UNIT-I

Industrial management - the branch of engineering that deals with the creation and
management of systems that integrate people and materials and energy in productive ways

industrial engineering,applied science, engineering science, technology, engineering - the

discipline dealing with the art or science of applying scientific knowledge to practical problems;
"he had trouble deciding which branch of engineering to study"

or

The branch of engineering that deals with the creation and management of systems that integrate
people and materials and energy in productive ways.

According to Henry Fayol “Management is to forecast and plan, toorganise, to command, to co-ordinate
and to control.”It attempts to describe management in terms of what a manager does and not what
management is?

According to Oliver Sheldon, “the term management is commonly used to cover the formation of policy,
its execution, the designing of the organisation and its employment.”

According to E.F.L. Breech – “Management can be defined as a social process entailing responsibility for
the effective and efficient planning and regulation of the operations of an enterprise,’’

The Development of Industrial Management

Studies of Worker Performance

The first sustained effort in the direction of improved efficiency was made by Frederick Winslow
Taylor, an assistant foreman in the Midvale Steel Company, who in the 1880s undertook a series
of studies to determine whether workers used unnecessary motions and hence too much time in
performing operations at a machine. Each operation required to turn out an article or part was
analyzed and studied minutely, and superfluous motions were eliminated. Records were kept of
the performance of workers and standards were adopted for each operation. The early studies
resulted in a faster pace of work and the introduction of rest periods.

Management of the Machine

Industrial management also involves studying the performance of machines as well as people.
Specialists are employed to keep machines in good working condition and to ensure the quality
of their production. The flow of materials through the plant is supervised to ensure that neither
workers nor machines are idle. Constant inspection is made to keep output up to standard. Charts
are used for recording the accomplishment of both workers and machines and for comparing
them with established standards. Careful accounts are kept of the cost of each operation. When a
new article is to be manufactured it is given a design that will make it suitable for machine
production, and each step in its manufacture is planned, including the machines and materials to
be used.

Other Aspects of Management

The principles of scientific management have been gradually extended to every department of
industry, including office work, financing, and marketing. Soon after 1910 American firms
established the first personnel departments, and eventually some of the larger companies took the
lead in creating environments conducive to worker efficiency. Safety devices, better sanitation,
plant cafeterias, and facilities for rest and recreation were provided, thus adding to the welfare of
employees and enhancing morale. Many such improvements were made at the insistence of
employee groups, especially labor unions.

Over the years, workers and their unions also sought and often won higher wages and increased
benefits, including group health and life insurance and liberal retirement pensions. During the
1980s and 1990s, however, cutbacks and downsizing in many American businesses substantially
reduced many of these benefits. Some corporations permit employees to buy stock; others make
provision for employee representation on the board of directors or on the shop grievance
committee. Many corporations provide special opportunities for training and promotion for
workers who desire advancement, and some have made efforts to solve such difficult problems
as job security and a guaranteed annual wage.

Productivity:

Productivity is a measure of output from a production process, per unit of input. For example, labor
productivity is typically measured as a ratio of output per labor-hour, an input. Productivity may be
conceived of as a metric of the technical or engineering efficiency of production. As such, the emphasis
is on quantitative metrics of input, and sometimes output. Productivity is distinct from metrics of
allocative efficiency, which take into account both the monetary value (price) of what is produced and
the cost of inputs used, and also distinct from metrics of profitability, which address the difference
between the revenues obtained from output and the expense associated with consumption of inputs.

Expressed simply:

Productivity = total output/total input which is identical to total results

achieved/total resources consumed or effectiveness/efficiency.

Productivity Measurement:

Productivity is measured as a ratio of outputs to inputs:

_ Quantity of outputs produced/Quantity of inputs consumed

By itself, a productivity measure has no meaning. It only gains meaning when compared to
productivity measures or prior periods, or to measures from comparable facilities producing
similar outputs.

