less permanent, less formal and more opportunistic companies will band together
to meet all specific market opportunities and fall a part when the opportunities evaporate.
3. No borders
This new organizational model redefines the traditional boundaries of the company. More co-
operation among competitors, suppliers and customers makes it harder to determine where one
company ends and another starts.
4. Trust
These relationships make companies far more reliant on each other and require for more trust than
ever before. They share a sense of “co-destiny” meaning that the fate of each partner is dependent on
the other.
5. Excellence
Because each partner bring its “core competence” to the effort it may be possible to create a “best of
every thing” organization every function and process could be world class – something that no single
company could achieve.

Virtual organizations can help competitiveness in the global economy.

CELLULAR ORGANIZATION:-

Organization structured around the units/cells that complete the entire assembly processes are called cellular
organization.

BOUNDARY LESS ORGANIZATION:-

It eliminates the internal boundaries among subsystems and external boundaries with external environment.
It is combination of team and network structure with the addition of temporariness.

INVERTED PYRAMID;-

Inverted pyramid is an alternative to the traditional chain of command. This is a structure which is narrow at
the top and wide at the base. It includes a few levels of management.
FLAT AND TALL/ FLAT AND LEAN ORGANIZATION:-

Flat organizations are those which have relatively few or even one level of management. Organizations
adopt flatter structures to reduce levels of management and bureaucracy and to give their workers/ work
force greater decisions- making responsibilities. These organizations are known by their wider span of
control. It facilitates communication across the organization.

Wide span of control

Advantages

 Few levels of management and decision making.

 Lower supervision costs.
 The subordinates feel more satisfied on the job front with great decision-making authority.

Disadvantages

 Makes it difficult to supervise the subordinate directly.

 Flat structures may not work as the business expands.

Tall/lean organization have many levels of management. Tall structure organizations focus on vertical
on vertical communication through the levels of grades in it.

Tall organizations involve a narrow span of management.

Narrow span of management

Advantages

 Allows for tight control and supervision.

 Communication with subordinates is easier.

Disadvantages

 Subordinates may feel left out of the decision making process and may lack motivation.
 Costs related to management and administration tend to increase.
 Coordinating decisions of numerous managers becomes difficult.
 Too much supervision may hinder initiative and motivative.
DECENTRALISATION:-

“Dispersal of authority among different individuals at various levels of organisation”.

Or

“Systematic delegation from top to bottom of the organisation”.

DEPARTMENTATION:-

Is the process of grouping various activities into separate units or departments. It is also called as
“departmentalisation”. It is the process of dividing the large functional organisation into smaller and flexible
administrative units.

METHODS OF DEPARTMENTATION:-

 Departmentation by enterprise function

 Departmentation by products.
 Departmentation by geographical area.
 Departmentation by time.
 Process wise departmentation.
 Combined departmentation.

Departmentation by enterprise function:-

 Simplest and most common type of departmentation.

 Departments are created on the basis of enterprise function such as sales, purchase, finance,
production etc.,
 Widely used in small, medium and large enterprises.

Managing Director

Sales dept. Purchase dept. Production dept. Finance dept. R&D dept.

Departmentation by products:-

 Also known as multi functional product departmetation.

 Some multi products and large business enterprises create this kind of departmentation.
 Grouping of activities on the basics of products.
 Under this all functions relating to a product are put under one department.

Managing Director

Car division Truck division Bus division

Departmentation by geographical area:-

 All the activities relating to a particular area or zone may be grouped together under one zonal
manager.
 This departmentation is widely used to organise sales and production activities.

Managing Director

Sales dept. Purchase dept. Production dept. Finance dept. R&D dept.

Eastern region western region northern region southern region

Departmentation by time:-

 Oldest form of departmentation.

 Used at lower levels of organisation.
 Grouping up of activities based on time.
 Found in those enterprises where emergency services are required.

Vice President

Morning shift Afternoon shift Night shift

Process wise departmentation:-

 Various stages of manufacturing process will be taken as a basis for grouping the activities.
 Example- textile.

Managing Director

Marketing HR Production Finance Purchase

ee

Ginning Spinning Weaving Dyeing Finishing

Combined departmentation:-

 Many organisations now-a-days creates departments by combining two or more methods.

 This kind of departmentation is used to get maximum benefits.
 This is the combination of two departments.

President

Production Finance Personnel sales

Crushing Refining Finishing

East zone West zone North zone South zone

 UNIT 2

OPERATIONS MANAGEMENT
PLANT LOCATION

Plant location decisions deal with where plant is to be located .Plant location is a strategic decision
several factors influence this decision.

The main objective of any business is to optimize its cost and revenue that is, minimize its costs and
maximize its returns. The degree of significance for the selection of location for any enterprise mainly
depends on its size and nature large scale industries requiring huge amount of investment there are many
considerations other than the local demand in the selection proper plant location these plants cannot be
easily shifted to other place and an error of judgment in the selection of site can be vary expensive to the
organization. However, small-scale industry mainly selects the site where in accordance with its capacity;
the local market is available for its products. It can easily shift to other place when there is any change in the
market.

FACTORS AFFECTING PLANT LOCATION

The following are the factors governing the decision of a plant location

1. Nearness to Market:

If the plant is located close to the market the cost of transportation can be minimized. This also helps
the producers to have direct knowledge of the requirements of the customers.

2. Nearness to supply of raw materials:

As far as possible the site selected should be near the source of raw materials, so that the cost of
transportation can be minimized and storing cost can be reduced due to shorter lead time.

3. Availability of labour:

Availability of right kind of labour force in required number at reasonable rates is also a deciding
factor in selection of site

4. Transport and communication facilities:

Generally, industries have a tendency to locate the industrial units near the railway station, highway
or port areas. Availability of power and fuel: Coal, electricity, oil and natural gas are the important sources
of power in the industries.
Ex: Tata iron and steel industry is established near the coalmines of Bihar.

5.Climatic conditions:

Climatic conditions largely affect certain production processes and also the efficiency of the
employees. Ex: Textile mills require moist climate that why these plant located at Mumbai and Ahmadabad.

6. Availability of water:

Water is used in industries for processing as in paper in chemical industries, for generation of power
in hydroelectric power, plants and also required for drinking sanitary purpose also.
7. Ancillary industries:

Many industries such as processing and assembly industries are not producing al the parts of their
product but purchase some of the parts from ancillary industries producing it.

8. Financial and other aids:

For the development of backward regions central as well as state government provide certain
incentives and facilities such as cash- subsides, concession financial assistance, land, power and other
facilities at cheaper rates, tax concession etc.

9. Agglomeration economies:

If the plant is located in an industrial area, it is likely that it can avail certain special benefits. These
result in cost savings, which accrue to a firm as a result of expansion and concentration of industries in a
region. As a result, the plant enjoys economies, both internal and external to it.

10. Government influence:

As already noted, the Government has its own strategy for a balanced regional development. To
encourage the entrepreneurs in locating their plants in the backward and less developed areas, it announces
fiscal and other incentives from time to time. It may withdraw the incentives, once it is satisfied that a
particular area has reached an optimum stage of development in terms of industries.

11.Political interference:

This applies more in case of location of public enterprises. Many a time, political considerations
override the economic rationale in assigning an industry to a particular location.

12. Other considerations:

These include pollution levels of an. area and the safety factor. These days, environmental hazards
and pollution levels are given serious thought in location decisions. Government has also notified certain
areas as hazard-prone or pollution-affected. License can be procured only when the industrial units are
located in places far from human habitation.
 PLANT LAYOUT

Plant layout can be defined as the process of determining a spatial location for a collection of
physical production facilities suitable to manufacture a product or provide a service. It is concerned with
arranging

 the manufacturing and servicing departments in the factory site

 the machinery within these departments
 the layout of individual work places

Before the production facilities are set up, it is necessary to study how best the plant layout can be
arranged to minimise the bottlenecks in the production process

Significance of Plant Layout:

Plant layout studies are essential when

 there is a change in the product design and this changes the sequence of operations or requires new
operations
 the management decides to manufacture a new product altogether
 the management wants to increase the output by using additional machinery or upgrading present
machinery, or increasing the present rate of capacity utilization
 it is necessary to reduce production costs.
 the present machinery becomes obsolete and it is to be replaced by the new ones

SYSTEMS OF PLANT LAYOUT OR TYPES OF PLANT LAYOUT:

There are 4 types of plant layouts , they are

1. Product Layout
2. Process or Functional Layout
3. Fixed Layout
4. Combined Layout ( Combination of Product and Process Layouts)

The pattern of plant layout is basically decided by the relationship between the number of products (P)
and the production quantity (Q) i.e on the basis of Q/P Ratio . Plant layout is a specialised process.

