Unit 1

INDUSTRIAL ENGINEERING & MANAGEMENT1

Unit 1: INTRODUCTION: Definition of Industrial Engineering (IE) - Development, Applications, Role of an
industrial engineer, Differences between production management and industrial engineering, Quantitative tools of IE
and productivity measurement. Concepts of management, importance, functions of management. Scientific
Management Taylors principles. Theory X and Theory Y. Fayols principles of management.

Definition:
Industrial Engineering is defined as: The special field of engineering concerned with the design,
improvement and installation of integrated systems of people, materials, equipment and energy.It
draws upon specialized knowledge and skill in the mathematical, physical and social sciences
together with the principles and methods of engineering analysis and design to specify, predict
and evaluate the results to be obtained from such systems.

Thus, industrial engineering is an engineering approach to the detailed analysis of the use
and cost of the resources of an organization. The main resources are men, money,
materials, equipment and machinery. The industrial Engineer carries out such analysis in
order to achieve the objectives (to increase productivity, profits etc) and follow the
policies of the organization.
Essentially, the industrial engineer is engaged in the design of a system and his function
is primarily that of management.
If an industrial engineer had to focus on only one concept to describe his field of interest
and objective, it would have to be productivity improvement.
Productivity improvement implies:
(i) a more efficient use of resources;
(ii) less waste per unit of input supplied;
(iii) higher levels of output for fixed level of input supplied etc.
The inputs may be:
(i)
Human efforts;
(ii)
Energy in any of its numerous forms;
(iii)
Materials;
(iv)
Invested capital etc.

1 Prepared by Prof. T.S.Nageswara Rao, Department of Management Studies, DVR &

Dr. HS MIC College of Technology, Kanchikacherla as a class notes. Adapted from
various sources.
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HISTORY & DEVELOPMENT OF INDUSTRIAL ENGINEERING

Industrial engineering had its roots in Industrial Revolution (around 1750). It was
nourished by individuals who sought to advance organization and management principles
at an early date. It emerged as a separate discipline and was formalized in the late 19 th
and early 20 th centuries. It achieved maturity after World War II.
The Industrial Revolution resulted from the advent of new inventions, especially in the
textile industry, then steam engine, advances in metal cutting and the production of
machine tools. These led to factories with large number of workers. With the growth in
the size of industries, came the beginning of management and management thinking.
The important steps and mile stones in the development of Industrial Engineering are :
(a) Division of Labour (Adam Smith)
(b) Scientific Management (Frederick Taylor)
(c) Analytical Calculating Machine (Charles Babbage)
(d) Method Study (Frank and Lillian Gilbreth)
(e) Operations Research
(f) Value Engineering & Systems Analysis
(g) Human Engineering (or) Ergonomics.
Before 1940, industrial engineering was applied mainly to manufacturing industries for
improving methods of production, to develop work standards or to formulate production
control and wage policies. Later on, the use of industrial engineering spread to nonmanufacturing activities such as construction, transportation, air-line operations and
maintenance, public utilities, government and military operations.
Even today, industrial engineering finds major applications in manufacturing plants and
industries. In an industry, besides production, the departments utilizing industrial
engineering concept are marketing, finance, purchasing, industrial relations etc.

ROLES OF AN INDUSTRIAL ENGINEER

The following are the different types of roles and functions an industrial engineer may need to
take on.
(1) Advisor/Consultant
The Industrial Engineer is available to others for interpretation of data, and to review it.
(2) Advocate/Activist
The Industrial Engineer promotes a process or approach actively..
(3) Analyst
The Industrial Engineer separates a whole into parts and examines them to explore for
insights and characteristics.
(4) Boundary Spanner
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The Industrial Engineer bridges the information gap between industrial engineering and
user.
(5) Motivator
The Industrial Engineer provides stimulus and skill availability to a group or an
individual.
(6) Decision-maker
The Industrial Engineer selects a preference from among many alternatives for the topic
of concern.
(7) Designer/Planner
The Industrial Engineer produces the solution specifications.
(8) Expert
The Industrial Engineer provides a high level of knowledge, skill and experience on a
specific topic.
(9) Coordinator and Integrator
The Industrial Engineer coordinates the activities of various personnel.
(10) Innovator/Inventor
The Industrial Engineer seeks to produce a creative or advanced technology solution.
(11) Measurer
The Industrial Engineer obtains data and facts about the existing conditions.
(12) Project Manager
The Industrial Engineer operates, supervises and evaluates projects.
(13) Trainer/Educator
The Industrial Engineer trains employees with the skills and knowledge of industrial
engineering.
(14) Negotiator
The Industrial Engineer helps the management in the negotiations with workers.