Productivity measures attempt to highlight improvements in the physical use of resources, that is,
to motivate and evaluate attempts to produce more outputs with fewer inputs while maintaining
quality.* By focusing on physical

measures, outcomes are not influenced by changes in relative costs and prices. In the short run,
profits can increase if output prices are raised faster than input costs are rising. In the long run,
however, competitive market forces will prevent a firm from passing firm-specific, or even
countryspecific, cost increases on to customers. Sustainable competitive advantage arises only by
having higher productivity than competitors or by offering specialized products and services that
competitors cannot match.

Productivity measures will permit managers to separate profit changes due to productivity factors
and sales activity from those due to changes in output prices relative to input costs. Further, by
linking productivity measures year to year, we obtain a dynamic, multiperiod evaluation of the
organization's perfonnance. The annual change in roductivity and the organization's long-term
productivity trend provide a convenient summary of operating performance.

PRODUCTION FUNCTION

Production is an organized activity of transforming raw materials into finished products. It is an

intentional act of producing something useful. In production systems we have different resources
as input.

The inputs are processed in a series of operations. The sequence, number, and type of operations
(mechanical,chemical, electrical, assembly, inspection, transportation, etc) are specified for each
input.

The output of the system will be complete parts products, chemicals etc. Production function
shows the relationship between the input and the output of an organization. By the study of
production function the maximum output which can be achieved with given inputs, or say
resources with a given state of technology is determined. The production function can be
represented by the simple mathematical equation which relates the outputs as the function of
inputs , that is

Y = f (X1, X2, …., Xn)

Where Y = units of output, which is the function of the quantity of two or more inputs

X1 = unit of labor, and

X2 = unit of machinery, and so on.

Some quantities of production are assumed as fixed, that is not varying with change of output,

such quantities never enter in the equation.

TYPES OF PRODUCTION SYSTEM

There are eight types of production which may be classified in three or four broad groups
according to the quantities of production involved [Samuel Eilon]. They are shown in Figure 1.2
in terms of product variety and production volume—the figure is self explanatory.

1. Job Shop Production system which has the following features :

(a) A small number of items produced only once,

(b) A small number of items produced intermittently when the need is felt,

(c) A small number of items produced periodically at known time interval.

2. Batch Production which has the following characteristics :

(a) A batch of items produced only once,

(b) A batch of items produced at irregular intervals when a need is felt,

(c) A batch of items produced periodically at known intervals to satisfy the continuous demand.

3. Continuous Production which consists of

(a) Mass production

(b) Flow production

1.2.2.1 Job Production

This is the oldest method of production on a very small scale. It is also popularly known as ‘job-shop or

Unit’ production. With this method individual requirements of consumers can be met. Each job order

stands alone and may not be repeated. Some of the examples include manufacturing of aircrafts, ships,

space vehicle, bridge and dam construction, ship building, boilers, turbines, machine tools, things of

artistic nature, die work, etc. Some of the features of this system are as follows:
 This system has a lot of flexibility of operation, and hence general purpose machines are

required.

Generally no automation is used in this system, but computer-aided-design (CAD) is used.

It deals with ‘low volume and large variety’ production. It can cater to specific customer

order, or job of one kind at a time.

It is known for rapid value addition.

Advantages

Low risk of loss to the factory adopting this type of production. Due to flexibility, there is no

chance of failure of factory due to reduction in demand. It can always get one or the other job

orders to keep it going.

Requires less money and is easy to start.

Less or no management problem because of very small work force.

Disadvantages

For handling different types of jobs, only workers with multiple skills are needed. This increases the labor
cost.

Low equipment utilization.

As the raw materials are purchased in less quantity, the cost of material procurement is more.

1.2.2.2 Batch Production

The batch production system is generally adopted in medium size enterprises. Batch production is a

stage in between mass production and job-shop production. As in this system, two or more than two

types of products are manufactured in lots or batches at regular interval, which justifies its name the

‘batch production system’. It has the following features:

A batch production turns into flow production when the rest period vanishes. In flow production,

the processing of materials is continuous and progressive.

 Batch production is bigger in scale than job production, but smaller than that of mass production.

Material handling may be automated by robots as in case of CNC machining centers.

A medium size lots (5 to 50) of same items is produced in this system. Lot may be produced

once in a while or on regular interval generally to meet the continuous customer demands.