1. PRODUCT LAYOUT:

Meaning:

 This type of layout is developed for product-focused systems.

 In this type of layout only one product, or one type of product, is produced in a given area.
 In case of product being assembled, this type of layout is popularly known as an assembly line layout.
 The work centers are organized in the sequence of appearance. This facilitates a high degree of
automation to minimise fatigue and error.
 The raw material centre at one end of the line and goes from one operation to another rapidly with
minimum of work-in-process storage and material handling.
 This layout is followed only by such industries where the product decisions are finalized and may not
change at least in the near future.
Example Layout :

For product X, the above layout displays six types of production operations: drilling, boring,
grinding, milling, reaming, and after all these operations, the product manufactured is inspected and sent to
the finished goods stores. In view of this sequence, these machines are also arranged in this order.

Q/P Ratio: Higher Ratio ( Big Ratio ) compared to other layouts

Method of Production Used: Mass Production

Applicability:

Product layout can be better-employed where

 the machines can he continuously handled for longer periods
 time and motion study can be conducted
 the products so manufactured do not require higher degree of .inspection

Examples:
 Paper Mills
 Automobile Assembly
 Loan Application Processing

EVALUATION OF PRODUCT LAYOUT:

Advantages:

( a ) Faster and cheaper production : Product layout facilitates faster production. Production time per unit
is Lower
(b) Lower cost of material handling: Since all the departments are located close by, material handling costs
are lower
(c) effective utilisation of floor space : Floor space can be effectively utilized as all the production
departments are located at one point
(d) Easy monitoring: Monitoring is made easier in the sense that it requires few controls and records to
maintain
(e) Team work benefits: Higher productivity is assured as-the workers act as a team.

Disadvantages:

(a) Threat of duplication: There is possibility for duplication of processing equipment and machine tools
(b) Huge capital outlay: It calls for large investments.
(c) Little flexibility: There is little degree of flexibility to switch over to a new product or change in the
design.
(d) Discontinuity in production likely Since all the machines are arranged in the sequence, if there is a
Break down in one machine, the entire manufacturing activity comes to a grinding halt.
(e) Monitoring each worker made difficult The output of one machine is the input of another machine.
Hence, it is likely that the efficiency of a particular worker cannot be recognized. However, it encourages
team effort and team productivity.
2. PROCESS OR FUNCTIONAL LAYOUT:

Meaning :

 This type of layout is developed for process focused systems.

 The processing units are organized by functions into departments on the assumption that certain skills
and facilities are available in each department similar equipments and operations are grouped together.
 If the equipment is arranged as per the nature or types of the given set of products operations major it is
called process layout.

Example Layout:

This layout is shown in above Figure where the movement of two types of products -----P and Q----is
shown. The product P requires the following operations as per their sequence: forging, turning, welding.
milling, grinding, drilling and inspection. Product Q requires the following operations: heat treatment,
drilling, and inspection.

Q/P Ratio: Lower ratio ( small ratio ) compared to product layout

Method of Production Used: Batch Production

Applicability:

To sum up, process layout can be preferred when

 more varieties of products are manufactured in fewer quantities

 close quality inspection is required
 it is difficult to carry out time and motion study
 it is necessary to use the same machine for more than one product

Examples:

 Auto repair shops

 Hospitals
 Public Libraries
EVALUATION OF PRODUCT LAYOUT:

Advantages:

(a) Optimum utilisation of resources Here, duplication of equipment is minimised. Thus, optimum
utilisation of financial resources is ensured
(b) Flexibility It involves a high degree of flexibility as any product with any design, as long as it requires
the available processes, can be manufactured with the same layout
(c) Continuity Breakdown in one machine does not affect the entire production activity
(d) Interesting to workers The individual productivity can be assessed straight. Hence, the workers also
take more interest
(e) Monitoring Progress under each machine operation is inspected. Hence, reasons for poor performance or
faulty operations can be quickly identified

Disadvantages:

(a) Higher material handling costs It leads to higher material handling costs in view of the fact that due
to backtracking it involves zigzag movements, of the work in progress.
(b) Larger production cycle Production cycle may he long as it involves more number of production
stages.
(c) Monitoring may be complex Many units require to be monitored at every level of production .The
process of production control may get more complex. It calls for more efficient routing, scheduling,
and controlling.
(d) Higher inspection costs It involves inspection at more points of production. Inspection costs are
likely to be more.
(e) Higher wage bill Each machine, whether it is general or a special purpose one, requires qualified
and efficient staff to maintain it. This may mount up the wage bill.

3. FIXED LAYOUT:

Meaning :

 Here, the manufacturing facilities are fixed in their position.

 They cannot be shifted from one place to another place.
 All the spare parts, tools, equipment, and men are brought to this point for further assembly and
processing operations on this fixed manufacturing facility.
 This type of layout is now not used very commonly as the machines required for manufacturing work
are big and complicated
 The fixed position layout is used only when it is difficult to move the major component and
fabrication is to be carried out.

Example Layout:

Example Layout 1
 Example Layout 2

Q/P Ratio: Very Lower ratio compared to product layout and process layout

Method of Production Used: Job Production

Applicability:

 Where huge projects are going on

Examples:

 Ship building
 Construction of bridges, buildings, dams etc
 Aircrafts manufacturing
 Manufacture of heavy pressure vessels

EVALUATION OF PRODUCT LAYOUT:

Advantages:

(a) 1t does not involve large investment.

(b) There is a high degree of flexibility in matters relating to product design, product mix, and production
volume. .
(c) Workers find it very interesting since job-enlargement can be effectively practiced. Job-enlargement
refers to the practice of providing the worker a bigger role to play in the job when he gets bored with his/
her present job.

Disadvantages:

(a) Material handling costs will be very high. But there is no alternative other than moving all resources
to the fixed layout position.
(b) At times, the resources may be under-utilised in case many jobs cannot be planned simultaneously.

4. COMBINED LAYOUT ( Combination of Product and Process Layouts)

 This is not a different method. It integrates the advantages of both the product layout and the process
layout.
 Modern production organisations integrate these two layouts to optimise productivity by arranging
the manufacturing sections in the process layout with scattered manufacturing lines as per the
convenience.
 When items of different types and sizes are to be manufactured, the machinery is arranged in the
process layout. The machines of similar processes are grouped as per the product details.
 The sequence of operations is the same. Only types and sizes of products vary.
Factors influencing plant layout:

1. Management policy:
Management has to decide on many matters e.g. nature and quality of products, size of the plant,
integration of production process, plans for expansion, amount of inventory in stock, employee facilities
2. Manufacturing process:
The type of manufacturing process e.g. synthetic/analytical, continuous/intermittent and
repetitive/non-repetitive, will govern the type of plant layout.
3. Nature of product:
Small and light products can be moved easily to the machines, whereas for heavy and bulky products
the machines may have to be moved.
4. Type of equipment:
The use of single purpose and multi-purpose machine substantially affects the plant layout.
Similarly, noisy and vibrating machines require special attention in the plant layout decision.
5. Types of buildings:
The plant layout in a single storey building will be different from that in a multi storey building. The
covered areas, the number of storey‟s, elevators and stairs, parking and storage area all affect the layout.
6. Availability of total floor area:
The allocation of space for machines, work- benches, sub-store aisles etc., is made on the basis of the
available floor area use of overhead space is made in case of shortage of space.
7. Arrangement of materials handing equipment:
Provide sufficient aisles for free movement of material handling equipment such as hand truck, fork
truck etc. Service facilities: The layout of factory must include proper service facilities required for the
comfort and welfare of workers. These include canteen, lockers, drinking water, first aid etc.
8. Possibility of future expansion:
Plant layout is made in the light of future requirement and installations of additional activities.