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QUANTITATIVE TOOLS USED IN INDUSTRIAL ENGINEERING

(1) Decision Matrices

Allocation and investment problems involving a relatively small number of possible

solutions

(2) Decision Trees

Allocation and investment problems involving several decision periods

(3) Mathematical Programming

Attempts to maximize the attainment level of one goal subject to a set of requirements
and limitations.

Linear Programming, Transportation Problem, Assignment model, and Integer

Programming are examples.

(4) Network Models

Family of tools designed for the purpose of planning and controlling complex projects.

The best known models are PERT and CPM.

(5) Dynamic Programming

An approach to decisions that are sequential in nature or can be reformulated so as to be

considered sequential.

(6) Markov Chains

Used for predicting the outcome of processes where systems or units change their
condition over time (e.g., consumers change their preference for certain brands of
products).

(7) Game Theory

Provides a systematic approach to decision-making in competitive environments and a

frame work for the study of conflict.

(8) Inventory Models

Used for inventory control problems to decide the optimal order quantity that will
minimize the annual inventory cost.

(9) Queuing Models

Used to predict the performance of service systems involving queues.

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(10) Simulation Models

Used for the analysis of complex systems when all other models fail.

PRODUCTIVITY

Productivity is defined as the ratio between output and input.

Output means the amount produced or the number of items produced.
Inputs are the various resources employed, e.g., land and building, equipment and
machinery, materials, labour etc.
Every organization (whether manufacturing or service) is interested in determining and
increasing its labour productivity and productivity of machinery.
If by using 200 workers, the company is able to produce goods worth Rs 20 lakhs daily,
the daily labour productivity is Rs 10,000.
Similarly, in APSRTC, if there are 10,000 buses and the daily revenue is Rs 2 crores, the
daily productivity of a bus is Rs 2,000.

The Motivation to Increase Productivity

(A) For Management
(i) To earn good profits
(ii) To repay the debts acquired from different sources
(iii)

To sell more and

(iv)To stand better in the market.

(B) For Workers
(i) Higher wages
(ii) Better working conditions
(iii)
Higher standard of living and
(iv)Job security and satisfaction
(C) For Customers
Reduced prices of articles.
Productivity Measures
(a) Labour Productivity
The inputs are aggregated in terms of labour hours.
(b) Direct Labour Cost Productivity
The inputs are aggregated in terms of direct labour costs.
(c) Capital Productivity
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The inputs may be the charges during the period to depreciation or the book value of
capital investment.
(d) Direct Cost Productivity
The inputs are all items of direct cost associated with resources aggregated on a monetary
value basis.
(e) Energy Productivity
The input is the amount of energy consumed.
(f) Raw Material Productivity
In this formulation, the numerators are usually weights of product; the denominator is the
weight of raw material consumed.
Increasing Productivity of Resources

Increasing productivity implies getting more output from the same amount of input.

(1) Material

Industries in which the cost of raw material is a big percentage of the cost of finished
goods, higher productivity can be achieved through proper use of materials i.e., by
reducing scrap.

Sometimes, a little change in the design of the component or component layout may save
a lot of material.

Productivity of materials can also be increased by using correct process, properly trained
workers, suitable material handling and storage facilities and proper packaging.

(2) Labour

A little change in the design of component parts so as to facilitate final assembly can
increase the number of products assembled per day with the same amount of labour.

(3) Plant, Equipment and Machinery

Productivity can be increased through the use of improved tools, simple attachments and
other devices, and by proper maintenance of the machinery.

Total production times can be reduced considerably by improving machine setting up

methods.

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(4) Land and Buildings

A suitable plant layout can accommodate more machinery in the same space and thus
raise productivity.

Proper orientation, construction and inside conditions of a building definitely increase

productivity.

PRODUCTION MANAGEMENT
Production management centers on two major areas:
(1) Design of the production system (which includes product, process, plant, equipment etc.,)
and
(2) Development of the control systems to manage inventories, product quality, production
schedules and productivity.
The functions of production management also include consideration of control system such
as:
(1)
(2)
(3)
(4)
(5)
(6)
(7)

Inventory control policies

Quality control policies
Production-schedule control policies
Productivity and cost control policies
Constructing control systems
Implementing and operating control systems
Modifying policies and designs.
Differences between Production Management and Industrial Engineering
Production Management

Industrial Engineering

Production management attempts to familiarize

a person with concepts and techniques specific
to the analysis and management of a
production activity.