Plant capacity generally is higher than demand.

Advantages

It is flexible in the sense that it can go from one job to another with almost zero cost. It needs

general purpose machine having high production rate.

If demand for one product decreases then production rate for another product may be increased,

thus the risk of loss is very less.

Most suitable for computer-aided-manufacturing (CAM).

Disadvantages

• As the raw materials to be purchased are in smaller quantity than in case of mass production,

the benefits of discount due to large lot purchasing is not possible.

• It needs specially designed jigs and fixtures.

1.2.2.3 Continuous Production

In this, the production activity continues for 24 hours or on three shifts a day basis. A steel plant, for

example, belongs to this type. It is impossible to stop the production process on a short notice without

causing a great damage to its blast furnace and related equipment. Other examples include bottling

plant, soft drink industry, fertilizer plant, power plant, etc). Mass production and Flow production

belong to continuous type only. They are explained below:

Mass production: In this type, a large number of identical items is produced, however, the equipment

need not be designed to produce only this type of items. Both plant and equipment are flexible
enough to deal with other products needing the same production processes. For example, a highly

mechanized press shop that can be utilized to produce different types of components or products of

steel metal without the need of major changes.

Flow production: In this type, the plant, its equipment, and layout have been chiefly designed to

produce a particular type of product. Flexibility is limited to minor modifications in layout or design of

models. Some famous examples are automobiles, engines, house-hold machinery, chemical plants, etc.

If the management decides to switch over to a different type of product, it will result in extensive

change in tooling, layout, and equipment.

Continuous production, in general, has the following features:

• It is very highly automated (process automation), and highly capital intensive. Items move

from one stage to another automatically in a continuous manner.

• It has a fixed or hard automation which means there is very less or no flexibility at all. Layout

of the plant is such that it can be used for only one type of product. Each machine in the

system is assigned a definite nature of work.

• To avoid problem of material handling, use of cranes, conveyors etc. are made.

• Work-in-process (WIP) inventory in this system is zero.

Advantages

• It gives better quality, large volume but less variety of products.

• Wastage is minimum.

• As the raw materials are purchased on a large scale, higher margin of profit can be made on

purchase.

• Only a few skilled, and many semi-skilled workers are required. This reduces the labor cost

substantially.

Disadvantages
• During the period of less demand, heavy losses on invested capital may take place.

• Because all the machines are dedicated and special purpose type, the system is not changeable

to other type of production.

• Most of the workers handle only a particular operation repetitively, which can make them

feel monotonous.

• As this type of production is on the large scale, it cannot fulfill individual taste.

PRODUCTIVITY INDEX

The combined effect of efficiency andeffectiveness is used in defining a term called productivity index.

It is an integration of both efficiency andeffectiveness. It indicates a combined effect of utilization (i.e..

efficiency)& performance(ie.effectiveness)

Effectiveness: it indicates a measure of howwell a set of targets or results areaccomplished.

Efficiency: it indicates a measure of how wellthe resources are utilized to accomplish atarget or results

Productivity index= performance achievedinput /resources

consumedor= effectiveness/efficiency

TYPES OF PRODUCTIVITY INDEX

1.Labour productivity

2.Direct labour cost productivity

3.Capital productivity

4.Direct cost productivity

5.Energy productivity

6.Raw material productivity

Labour productivity

‡The resource inputs are aggregated in termsof labour hours. Hence this index is relativelyfree of
changes caused by wages rates and labour mix.

Direct labour cost productivity‡

The resource inputs are aggregated in termsof direct labour cost .This index will reflect theeffect of both
wages rates and changes in thelabour mix.

Capital productivity

‡Several formulations are possible .Theresource inputs may be the charges during theperiod to
depreciation ,in another ,the inputsmay be the book value of capital investment.

Direct cost productivity

In this formulation ,all items of direct costassociated with resources used are aggregatedon a monetary
value basis.

Energy productivity

‡In this formulation the only resources considered is the amount of energy consumed.

Raw material productivity‡

In this formulation, the numerators are usuallyweight of products, the denominators are theweight of
raw material consumed.