Principles of plant layout:

1.Principle of integration:
The best layout is one which integrates the men, materials, machinery, supporting activities and any
other such a factors that results in the best compromise.
2.Principle of minimum movement:
The number of movement of workers and materials and the distance moved should be minimized.
The materials should be transported in bulk rather than in small amounts.
3.Principle of smooth and continue flow:
It states that bottlenecks, congestion points and bulk tracking should be removed by proper line
balancing techniques.
4.Principle of cubic space:
Space of a room, it the ceiling height is also utilized, more materials can be accommodated in the
same space.
5. Principle of satisfaction of safety:
Working places-safe, well-ventilated and free from dust, noise fumes, odors and other hazardous
conditions, help to increase the efficiency of the workers and improve their morale.
6.Principle of flexibility:
It means the best layout in one which can be adopted and re-arranged at a minimum cost with least
inconvenience.
PRODUCTVITY

Definition:
Productivity is defined as the rate at which the goods and services are produced. It refers to the
relationship between the inputs and the output. It is calculated as a ratio between the amount produced and
the amount of resources (land, labour, capital, technology etc.) used in the course of production in other
Words

And also defined productivity as human efforts to produce more and more with less and less inputs
of resources as a result of which the benefits of production are distributed among maximum number of
people.

METHODS OF PRODUCTION
Meaning of Production:

The processes and methods used to transform tangible inputs (raw materials, semi-finished goods,
subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services. Resources are
used in this process to create an output that is suitable for use or has exchange value.

The methods of production can be of the following types:

(a) Intermittent or interrupted production which includes
 job production
 batch production
(b) Mass and flow line production

JOB PRODUCTION :

 In this system, goods are produced according to the orders with this method, individual requirements
of the consumers can be met.
 Each job order stands alone and is not likely to be repeated.
 Factories adopting this type of production, are generally small in size.
 Here, every job is different from the other in terms of type, cost, efforts, consumption of
materials, or its specifications. As a result, production design could consume a lot of time.
 The quantity of each job could be small, and hence, the large-scale economies cannot be realized.
 Normally, the job production is the costliest.
 It may involve special machinery and special. training for the labour.
 Some of the examples include special purpose machines, large turbo-generators, special heat
treatment furnace, and so on.·

Advantages:
1. It is the only method, which can meet the individual requirement.
2. There is no managerial problem, because of very less number of workers, and small size of concern.
3. Such type of production requires less money and is easy to start.
Disadvantages:
1. There is no scope for continuous production and demand
2. As the purchase of raw materials is less, hence cost of raw materials per unit will be slightly more.
3. For handling different type of jobs, only skilled and intelligent workers are needed, thus labour cost
increases.
BATCH PRODUCTION:

 This type of production is generally adopted in medium size enterprise.

 Batch production is in between job production and mass production.
 Batch production is bigger in scale than the job production.
 Here, al1the products manufactured under a batch are similar in terms of type, cost,
efforts, consumption of materials, or the specifications.
 Though the product design consumes a good amount of time, the cost of product design per unit
could be lesser.
 The economies of production can be realized relatively better than in job production.
 When compared to the costs in job production, the cost per unit in batch production is lower.
 Flow of materials in the manufacturing process can be continuous.
 Process layout can be advantageously used.
 The automation and mechanization may be advantageously employed.
 It calls for efficient maintenance of equipment and production control systems.
 The products manufactured under this method include: pharmaceuticals, readymade garments, sheet-
metal presses, paints, many consumer products such as mineral water bottles, and so on. .

Advantages:

1. While comparing with mass production it requires less capital

2. Comparing with job production, it is more advantageous commercially.
3. If demand for one product decrease then production, for another product
may be increased, thus the risk of loss is very less.

Disadvantages:

1. Comparing with mass production cost of scales and advertisement per

unit is more
2. Raw materials to be purchased are in less quantity than that in mass production; therefore it is slightly
costlier than that of mass production because less quantity discount is available.

MASS PRODUCTION

 This is also called flow production.

 Here. the production can be undertaken on large and specialised machines and processes.
 In mass production. the following factors can be advantageously employed:
 Mechanisation and division of labour
 Large-scale economies
 Sophisticated material handling systems to minimise the material handling costs
 Work study techniques
 Sophisticated quality control techniques such as ISO 9000

 Mass or flow production calls for certain special care.

 The production processes have to be carefully monitored as idle machinery results in the wastage of
resources; the plant layout should be designed to suit the requirements of the various stages in the
manufacture of the product; methods. tools, and material handling need special monitoring; and
resetting of machines should be done faster.
 The main advantage of this method of production is the lowest unit cost of production. The products
such as TV s air conditioners, cars, scooters, and others are manufactured through mass production.
Advantages:

1. A smooth flow of materials from one work station to the next in logical order.
2. Since the work from one process is fed directly into the next, small in process inventories result
3. Total production time per unit short
4. Simple production planning control system are possible
5. Little skill is usually required by operations at the production line, hence training is simple, short and
inexpensive.

Disadvantages:

1. A breakdown of one machine may lead to a complete stoppage of the line that follows the machine.
Hence maintenance and repair is challenging job.
2. Since the product dictates the layout, changes in product design may require major changes in the layout.
3. Generally high investment are required owing to the specialized nature of the machines and their possible
duplication in the line
 WORK STUDY

Work study is one of the most important management techniques which is employed to improve the
activities in the production. The main objective of work study is to assist the management in the optimum
use of the human and material resources.

Definition:
Work study refers to the method study and work measurement, which are used to examine human
work in all its contexts by systematically investigating into all factors affecting its efficiency and economy
to bring forth the desired improvement.

Benefits

Work study offers the following benefits:

 Work study directly leads to standardisation of the job process

 It determines the cost of the work performed
 It saves, and thus, minimises time since the unnecessary movements are eliminated
 It enhances productivity of the workers and machines
 It helps to evaluate the performance of an employee or department as against hard targets
 It enables the worker to earn incentive
 It contributes to cost savings
 It enhances the employee morale
 It facilitates the orgnisation to plan and achieve work targets

METHOD STUDY

The systematic recording and critical examination of existing and proposed ways of doing work, as a
means of developing and applying easier and more effective methods and reducing cost it is also called
motion study.
Basic Procedure of Method Study:

The process of method study involves the following procedure:

(a) Select The task or work to which the method study principles are to be applied is to be identified and
the underlying objectives, such as saving the costs, increasing productivity, or eliminating unnecessary
motions by the worker, and so on, are to be specified.

(b) Record The current process of doing the job has to be recorded. While doing so, every detail,
however small it may be, has to be identified. Where the process is too long, involving many stages of
production, inspection, or transportation, the present process of doing the job is recorded sufficiently,
together with all the relevant information, using the process chart symbols . The recording techniques
include process charts, diagrams, and motion and film analysis.

(c) Examine The recorded events are to be critically examined in a sequence, even to the extent of
questioning the very purpose of an activity. Thus, all possible basic questions should be put forth,
especially those of the following types.
Person Who does this job? Why should he alone do this? Why does not any body else do this?
Purpose Why is it to be done? Is this activity necessary?
Place Where is it to be done? Why only there? Why not anywhere else?
Sequence When is it done? Should it be done in this sequence only? Is this the most economical
 way? Can't we do this in a different way? If so, what is the proposed change?
Method How is it done? Is there any other method of doing it? If so, what is it? What are its
implications on resources such as money, time, and effort?

These questions can help the person conducting the study to eventually produce the best way of
working, considering all the circumstances.

(d) Develop and define Based on the recorded data, the alternative methods of doing the same job more
effectively, are to be indentified and evaluated. From these alternatives, the best one is selected and
developed to suit the requirements. An alternative is considered to be the best when it is thoroughly
evaluated in terms of feasibility, safety, effectiveness, and compatibility to design, production systems,
and quality control procedures. The alternative is then defined clearly so that everyone concerned can
understand it.

(e) Install The new method so developed is to be installed in a phased manner. As part of installation,
adequate planning of schedules and deployment of resources should be taken care of. Many good
proposals do not take off for want of adequate preparation for installation. Once the method is adopted,
the workers have to be retrained, the equipment has to be provided, and the method has to be tested
in order to seek improvement. Installation is said to be complete only when the new method starts
working consistently and efficiently. In case of undesirable results, it should be examined afresh.

(f) Maintain It should be ensured that the method is used in the manner intended. Complaints and
improvements in productivity should be registered. Once the new method starts yielding the desired
results, it is necessary to maintain the new method without any change for sometime. From time to
time, it should be monitored. The progress has to be reviewed in the light of the experiences of the operating
and concerned staff.