Industrial engineering deals with the analysis,

design and control of productive systems. (A
productive system is any system that produces
either a good or service).

It tells how to manage, i.e., how to direct It does not focus on how to manage but
human efforts in a production environment focuses only on designing the system.
with less attention paid to the analysis and
design of productive systems.
Example: Training of a pilot
Example: Designing an aircraft

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CONCEPT OF MANAGEMENT

Management may be labelled as the art of getting work done through people, with
satisfaction for employer, employees and the public.

For getting the work done (of an enterprise) through efforts of other people, it is
necessary to guide, direct, coordinate and control human efforts towards fulfillment of the
goals of the enterprise.

The goals of the enterprise are fulfilled through the use of resources like men, money,
materials and machinery.

Importance of Management
(1) No enterprise can survive without management, even if it possesses large amount of
money, excellent machinery and expert man-power, because without management, it will
be all confusion and nobody will know what to do and when to do it.
(2) Management creates a vital, dynamic and life-giving force to the enterprise.
(3) Management coordinates activities of different departments in an enterprise and
establishes team spirit among the employees.
(4) Management provides new ideas and vision to the organisation to do better.
(5) Management tackles business problems and provides a tool for the best way of doing
things.
(6) Only management can meet the challenge of change.
(7) Management provides stability to the enterprise by changing and modifying the resources
in accordance with the changing environment of the society.
(8) Management helps in personality development thereby raising efficiency and
productivity.
Characteristics of Management
(1) Management is goal-oriented.
(2) Management works as a catalyst to produce goods using labour, materials and capital.
(3) Management is a process comprising of functions such as planning, organising, staffing,
directing and controlling.
(4) Management represents a system of authority a hierarchy of command and control.
Managers at various levels possess varying degrees of authority.
(5) Management is a unifying force. It integrates human and other resources to achieve the
desired objectives.
(6) Management harmonises the individuals goals with the organizational goals to minimize
the conflicts in the organization.

FUNCTIONS OF MANAGEMENT
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(1)

(2)

(3)

(4)

(5)

One way to look at the process of management is to identify the basic functions which
make up the process.
Some functions are basic to managerial activities and are applicable to all business
enterprises.
The functions used to describe the process of management are: (i) Forecasting; (ii)
Planning; (iii) Organising: (iv) Staffing; (v) Directing; (vi) Coordinating; (vii)
Controlling and (viii) Decision-making.
Forecasting
Forecasting estimates the future work or what should be done in future.
Forecasting is a necessary preliminary to planning.
Forecasting begins with the sales forecast and is followed by production forecast and
forecasts for costs, finance, purchase, profit etc.
Planning
Planning is a rational, economic and systematic way of making decisions today which
will affect the future e.g., what is to be done in the future, who will do it, and where it
will be done.
Without planning, the activities of an organisation will lead to confusion.
Prior planning is very essential for utilizing the available facilities (men, materials,
machines etc.) to the best advantage.
Organizing
Organizing is the process by which the structure and allocation of jobs is determined.
Organizing involves determining activities required to achieve the companys activities,
grouping these activities in a logical basis and finally assigning persons to the job
designed.
Organizing means organizing people, materials, jobs, time etc and establishing a
framework in which responsibilities are defined and authorities are laid down.
Staffing
Staffing is the process by which staff are selected, trained, promoted and compensated.
Staffing involves the developing and placing of qualified people in various jobs in the
organization.
Staffing is a continuous process. The aim is to have appropriate persons to move in to
vacated positions or newly created positions in the organization.
Directing
Directing is the process by which performance of subordinates is guided towards the
common goals of the organization.
Directing involves motivating, guiding and supervising subordinates toward company
objectives. Directing thus involves: (a) Giving instructions to the subordinates; (b)
Guiding the subordinates to do their work; and (c) Supervising the subordinates to make
certain that the work done by them is as per the plan established.
Directing involves: (i) Leadership; (ii) Communication; (iii) Motivation and (iv)
Supervision.
(i)
Leadership