INDUSTRIAL OWNERSHIP‡

A firm is an ownership organization whichcombines the factors of production(men ,material &

machines)in a plant for thepurpose of producing goods or services &selling them at profit.
The ownership of an industry may beindividual or collective .

Types of ownership‡

The different types of ownership are:

1.Single ownership .

2.partnership.

3.Joint stock companies.

4.co-operative organization.

5.State & central government owned.

1.SINGLE OWNERSHIP‡

A business owned by one man is called singleownership. single ownership works well forthose
enterprises which require little capital &lend themselves readily to control by oneperson.

Example : agriculture ,small scale industries ,cottage industries , retail trade , handicraftsetc.

Suitability/applications

It is suitable :

1.For retail traders, service concern and smallengineering firms which require relativelysmall capital to
start with & to turn.

2.For those businesses which don't involve highrisks of failure.3. When the business can be take care by
one person.

Advantages of single ownership

1-Easy to establish as it does not require tocomplete any legal formality.

2-Owner is free to make all decisions

3-This type of ownership is simple, easy tooperate & extremely flexible.

4-owner enjoys all the profits.

5-Owner can keep secrecy as regards the rawmaterials used, method of manufacturing etc.

Disadvantages of single ownership‡

1-The owner is liable for all obligations and debtof the business.

2-The business may not be successful if theowner has limited money, lacks ability & notnecessary
experience to run the business.

3-Generally, single ownership firm has limitedlife.

2-PARTNERSHIP‡

Section 4 of the Indian PartnershipAct,1932,defines partnership as follows:

partnership is the relation between personswho have agreed to share the profits of abusiness carried on
by all or any one of themacting for all.

The persons who have entered into apartnership with one another are individually called partners &

collectively a firm 

.The name under which business is carried on is called firm name.

Features of partnership

Association of two or more persons.

Agreement Carrying on a business

Lawful business

Profit sharing

Rights of partner

1.Every partner has a right to take part inmanagement of the business.

2.Every partner has a right to be consultedabout the affairs of the partnership

3.Every partner has a right to inspect the booksof account & have a copy of the same.
4.Every partner has a right to share the profit orloss with others in the agreed ratio.

5.In case of an emergency, a partner has theright to act according to his best judgment &be indemnified
for the expenses incurred byhim.

6.A person has the right not to allow theadmission of a new partner.

7.On giving a proper notice, a partner has theright to retire from the firm.

Types of partner

1.Actual partner:a person who becomes a partner by anagreement and is actively engaged in
theconduct of the business of partnership isknown as an actual partner.

2.Sleeping /dominant partner:A sleeping partner is one who does not takean active part in the conduct
of the businessof the firm .He, like other partners , investscapital & shares in the profit of the
businessBut a sleeping partner need not give a publicnotice of his retirement from the firm. He isnot
liable for any act of the firm done after hisretirement .He is, however liable for the debtsof the firm.

3.Nominal partner:A nominal partner is known to the world as apartner in the firm, but he does not
share inthe profits of the firm .

4.Partner in profit only:Sometimes partners may agree that a partnershall get a share of the profits only
& that heshall not be liable to contribute towards thelosses. Such a partner is known as a partner
inprofit only.

5.Partner by estoppels /holding out:Some times a person who is not a partner in afirm may, under
certain circumstances ,liablefor its debts as if he were a partner .such apartner is called a partner is
called a partnerby estoppels or holding out.

6.Minor partner:With the consent of all partners for the timebeing , a minor may be admitted to
thebenefits of partnership .A minor partner has aright to such share of the property and of theprofits of
the firms as may have been agreedupon.

JOINT STOCK COMPANY‡

A joint stock company is an association of individuals called shareholders , who jointogether for profit
and agree to supply capitaldivided into shares that are transferable forcarrying on a specific business.‡

Death , insolvency,disablement of theshareholders does not affect the joint stockcompany.‡

A joint stock company consists of more thantwenty persons for carrying any businessother than the
banking business.
‡These persons give a name to the company,mention the purpose for which it is formed &state the
nature & the amount of capital(shares) to be issued etc.& submit theproposal to the registrar issues a
certificate inthis connection ,the company startsoperating.