RECORDING

The current process of doing the job has to be recorded, while doing so every detail however small it
may be, has to be identified. Where the process is too long, involving many stages of production, inspection
or transportation, the present process of doing the job is recorded sufficiently together with all the relevant
information, using the process chart symbols.
WORK MEASUREMENT

Work measurement, also called time study, establishes the time taken by a qualified worker to
complete a Specified job at a defined level of performance. These techniques are used to answer the
questions-how long? and when? They usualy follow the results of method study. They are employed for the
following purposes
 To develop costing systems
 To determine the production schedules
 To developing incentive schemes
 To compare the time taken by alternative methods of a given job
 To standardise the job in terms of standard time, thus, supplementing the efforts of method study
 To determine the optimum number of men and machines to ensure their effective utilization

Procedure of Work Measurement

The essential prerequisite to carry out work measurement is to describe the method underlying the job. In
other words, it is a logical sequence of method study where the focus is on proposing a new method, which
results in elimination of unnecessary motions. Having decided the new method, the next step is to find out
how much time is taken for carrying out the new method. In determining this, the following process is
involved: .
 Break the job into elements which can be identified as distinct parts of an operation, capable of being
observed, measured, and analysed
 Measure time taken to perform each element (ideally, each element should not take more than 30
seconds) using a stopwatch
 Add the time taken to do all the elements and arrive at the basic time (also called as Normal Time)
required to do the job
 STATISTICAL QUALITY CONTROL

Introduction:
Quality is the determining factor the success of any product or service large resource are committed
in every organization to ensure quality
Definition:
It is defined as customer satisfaction in general and fitness for use in particular. Both the external
consumer who buy the product and services and the internal consumers that is, all divisions or departments
of the business organization are equally interested in the quality.

Statistical quality control:

The process of applying statistical principles to solve the problem of controlling the quality control of a
product or service is called statistical quality control.

Quality elements: a) Quality design b) Quality conformance

a) Quality design: Quality of design refers to product feature such as performance, reliability durability, ease
of use, serviceability
b) Quality conformance: Quality conformance means whether the product meets the given quality
specification or not

Elements of statistical Quality Control:

The technique under SQC can be divided in to two parts a) Process control b) Acceptance sampling

Process control:

Process control is a technique of ensuring the quality of the products during the manufacturing
process itself. If a process consistently produces items with acceptable or tolerable range of specification. It
is said to be statically under control. Process control is achieved through control charts. Process control aims
to control and maintain the quality of the products in the manufacturing process.

Statistical control charts:

A control chart compares graphically the process performance data to computed statistical control
limits. These control limits act as limit lines on the chart control chats are the tools to determine whether the
process is under control or not.
The quality of the production process may be affected by chance cause or assignable cause.

Chance cause:

such causes, which may or may not affect the manufacturing process are called chance cause, chance
cause cannot even be identified. It is not possible to always maintain the given specification.

Assignable Cause:

Assignable causes affect the quality of the production process. These causes can be identified and
specified. Causes such as change in the labour shift, power fluctuations, or excessive tool wear are said to be
assignable causes as they affect the quality of manufacturing process in different ways.

Process capability:

Process capability refers to the ability to achieve measurable results from a combination of machines,
tools, methods, materials and people engaged in production.
MARKETING MANAGEMENT

Introduction:
Marketing, as indicated in the term, denotes a process that is continuous in nature. The market should
be continuously involved in initiating, conducting and finalizing transactions and exchange. This is an
unending process and would continue till production and consumption cease to exist in the world.

Meaning:
The term ‘marketing’ can be defined analytically or operationally. The analytic way of explaining
the terms to show how marketing differs from various other activities of a firm, marketing deals with
identifying and meeting human and social needs. One of the shortest definitions of marketing is “meeting
needs profitably”.
Definitions:
According to kotler: “Marketing is the science and art of exploring, creating, and delivering value
to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires”

According to American management association: “Marketing is the process of planning

and executing the conception, pricing, promotion and distribution of ideas, goods and services to create
exchanges that satisfy individual and organizational objectives”.

Thus marketing may be defined as those as those business functions which are most directly and
primarily concerned with three activities
 The recognition of the demand,
 The stimulation of demand
 The satisfaction of demand

Selling versus Marketing:

Selling refers to the act of transferring the ownership of the goods and services from the seller to the
buyer. Marketing refers to the whole process encompassing the entire range of activities starting from
identifying the customers requirements to satisfying these in a mutually beneficial manner.
MARKETING FUNCTIONS:

Buying:
Buying involves both the marketing and the customers. The marketing manager must know about the
type of customers, their consuming habits demands and buying pattern.
Selling:
It creates a demand for a product selling function involves.
1. Product planning and development
2. Finding out or locating buyers
3. Demand creation through salesmanship, advertising and sales promotion
4. Negotiation of terms of sales such as price, quantity and quality etc.
Transporting:
It involves the creation of place utility. In order to have value goods must first be transported from
the place they are produced to the place where they are needed.
Storage:
It concerned with storing finished products properly without any damage, until they are dispatched to
the customers it is also concerned to the customers it is also concerned with maintaining stock of raw
materials with maintaining stock of raw materials, components etc. to meet production schedules.

Standardization and grouping:

These two functions are supplementary and complementary to each other. A standard is a measure of
fixed value. The standard could be based on colour, weight, quality, and number of items, price, or any other
parameter. Both domestic and export markets rely extensively on this function. Grading is the process of
sorting the goods. The price varies with the grade of the goods. This function enables the marketer to fix a
uniform price for a given grade of the goods. It further promotes good
understanding between the buyer and the seller.
Finance:
 Finance is the life blood of business value of goods is expressed is money and it donated by price to
be paid by buyer to seller credit is necessary in marketing it plays all important role in retail trade
particularly in the sales of costly consumer goods.
Marketing research:
The marketing personnel must study the trends in market demand, supply prices and related market
information. The knowledge about the latest market information may help the firm to reduce
risk loss in purchasing, in pricing, in forecasting market demand and in facing competition in the market.

MARKETING MIX
It refers to the combination of four basic elements, viz., product, price, promotion and the place,
known as the four P’s of marketing.

Product Mix:
It is used to describe the assortment of different product types (product lines) and their varieties
(product depth). In addition, different tangible and intangible features of the product also form the product
mix.
Price Mix:
Price mix refers to the decisions relating to the price charged for the product, service or idea.
Promotion Mix:
Refers to the activities relating to promotion of the product, service or idea.
Place Mix:
Place or physical distribution mix refers to the activities that are involved in transferring ownership
to consumers at the right time and price.

PRODUCT LIFE CYCLE

1. Products have limited life.

2. Products sales pass through distinct stages, each passing different challenges, opportunities and problems
to seller.
3. Profits rise and fall at different stages of product life cycle.

Early growth: when the results of usage of product start flowing into the market and the results are
encouraging, more and more buyers come forward to try. The sales revenue remains very low till this point
of time. This is also a very critical stage, as the manufacturer cannot avail scale economies.

Rapid growth: A new product enters the stage of rapid growth when it satisfies the needs of the customers.
The sales start picking up with repeat purchases and by word of mouth publicity, coupled with continued
promotion outlay from the manufacturer’s side. As new customers get attracted to the product for the first
time, sales soar, sales revenues increase faster than costs, and profits start accruing. This trend attracts the
attention of the competitors who release a similar product copying the best features of the new product.

Maturity: when the product’s sales growth slows down, it is called maturity. Due to this slow down, the
industry as a whole suffers from overcapacity. At this stage, firms tend to attract the customers away from
their competitors through cheaper prices and larger promotional efforts and outlay. Those who cannot afford
such large promotional outlay and woo customers of the competitors.

Saturation: When the sales growth slows down to zero, such a stage is called saturation. This size of the
market does not increase beyond this stage. In other words, old customers who have stopped buying the
product replace any new customer entering the market. All sales are simply replacement sales or repeat
purchases by the same customers.

Decline: When sales of a product tend to fall, such a stage is called decline. When a product ceases to satisfy
the customer’s needs in relation to those available in the market, it is no more preferred. As a result, its
competing products offering superior benefits take over the market. This leads to weakened profitability.

CHANNELS OF DISTRIBUTION
Channels of distribution refer to the ways and means of reaching the customer through the
intermediaries such as wholesalers, retailers, and other agencies, if any.