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Leadership is the quality of the behaviour of the managers whereby they inspire
confidence and trust in their subordinates, get maximum cooperation from them and
guide their activities in an organized effort.
Leadership is more than personal ability and skill.
(ii)
Communication
Communication is the process by which ideas are transmitted, received and understood
by others for the purpose of carrying out desired results.
Communication may include verbal or written orders, reports, instructions etc.
An ineffective communication leads to confusion, misunderstanding, dissatisfaction and
sometimes even strikes.
(iii)
Motivation
Motivation means inspiring the subordinates to do a work or to achieve company
objectives effectively and efficiently.
Motivation could be classified as:
(a) Financial motivation such as salary, bonus, extra increments, cash awards
etc., and
(b) Non-financial motivation such as promotion, recognition, praise etc.
(iv)
Supervision
Supervision is necessary in order to ensure:
(a)
that the work is going on as per the plan established;
(b)
that the workers are doing as they were directed to do.

(6) Coordinating

Coordinating means achieving harmony of individual effort towards the accomplishment

of companys objectives.

Ineffective coordination between different functions of a business enterprise such as

production, sales, administration can ruin the enterprise.

Coordination involves making plans that coordinate the activities of subordinates,

regulate their activities on the job, and regulate their communications.

(7) Controlling

Controlling is the process that measures current performance and guides it towards some
pre-determined goal.

Controlling involves: (i) the monitoring of programme activities to make sure that end
objectives are being met and (ii) the initiation of corrective action as required to
overcome problems, if any, hindering the accomplishment of objectives.

Controlling is necessary to ensure that orders are not misunderstood, rules are not
violated and objectives have not been unknowingly shifted.

Controlling is a continuous process which measures the progress of operations, verifies

their conformity with the predetermined plan and takes corrective action, if required.
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(8) Decision-making

Decision making is the process by which a course of action is consciously chosen from
available alternatives for the purpose of achieving desired results.

An outstanding quality of a successful manager is his ability to make sound and logical
decisions.

THEORY OF SCIENTIFIC MANAGEMENT (Frederic Taylor)

Frederick W Taylor proposed the concept of scientific management, in 1910.

The basic assumption here is that MAN IS ECONOMIC IN NATURE

Scientific Management is the result of applying scientific knowledge and the scientific
methods to the various aspects of management.

The primary emphasis of scientific management was on planning, standardizing and

improving human effort at the operative level in order to maximizing output with
minimum input.

Basic Approach of Scientific Management

(i)

Analyse work scientifically. Investigate all aspects of work on a scientific basis rather
than using rules of thumb.
Provide specific guidelines for worker performance.
Develop one best way of doing a job (using time and motion studies).
Select workers best suited to perform the specific tasks.
Train and develop each workman in the most efficient method for doing the job.
Divide the work so that workmen and management share almost equally in the daily
performance of each task; workers do their jobs as per the standards laid down and
management does planning.
Achieve support and cooperation from workmen by arranging better working conditions,
service conditions and guidance and by giving them greater economic rewards which in
turn are obtained through increased efficiency and productivity.

(ii)
(iii)
(iv)
(v)
(vi)

(vii)

Scientific Management removed the workers judgment in planning, organizing and controlling
his own task performance. Rather, it required that management should plan, organize and control
the workers performance.
Opposition to Scientific Management

Primary resistance to scientific management came from the managements, who were not
prepared to discard the old style of working in favour of scientific approach.

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Another cause for opposition was that the scientific management treated workers like
cogs in a well-oiled machine and that the system destroyed humanistic practices in
industry.

THEORY X and THEORY Y (Douglas McGregor)

Management researcher Douglas McGregors research suggested that managers

assumptions about worker motivation tended to fall into one of two categories.

McGregor felt that such assumptions exert a heavy influence on how managers operate:

The two theories are: (1) Theory X (Traditional Theory) and (2) Theory Y (Modern Theory).
THEORY X
The assumptions of Theory X are:
(i)

Employees inherently (= naturally) dislike work and always try to avoid it.

(ii)

Most employees are less ambitious, they do not want to take any responsibility and do
not want to improve the wok through interest but wait for formal
directions/instructions.

(iii)

Most people need to be coerced (compelled), controlled and threatened with

punishment to get them to work and achieve goals.

(iv)

Motivation occurs only at the physiological and safety levels.

(v)

Most people have little capacity for creativity, problem solving, and decision making.

(vi)

Workers feel that they are of less importance in an organization. They think that they
are considered as cogs in the wheel.
Based on the above assumptions, Theory X suggests that workers are to be directed,
controlled and punished to achieve the desired results.