Types of Channels of Distribution:

Manufacturer – consumer:
This is a direct marketing channel where the manufacturer contacts the customer directly without
involving middlemen or intermediaries. The manufacturers of industrial goods such as aeroplanes, turbo-
engines, ships, and other high-value capital goods mostly follow this route. However, consumer product
manufacturers also through Internet, mail order operations, and door-to-door selling are following this
method. It is common sight to find the representatives of the manufacturers going from house to house to
sell their products, which are normally used in the households.

Manufacturer – wholesaler – consumer:

This channel is primarily used in the case of industrial goods and high-value consumer durable
products. The wholesaler, who may also be called as distributor in this channel, carries out the functions of
retailing to large customers who may in themselves be the manufacturers also. The wholesalers in this
channel buy goods from many manufacturers, stock, and subsequently, sell them through internet or directly
to the customers in a wider geographical area. An example of the use of this method can be observed in the
computer hardware industry.

Manufacturer – retailer – consumer:

Here, the large retailing chains, including supermarkets, use this channel to buy products in large
quantities from manufacturers at a very competitive price and sell the same to the ultimate consumers. As
the retailers enjoy large discounts in this process, they share this benefit with their customers by keeping
their products competitively priced. The consumers patronage this channel because they can buy in small
quantities from a wide variety at lower prices.

Manufacturer – wholesaler – retailer – consumer:

This is a chain widely followed for fast moving consumer goods, which are likely to have mass
markets. When the consumers are large in number, widely dispersed geographically, and products are of low
value, this channel is favoured. Manufacturers would find it prohibitively expensive to set up their own
outlets
in such circumstances. For manufacturers of consumer goods such as hosiery, food items, confectionery,
clothes, and readymade garments, cosmetics, and so on, intermediaries are indispensable in the distribution
chain.
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right the quality problems. However, collecting data about all the variables involves a
large amount of time and resources.
The R chart is based on the range of the items in the given ample. It highlights
the changes in the process variability. It is a good measure of spread or range. It

shows better results when read along with the X chart.

For x charts: UCL = x + A2 R When x = Mean of Means

LCL = x - A2 R R = Mean of sample range

A2= Constant

For R chart: UCL = D4 R D4, D3 are constants

LCL = D3 R

R is the average of sample ranges (Ranges is the difference between the

maximum variable and minimum variable)

EX: Construct x and R charts from the following information and state whether the

process is in control for each of the following x has been computed from a sample of
5 units drawn at an interval of half an hour from an ongoing manufacturing process.
Samples 1 2 3 4 5 6 7 8 9 10

x 24 34 35 39 26 29 13 34 37 29

R 23 39 14 5 20 17 21 11 40 10

Solution: The mean of means x =

∑x =
300
= 30
n 10

R is calculated as R =
∑R = 200
= 20
n 10
x Chart: x hart
c UCL and LCL compute at sample size 5 A 2 table value is 0.58

UCL= x +A2 R = 30 + (0.58x20) =41.6

LCL = D3 R = 30 – (0.58x20) = 18.4

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60

50
UCL = 41.6
40
Measurement
30 x = 30
of variables
20
LCL = 18.4
10

0
1 2 3 4 5 6 7 8 9 10
Number of samples

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R Chart: R chart UCL and LCL compute at sample size 5, D4 table value is 2.11 and
D3 table value is 0

UCL = D4 R = 2.11 x 20 = 42.2

LCL = D3 R = 0 x 20 = 0

45
UCL = 42.6
25

20 R = 42.6
Measurement
of variables 15

10

0 LCL = 0
1 2 3 4 5 6 7 8 9 10
Number of samples

Therefore 3, 7 points the process is out of control.

Control charts for attributes: The quality of attributes can be determined on
the basis of ‘Yes’ or ‘No’, ‘Go’ or ‘No go’. In other words, in case of a mirror
glass, even if there is one scratch it is not considered to be a quality mirror, in
such a case quality is decided base on whether the mirror has any scratch or not.
The control charts for attributes are ‘C’ chart and ‘P’ charts
‘C’ Chart: ‘C’ chart is use where there a number defects per unit. This control
charts controls the number of defects per unit. Here the sample size should be
constant. This calculate as below.

UCL = c + 3 c and LCL = c - 3 c

Where the c = Total number of defects in all the samples

Total number of samples inspected

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Ex:
Sample Number No. of defects Sample Number No. of defects
1 5 11 4
2 4 12 6
3 9 13 7
4 7 14 3
5 8 15 5
6 9 16 3
7 4 17 3
8 5 18 1
9 2 19 7
10 6 20 2
Total number of defects = 100

c = 100 = 5
20

UCL = c + 3 c = 5 + 3 5 = 11.69

LCL = c -3 c = 5-3 5 = 0
LCL = 0 means, LCL got negative value, take it as equal to zero

20

15
UCL = 11.69
10
No. defects
per each 8
sampled unit
6
5 c= 5
4
2
0 LCL = 0
2 4 6 8 10 12 14 15 18 20
Number of samples

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‘P’ Chart: ‘P’ Chart is used where there is date about the number of defectives
per sample. It is also called fraction defective chart or percentage defectives
chart. Here each item is classified on ‘go or no go’ basis that is good or bad.
Hence if the sample size is larger, the results could be better.
UCL =
LCL =
Total no. of defective found
Where average defective ( p ) =
Total no. of pieces inspected
‘n’ = Number of pieces inspected per day
Ex: For each of the 14 days a number of magnets used in electric relays are
inspected and the number of defectives is recorded. The total number of
magnets tested is 14,000. The following are the particular of the number of
defectives found every day.
Number of Number of
Day number Day number
defective defective
1 100 8 120
2 50 9 60
3 150 10 140
4 200 11 50
5 150 12 70
6 50 13 40
7 80 14 40

Solution:
Total number of defectives = 14000
The average sample size(n) per day= 14000/14 days = 1000
Total no. of defective found per day
Percentage of defective per day =
Total no. of pieces inspected per day

Day Percentage of Number of Percentage of Day Number of

number defectives defective defectives number defective
1 100/1000=0.10 100 120/1000=0.12 8 120
2 50/1000 =0.05 50 60/1000 =0.06 9 60
3 150/1000=0.15 150 140/1000=0.14 10 140
4 200/1000=0.20 200 50/1000 =0.05 11 50
5 150/1000=0.15 150 70/1000 =0.07 12 70
6 50/1000 =0.05 50 40/1000 =0.04 13 40
7 80/1000 =0.08 80 140/1000=0.14 14 40

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Total no. of defective found

(p)=
Total no. of pieces inspected
1400/14000 = 0.1
0.1(1 − 0.1)
UCL = 0.1 + 3 = 0.4
1000

0.1(1 − 0.1)
LCL = 0.1 - 3 =0
1000

0.45
0.40 UCL = 0.4

0.30
Percentage
of defective 0.20
0.15
0.10 p = 0.1
0.05
LCL = 0

1 5 10 15

Day Number

Acceptance Sampling: Acceptance sampling is a technique of deciding

whether to accept the whole lot or not based on the number of defectives from a
random drawn sample.
It is widely use in buying food products, such as rice, wheat etc. Before
buying the random samples drawn from the bags of say rice are tested. If the
quality of sample drawn looks good or free from defects then according to the
requirement the entire bag or part of it can be brought
The process of acceptance sampling through operating characteristic
curve (OCC)

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UNIT – 4
MATERIALS MANAGEMENT
Definition of Materials: Materials refer to inputs into the production process,
most of which are embodied in the finished goods being manufactured. It
may be raw materials, work-in-progress, finished goods, spare parts and
components, operating supplies such as lubricating oil, cleaning materials,
and others, required for maintenance and repairs.
Definition on Material Management: Material management deals with
controlling and regulating the flow of materials in relation to changes in
variables like demand, prices, availability, quality, delivery schedules etc.
Objects of materials management:
1. Minimization of materials cost s
2. To reduce inventory for use in production process and to develop high
inventory turnover ratios.
3. To procure materials of desired quality when required, at lowest
possible overall cost of the country.
4. To reduce paper work procedure in order to minimize delays in
procuring materials.
5. To note changes in market conditions and other factors affecting the
concern.
Production
Inventory Material
Purchasing control handing

6. The purchase, receive, transport, store materials efficiently

7. To reduce cost, through simplification, standardization, value analysis
etc.
8. To conduct studies in new areas e.g., equality consumption and cost of
materials so as to minimize cost of production.

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Function of Materials Management:

1. Materials planning and programming
2. Purchasing materials inspection of materials
3. Inspection of Materials
4. Classification, codification and standardization in stores
5. Storage of materials
6. Issuing of materials
7. Maintence of proper inventory records
8. Materials receiving
Inventory: It defined as a comprehensive list of movable items which are
required for manufacturing the products and to maintain the plant facilities in
working conditions.
Inventory Control: The systematic location, storage and recording of goods
in such a way the desired degree of service can be made to the operating
shops at minimum ultimate cost.
Objectives of Inventory Control:
1. To support the production departments with materials of the right
quality in the right quantity, at the right time and the right price, and
from the right supplier
2. To minimize investments in the materials by ensuring economies of
storage and ordering costs
3. To avoid accumulation of work in process
4. To ensure economy of costs by processing economic order quantities
5. To maintain adequate inventories at the required sales outlets to meet
the market needs promptly, thus avoiding both excessive stocks or
shortages at any given time
6. To contribute directly to the overall profitability of the enterprise
Functions of inventory control:

To develop policies, plans and standards essential to achieve the
objectives

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To build up a logical and workable plan of organization for doing the

job satisfactory

To develop procedure and methods that will produce the desired
results economically

To provide the necessary physical facilities

To maintain overall control by checking results and taking corrective
actions.

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Inventory Management System or Level:

The objects of inventory control is to establish level of inventory which
will serve to minimize the company’s costs and maximize its revenue.
It is determined by five basic variables
a) Minimum inventory b) Reorder point c) Recorder quantity d) Procurement
lead time e) Maximum inventory.

Reorder Point Maximum Stock

Quantity

Time
Procurement
Time

a) Minimum inventory: Minimum inventory or buffer stock is needed to take

care of any temporary unpredictable increase in the part usage or in the
procurement lead time.
b) Reorder point: It is sufficiently above the minimum inventory to allow for
issuing the purchase order and for delivery by a vendor. Reorder point stock
level is equal to the minimum stock plus the expected consumption during the
procurement lead time.
c) Reorder Quantity: This is the fixed quantity of item for which order is
placed every time the stock drops to the reorder point. This quantity is fixed
either on the basis of experience or calculated.
d) Procurement lead time: This comprises the time required for preparing the
purchase order, the time gap between placing an order and receiving supplies
and time required for inspection etc.

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e) Maximum inventory: It is approximately the sum of the order quantity and

minimum inventory. It will exactly equal the sum of these two quantities if the
ordered material is received just when the minimum stock is reached.
ABC Analysis: ABC analysis is a technique of controlling inventories based
on their value and quantities. It is more remembered as an analysis for
‘Always Better Control’ of inventory. Here all items of the inventory are listed
in the order of descending values, showing quantity held and their
corresponding value. Then, the inventory is divided into three categories A, B
and C based on their respective values.

100
90

Volume of 70
inventory
(Rs.)

A B C

0 10 30 100

Volume of inventory (Units)

A – Refers to high value item

B – Refers to medium value item
C – Refers to low value item
A category comprises of inventory, which is very costly and valuable.
Normally 70% of the funds are tied up in such costly stocks, which would be
around 10% of the total volume of stocks. Because the stocks in this
category are very costly, these require strict monitoring on a day-to-day basis.
B category comprises of inventory, which is less costly. Twenty
percent of the funds are tied up in such stocks and these accounts for over
20% of the volume of stocks. These items require monitoring on a weekly or
fortnightly basis.

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C category consists of such stocks, which are of least cost. Volume-

wise, they form 70% of the total stocks but value-wise, they do not cost more
than 10% of the investment in the stocks. This category of stocks can be
monitored on a monthly or bi-monthly basis.
The following table summarizes the concept of ABC analysis;
Desired Degree
Category Value (%) Volume (%)
of Control
A 70 10 STRICT
B 20 20 MODERATE
C 10 70 LOW

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Economic Order Quantity (EOQ): Economic order quantity is defined that

quantity of materials, which can be ordered at one time to minimize the cost
of ordering and carrying the stocks. In other words, it refers to size of each
order that keeps the total cost low.
Inventory costs: The inventory costs can be classified into two categories,
1) Inventory ordering cost 2) Inventory carrying cost.

Carrying Cost
Annual Cost

Ordering Cost

Ordering Quantity

Inventory Ordering Costs (Co): The cost refer to the cost incurred to
procure the materials particularly in large organizations, these cost are
significant. This is also called as procurement cost.
Definition: It is the cost of placing an order from a vendor. This includes all
costs incurred from calling for quotation to the point at which the item is taken
into stock.
Ex: Receiving quotations, Processing purchase requisition, Receiving
materials and then inspecting it , Follow up and expediting purchase order,
Processing sellers invoice.

Ordering Cost

Ordering Cost

Ordering Quantity

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Inventory Carrying cost: Carrying cost which are also known as holding
costs are the costs incurred in maintaining the stores in the firm. They are
based on average inventory and consist of:
Ex: Storage cost includes: Rent for storage facilities, Salary of person and
related storage expenses, Cost of insurance, Cost of capital.

Annual Cost
Carrying Cost

Ordering Quantity
Determine EOQ:
Step1:
Total Ordering cost per year = No. of orders placed per year x ordering cost
per
Order
= (A/S) x O
A = Annual demand
S = Size of each order (units per order)
O = Ordering cost per order
Step2:
Total Carrying cost per year = Average inventory level x Carrying cost per
year
= (S/2) x C
A = Annual demand
S = Size of each order (units per order)
C = Carrying cost per unit

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Step3:
EOQ is one where the total ordering is equal to total carrying cost
A S
×O= ×C
S 2
2AO = S2 × C
2AO
S2 =
C
2AO
S=
C
Total Cost

Carrying Cost
Annual Cost

Ordering Cost
EOQ

Ordering Quantity

Where S is the Economic order quantity, A is the annual demand in units, O is

the ordering cost per order and C is the carrying cost per unit

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Ex: A biscuit manufacturing company buys a lot bags of 10,000 bags wheat
per annum. The cost per bag is Rs.500 and ordering cost is Rs.400. The
inventory carrying cost is estimated at 10% of the price of the wheat
determine EOQ and number of orders required per year.
Solution:
Annual demand (A) = 10,000 bags
Ordering cost per order (O) = Rs.400
Carrying cost per unit (C) = 10% of Cost price
= 0.10 x 500 = Rs.50/-

2AO
EOQ =
C
2 × 10,000 × 400
=
50
= 1,60,000
EOQ = 400 bags
Annual demand (units)
The number of orders to be placed during the year =
EOQ
10,000
= 25 orders
400
In the above case, the company has to place 25 orders to optimize its
ordering and carrying costs.
Method of pricing the materials issued:
It is necessary to value the stocks at the end of the accounting period.
These are different methods followed in different industries at different points
of time for this purpose. .
The Methods are:
1. First in First out (FIFO)
2. Last in First out (LIFO)
3. Simple average price method
4. Weighted average price method

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 UNIT 3

HUMAN RESOURCE MANAGEMENT

 UNIT 4

STRATEGIC MANAGEMENT AND PROJECT MANAGEMENT

Identifying Corporate Mission:
Identify what the organization wants to achieve to start with for the purpose of it is necessary that all
concerned parties understand the overall purpose of the organization and the methods of attaining them. It is
also desirable that they agree on the corporate policies of the organization.
Formulate strategic objectives:
By preparing statements of mission, policy, strategy, and goals, the top management established the
frame work within which its divisions or departments prepare their plans. It is essential that the members of
the organization agree on these given strategic objectives. The strategic objectives thus formulated reinforce
the commitment of the members of the organization to achieve the corporate goals.
Appraise internal and external environment:
To evolve alternative strategies to achieve these evolve alternative strategies to achieve these goals,
a detailed appraisal of both the internal and external environment is carried out. The appraisal of internal
environment reveals the strengths and weakness of the firm. The appraisal of external environment reveals
the opportunities and threats for the firm. It is popularly called as SWOT analysis capitalizes on internal
strengths, make use of best opportunities and beware of the threats in the external environment.
Develop and evaluate alternative strategies:
There could be some alternative strategies to pursue a given goals. If the goal is to expand the business,
the following could be the three alternatives.
• Sold new products to the existing product line
• Finding new markets, a part from the present market territories.
• Manufacturing within the organization, the components, which were earlier procured from outside.
Similarly, if the goal is to attain stability, the alternative strategies could be to maintain the following.
• The existing range of products
• The existing markets
• The functions presently being carried out.
Select the best strategy:

For the firm to be more successful, it is necessary to focus its strategies around its strengths and
opportunities. It is a prerequisite that the numbers of the organization agree on the strategic plan. Such a
plan, which has been generally agreed upon, is normally considered as the best strategy.