THEORY Y
The assumptions of Theory Y are:
(i)

Work is as natural as play or leisure, if the conditions are favourable.

(ii)

The workers are committed to the objectives of the organization. They are self-controlled
and no coercion (= force) is required.

(iii)

The workers feel responsible for the work for which they are appointed.

(iv)

The workers are active, creative and have the capability of decision-making. They also
actively participate in decision-making.
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(v)

Motivation occurs through self-actualization and satisfaction.

(vi)

The intellectual potentials of most individuals are only partially utilized in most
organizations.

(vii)

When conditions are favourable, the average person not only accepts responsibility but
also seeks it.
Thus, Theory Y suggests that people are self-driven, self-controlled and are participative in
nature. So, the management must create an environment suitable for the employees to excel.

THEORY X (or) THEORY Y?

McGregor felt that in some situations Theory X assumptions may be more appropriate
than those of Theory Y.

For example, when people are being asked to perform tasks they would strongly prefer
not to perform, Theory X is more appropriate. Here, the work is not as natural as play.

From McGregors point of view, an effective leader should apply the appropriate theory
depending upon the context.

PRINCIPLES OF MANAGEMENT (Henri Fayol)

Henri Fayol, a French industrialist is known as the father of modern management

theory. He joined a coal-and-iron company as an apprentice mining engineer and
reached the top position of Managing Director.

On the basis of his experience as a top-level manager, Fayol realized that it is possible to
develop theories about management that could be taught to individuals with
administrative responsibilities.

Fayol outlined a number of principles that he found useful in running his large
organization.

The fourteen principles are: (1) Division of work; (2) Authority & responsibility; (3)
Discipline; (4) Unity of command; (5) Unity of direction; (6) Subordination of individual
interest to general interest; (7) Remuneration; (8) Centralization; (9) Scalar chain; (10)
Order; (11) Equity; (12) stability of personnel tenure; (13) Initiative and (14) Espirit de
Corps.

He added that these principles apply not only to business but also to political, religious,
charitable, military and other organizations.

(1) DIVISION OF WORK

Division of work or work specialization results in efficient use of resources and increases
productivity. This is applicable to both managerial and technical functions.

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(2) AUTHORITY & RESPONSIBILITY

Authority means the right to give orders or command. Responsibility is the obligation to
achieve objectives. Authority and responsibility should be commensurate with each other.

If there is too much authority, it is likely to be misused. If there is too much

responsibility, it may result in frustration.

(3) DISCIPLINE

Discipline means following of rules, regulations, policies and procedures by all

employees of the organizations. Discipline is absolutely necessary for running of an
organization. There must be a clear and fair agreement for observing the rules and
regulations.

(4) UNITY OF COMMAND

An employee should receive orders from one supervisor only to avoid possible confusion
and conflict. (= A worker should not be under the control of more than one supervisor).

(5) UNITY OF DIRECTION

The activities of an organization should be organized such that there is one plan and one
person in charge.

(6) SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST

The interests of one employee or group of employees should not be given importance
over the interests of the organization.

(7) REMUNERATION

Compensation and methods of compensation should be fair to both the employee and the
employer.

(8) CENTRALIZATION

If all the powers are vested in the top management, it is called centralization of authority.
If all the powers are vested in the lower management, it is called decentralization. A
balance between centralization and decentralization must be achieved. The objective here
is the optimum utilization of the capabilities of the personnel.

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(9) SCALAR CHAIN

A scalar chain of authority extends from the highest to the lowest rank of an organization
and defines the communication path. However, horizontal communication may also be
encouraged as long as managers are kept informed.

(10)
ORDER
Order is the principle of arrangement of things and people.
Everything should be in its place and there must be a place for everything.
Order leads to the creation of sound organization with efficient management.
(11)
EQUITY
Organizations run best when managers are fair with their employees.
(12)
STABILITY OF TENURE OF EMPLOYEES
Stability of tenure increases the efficiency of the employees and is a symbol of sound
management. Because time is required to understand the jobs at hand and become
effective in new jobs, high turnover of employees should be prevented.
(13)
INITIATIVE
Managers should encourage and develop the subordinates to take initiative.
Initiative is the result of creative thinking and imagination and helps in formulating,
planning and in execution.
(14)
ESPIRIT DE CORPS
Espirit de corps means team spirit.
Union is strength. Harmony and teamwork, the prerequisites for better performance and
effective organization, are essential in every organization.

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