Establish strategic business units (SBUs):

It is more strategic to define a business unit in terms of customer groups, needs and/or technology
and set up the business unit accordingly. Most of companies define their businesses in term of products.

Fix target allot resources to each SBU:

The development of SBUs based on appropriate finding the top level management knows that its
portfolio has certain old, established relatively new, and brand new products.
Resources should be allocated based on market growth rate and relative market share of SBUs. Here
resources mean executive talent money and time. Developing operating plans: The operating plan explain
how the long-term goals of the organization can be met, the corporate plans reveal how much the projected
sales and revenue are where the top management finds a significance gap between the targeted sales and
actual sales, it can either develop the existing business or acquire a new one to fill the gap.
Monitor performance:

The results of the operating plans should be will monitored from time to time. In the case of poor
performance, check up with the members of the team to find out their practical problems and sort these out.
Also, it is essential to verify whether there are any gaps in formulating the operating/tactical plans.

Revise the operating plans, where necessary:

It is necessary to rise the operational plans particularly when the firm does not perform as well as
expected. The planes can be revised in terms of focus, resource or time frame.
Environmental Scanning:
Environmental scanning is a vital part of the corporate planning process. Effective planners try to
anticipate what is likely to happen or attempt to influence the environment in favourable directions. This
requires long-term strategic vision and commitments to corporate planning.
Why environmental scanning:
• The banks and business enterprises in the public sector are being disinvested by the government.
• The government policies keeping changing the current focus of the government of India has been an
globalization, privatization, deregulation.
• As a results foreign goods are being dumped into the markets.
• Computers have wiped out the market for typewriters and electronic type writers.
• Info-tech industry, which was very strong for over decades, suddenly revealed downtrend.
• The advent of television channels has almost zeroed down the market for VCR and significantly
affected the flow of film viewer traffic.
Environmental analysis:
Refers to the process of analyzing the environment, component-wise or sector-wise to provide a
basis for further diagnosis. It interrelates the formation of objectives, generation of alternative strategies, and
other related issues.
Environmental diagnosis:
Comprises the managerial decisions based on the perceived opportunities and threats of the firm. In
effect, it helps to determine the nature of the impending tasks to take advantage of opportunity or to
effectively manage threat.

External Environment Analysis (Opportunity and Threat):

The external environment has a profound impact on the business operations irrespective of the nature
of the business. The business has to monitor the key forces both in to micro and macro environment. The
forces in the micro-environment may be customer competitors, and other
The forces in the macro environment may be demographic, economic, technological socio-cultural,
political or legal. All these factors and parties affect the business operations both in the short and long run.
These factors can be grouped under three parts of the environment.
• General environment

• Industry environment

• International environment

General environment:
A firm is said to be more effective when its strategy caters to the needs effective when its strategy
caters to the needs of the environment. The additional features added to the main product at times could
provide a new life to the main product. The corporate units, which realize this, will survive in the long-run.
Thus, the major causes of growth, decline, and other large scale changes in firms are the factor in the
external environment, not internal development. Socio-economic sector The technological sector The
government sector
Industry environment:
It is an important component of the overall environmental analysis as input for corporate planning.
Industry refers to the group of firms carrying on similar activity. It has three sectors, customers, suppliers
and competitors.

• Customers: The strategist must identify and analyze the customers for the organization locates the
potential customers and the emerging changes in their buying pattern. It is necessary to identify the
profile of buyers in terms of their needs and preferences based on the basic demographic factors such
as age, income size of household and consumption pattern. These factors create the primary demand
 for products or service and help to scan the geographical environment for potential market and
customers.
• Suppliers: Strategist also must determine the availability and costs of supply condition including
raw materials, energy, prevailing technology, money and labour. The supplier can influence a firm
and its strategy, particularly when the firm is outsourcing its logistic requirements.
• Competition: The strategist moulds his strategy in the light of the competitor’s strategy, the exit or
entry of competitors to be analyzed and diagnosed.
International Environment:
The strategy of globalization implies a great source of opportunities and also threats to business
firms. Such firms, which an make use of the opportunities, would flourish and those, which cannot gear up,
would demise.

Internal Environment analysis and diagnosis:

Internal environmental analysis and diagnosis is a process of analyzing and diagnosing the firm’s
internal strengths and weaknesses. By identifying its strength and weaknesses, the firm can strategically
exploit the available opportunities, overcome threats, and correct weaknesses placing itself at a competitive
advantage.
Conducting internal analysis and diagnosis:
Identify first the internal strength and weaknesses. The strength and weaknesses may include the
following.
• Marketing factors
• Research and development
• Engineering design and management Production management
• Managerial personnel
• Accounting and financial policies and procedures.
Profile of research and development:
• Financial resources (budget to conduct research, to develop new products and processes, improve
existing processes and so on)
• Infrastructure (in terms of state-of-the-art technologies)
• Human resources (how many scientist and engineers are required, presently available, turnover of
key personnel)
• Organizational system (system to monitor technological developments from time to time)
Strategy advantage profile:
The ultimate result of such a detailed internal analysis to build a strategic advantage profile strategic
advantage profile is a tool used to evaluate systematically the enterprises internal factors the competitive
strengths or weaknesses for each internal area such as marketing, R &D and others

SWOT ANALYSIS :
SWOT analysis is defined as the rational and overall evaluation of a company’s strength, weakness,
opportunities, and threats which are likely to affect the strategic choice significantly.

External environment analysis (Opportunities and Threats):

The external environment has a profound impact on the business operations irrespective of the
nature and size of the business. The business has to monitor its key macro-environment forces and micro
economic parties.
Opportunities:
It necessary should identify what opportunities are available to it to focus upon. The latest
technology, deregulated or free markets, liberalized rules and regulations and other may make a lot of
difference for a business organization provided it can envision how to avail these visionary identify
opportunities from treats.
Threats:
Some development in the external environment represents threats. A threat is a challenge posed by
an unfavorable trend or a development that results in the loss of sales or profit till a defensive marketing
action is initiated. A few example of threat could be outlined as change in government policy such as
liberalization privatization and globalization, changing technology changing value systems environmental
constraints law and order.
Internal environment analysis (Strength and Weakness):
It is necessary to analyze one’s own strength and weakness periodically to sustain the degree of its
competitive strength. Generally top management or an outside consultant reviews competencies pertaining
to marketing, financial, manufacturing and organizational system and rates each factor as a major strength,
minor strength, mental, factor, minor weakness, or major weakness.

Strength:
It is not necessary that a business organization has to correct all its weakness nor that its propagate its
strength. The big question is whether the business should limit itself to those opportunities, where its
possesses the required strength or should it consider better opportunities where it might have to develop
certain strength.
Weakness:
Some times the company may not do well not because its departments lack the required motivation
but because they do not work together as a team for example consider the case of an electronics company
which employs engineers, sales and service staff for its operations. It is not adequate if they keep on doing
their work. The organization becomes more effective only when they work as a team. It is therefore,
critically important to build effective teams and assess the effectiveness of these teams. This is a part of the
internal environmental audit. Progressive companies adopt this strategy.
STRATEGY FORMULATION , IMPLEMENTATION AND EVALUATION
PROJECT MANAGEMENT ( PERT AND CPM)
PROJECT MANAGEMENT ( PROJECT CRASHING)
 UNIT 5

CONTEMPORARY MANAGEMENT PRACTICES

Business process management
Business Process Management (BPM) is a management approach used for describing, controlling,
modeling, and optimizing business processes. Business Process Management builds a bridge between
various business processes and forms the basis for organizational and information-technological initiatives
aiming at improving the value-added chain within companies and between companies and their suppliers.
BPM subsumes Supply Chain Management (SCM), Customer Relationship Management (SRM), Enterprise
Resource Planning (ERP), and Business Intelligence (BI).

The purpose of BPM is to continuously improve processes and from this perspective BPM can be
considered as the "process optimization process".

Business processes are dynamic and complex and have to take into account a network of internal and
external relationships. By means of Business Process Management such challenging cross-functional
processes can be coordinated and automated. Within the scope of BPM, processes can be modeled and then
aligned with the requirements of a company or business associate. In this respect, the ability to constantly
adapt to frequently changing conditions plays a key role as immediate reaction to new business situations
leads to a high degree of flexibility.

How does BPM work?

Business Process Management (BPM) consists of different steps:

• Design – Preparation of an appropriate and efficient theoretical design; identification of existing

processes; design of to-be processes.
• Modeling – Introduction of variants to the theoretical process design to determine how different
circumstances may affect the process
• Execution – Actual execution of a process with a combination of automated activities and human
intervention
• Monitoring – Definition and monitoring of control parameters; tracking of processes; identification
and verification of improvements
• Optimization – Optimization of processes based on process performance information that was
retrieved from prior BPM phases

BPM integrates analysis and modeling of processes as well as their implementation and the monitoring
of the results.

Goals of BPM
Business Process Management attempts to:

• improve the alignment of all aspects of an organization with customer requirements

• increase process transparency
• promote business efficiency
• maximally exploit employee potential
• improve product quality
• reduce costs
1. Explain in detail the internal and external sources of recruitment of employees in an organization?

2. What do you understand about performance appraisal ? Discuss the various tools and techniques of
performance appraisal?
3 .Discuss the elements of corporate planning process and brief on the SWOT Analysis ?
4. Compare and contrast the PERT and CPM?

5. Write a short notes on Six Sigma and Just in Time?

6. a)Define Performance Appraisal?
b) Explain techniques of Performance appraisal ?

7. Discuss in detail different training methods?

8 .Distinguish between project evaluation and review technique ( PERT ) and critical path method ( CPM)?
9. a) Explain the concept of corporate planning ?
b) Discuss the essential steps in corporate planning through a flow chart?
10. Provide a short notes on the following
a) Six sigma
b) Just in Time ( JIT)
11. Discuss various methods of recruitment and factors affecting recruitment?

12. What do you understand about performance appraisal ? Discuss the various tools and techniques of
performance appraisal?
13 .What is network analysis? Explain the rules for drawing networks?
14. Identify and discuss the stages in the process of strategy formulation and implementation ?

15. Business process reengineering and business process management are two different approaches to business
improvement . explain in detail
16. Explain different training methods in detail?

17. . a)Define Performance Appraisal?

b) Explain techniques of Performance appraisal ??
18 . a) Explain the concept of corporate planning ?
b) Discuss the essential steps in corporate planning through a flow chart?
19. Compare and contrast the PERT and CPM?

20. Write a short notes on the following

a) Six sigma
b) Just in Time ( JIT)
1. What refers to the relationship between the employees and the management ?
(a) HRD (b) Personnel Management (c) Industrial Relations (d) HRM

2. Who focused on Compensation, Integration and maintenance of people in the organisation

(a) Peter F Drucker (b) Flippo (c) Pigours & Myres (d) Pyle

3. Which of the following is not a feature of personnel management?

(a) Aims to achieve efficiency (b)Aims to achieve proficiency
(c)Aims to achieve justice (d)Concerned with people at work

4. The process of formulating a personnel program, which is determined in advance is called

(a) Planning (b) Organisation (c) Directing (d) Controlling

5. What refers to a collection of tasks assigned to a position in an organisation structure?

(a) Job (b) Job analysis (c) Job description (d) Job specification

6. The function of introducing the company to the employee before he reports for the duty is called
(a) Training (b) Induction (c) Recruitment (d) MBO

7. Which of the following is a financial incentive?

(a) Stock Options (b) Job Security (c) Flexi-time (d) Job Rotation

8. Which of the following denotes a number of techniques for planning and control of complex projects' ,
(a) Network analysis (b) Planning analysis (c) Activity analysis (d) Project analysis

9. PERT refers to
a) Programme Escalation Review Tool (b) Programme Evaluation Review Technique
(c) Project Evaluation Revised Testing (d) Project Evaluation Reasoning Tool

10 What are the costs that are determined per day ?

(a) Direct costs (b) Differential costs (c) Direct Costs (d) Indirect Costs

11. What refers to the process of planning undertaken by the top management to achieve their organizational
goals?
(a) Strategy formulation (b) Corporate planning (c) Environmental scanning (d) Corporate planning

12. Which of the following is not a characteristic of a mission statement?

(a) Flexible (b) Provides shared visions (c) Focuses on products (d) Focus on limited

13. What refers to the general of specific programme of action and deployment of resources to all on goals in a set
of given conditions? .
(a) Strategy (b) Goal (c) Programme (d) Objectives

14. What refers to the logical sequence of operations to be performed in a given project or job?
(a) Strategy (b) Programmes (C) Purpose (d) Policy

15 . What involves an analysis and diagnosis of the external and internal environments of a business firm?
(a) Environmental analysis (b) SWOT analysis (c) Environmental scanning (d) Strategic Analysis

16. A good strategy with effective implementation has ________ probability of success.
(a) lower (b) higher (c) moderate (d) least

17. Just in time concept eliminates

(a) Operations (b) Inventory (c) Man power (d) WIP

18. EOQis
(a) Equal order quantity (b) Estimated overall quantity (c) Economic order quantity (d) Equilibrium open quantity
19. Six sigma is registered trademark of
(a) GE (b) United Bank of Switzerland (c) Honeywell International (d) Yes Bank

20. In physical distribution, the final destination of marketing channel is

(a) Service Provider (b) Manufacturer (c) Customer (d) retailer

1. What is an expression of the values and beliefs of the organisation?

(a) Induction (b) Personnel Policy (c) Recruitment (d) Service

2. Which of the following is a benefit of HRM?'

(a) Decreases the employee productivity (b) Decreases the employee commitment to the organisation
(c) Pre requisite for lower productivity (d) Ensures that the right person is selected for the right job

3.Which of the following is not a stage in the recruitment strategy?

(a) Advertising the-vacancy position (b) Screening the applications
(c) Conducting the interview (d) Dismissing the employee

4. Which of the following IS an example f or the analytical methods of job evaluation?

(a) Ranking Method (b) MBO (c) Factor Comparison Method (d) Point Rating Method

5. In which of the following methods is the employee asked to choose an alternative?

(a) ranking method (b) forced distribution method (c) narrative essay method d) MBO

6.Which of the following is an example for off-the-job training?

(a) Lecture Method (b) Experiential Learning (c) Demonstration (d) Apprentice Training

7. In network analysis the overall objective is

(a) To minimize overall time spent (b) To maximise overall return on capital
(c) To neutralize overall time spent (d) To cover all activities at any cost

8.CPM stands for

a) Critical Path Method b) Critical Progress Method c)Critical Programme Method d)Critical Process Method

9. What is the cost incurred if project is allowed to take normal distribution of time?
(a) Optimum cost (b) Excessive cost (c) Normal cost (d) Deterministic cost

10.What reflects the vision of the top management?

(a) Goal (b) Policy (c) Mission (d) Strategy

11. What refers to the general of specific programme of action and deployment of resources to all on goals in a set
of given conditions? .
(a) Strategy (b) Goal (c) Programme (d) Objectives

12. What refers to the group of firms carrying on similar activity?

(a) Suppliers (b) Competitors (c) Industry (d) Strategy

13. Which of the following is not a part of the environment?

(a) General (b) Economy (c) Industry (d) International.

14. Which of the following is not a stage in the process of strategy formulation and implementation?'
(a) Corporate planning (b) Formulating policies (c) Generic alternatives (d) Plans and administration

15. One of the following strategies implies that unviable products and services can be dropped. Name it.
(a) Expansion strategy (b) Retrenchment strategy (c) Stability strategy (d) Combination strategy

16. Which of the following involves decision to sub contract some or all non core processes?
(a) BPR (b) BPO (c) APM (d) MIS
17. Balanced scorecard was developed by
(a) Robert Kaplan (b) David Norton (c) Robert Kaplan & David Norton (d) Herald Koontz &Weihrich

18. ERP is
(a) Economic resource planning (b) Enterprise resource planning
(c) Emerging resource planning (d) Economic review periodical

19. Production decisions and scheduling activities of Supply chain management are grouped under
(a) Operational activity (b) Tactical Activity (c) Strategic Activity (d) Operational and tactical activities

20. In the context of JIT Muda means

(a) unevenness (b) waste (c) excess (d) creativity