The managing body of a joint stock companyis the board of directors elected by the shareholders .

The board of directors :

1) makes policies

2) takes decision

3) run the company efficiently.

There are two types of joint stock company :

(a) private limited company /sector

(b) public limited company / sector

(a) Private company:A private company is normally what theAmericans call a close corporation .it
means acompany restricts the right to transfer sharesand the number of members limit is between2 to
50.

(b)Public Company:A public company means a company which byits articles:i) Does not restrict the right
to transfer itsshares.ii) No limit of members.iii) Does not prohibit any invitation to the publicto subscribe
for any share / debenture of thecompany.

Differences between public &private company

1. Minimum number of members(a) the minimum number of members/persons required to form a

public companyis 7.(b) It is 2 in case of private company.

2. Maximum number of members(a) there is no restriction of maximum numberof members in a public

company(b) where as the maximum number cannotexceed 50 in a private company.

3.Number of directors(a) a public company must have at least 3directors.(b) Where as in a private
company, at least 2directors.

4.Prospectus(a)There is a need to issue a prospectus in apublic company(b)No need to issue a

prospectus in a privatecompany
5.Transferability of shares(a) in a public company shares are freelytransferable.(b)There is a restriction
of share transferability.

CO-OPERATIVEUNDERTAKINGS/ORGANIZATION‡

Co-operative is a form of businessorganization formed by individuals to improvetheir economic

conditions through collectiveefforts .such an association is registered underco-operative societies .‡

These organization has been instituted invarious fields such as production ,distribution ,banking
,marketing etc.‡

It is a voluntary association of economicallyweak persons who work for achievement of their common
economic objectives on thebasis of equality & mutual services.

Features of co-operativeundertakings‡

Individual having common interest andwillingness to work together to improve theirfinancial positions
from a voluntaryassociation as co-operative.‡

The members can leave the co-operative withdue notice . There is no compulsion to continue.‡

All the members of a co-operative societyenjoys equal status.‡

Each member is entitled to one vote onlyirrespective of the number of shares held by him.

Forms of co-operativeenterprise/organization/society

1.Consumers cooperatives ,in retail trade &services.

2. Producers cooperatives , for group buying &selling such items as dairy products , grains ,fruits etc.

3.Cooperative farming for more & good qualityyield from the farms.

4.cooperative housing for constructing &providing houses to the members of theassociation at relatively
lesser rates.

5.cooperative credit society , to provide loansto the needy individuals.

UNIT-II
Principles of Management:

The 14 Management Principles from Henri Fayol (1841-1925) are:

1. Division of Work. Specialization allows the individual to build up experience, and to

continuously improve his skills. Thereby he can be more productive.
2. Authority. The right to issue commands, along with which must go the balanced responsibility
for its function.
3. Discipline. Employees must obey, but this is two-sided: employees will only obey orders if
management play their part by providing good leadership.
4. Unity of Command. Each worker should have only one boss with no other conflicting lines of
command.
5. Unity of Direction. People engaged in the same kind of activities must have the same objectives
in a single plan. This is essential to ensure unity and coordination in the enterprise. Unity of
command does not exist without unity of direction but does not necessarily flows from it.
6. Subordination of individual interest (to the general interest). Management must see that the
goals of the firms are always paramount.
7. Remuneration. Payment is an important motivator although by analyzing a number of
possibilities, Fayol points out that there is no such thing as a perfect system.
8. Centralization (or Decentralization). This is a matter of degree depending on the condition of
the business and the quality of its personnel.
9. Scalar chain (Line of Authority). A hierarchy is necessary for unity of direction. But lateral
communication is also fundamental, as long as superiors know that such communication is
taking place. Scalar chain refers to the number of levels in the hierarchy from the ultimate
authority to the lowest level in the organization. It should not be over-stretched and consist of
too-many levels.
10. Order. Both material order and social order are necessary. The former minimizes lost time and
useless handling of materials. The latter is achieved through organization and selection.
11. Equity. In running a business a ‘combination of kindliness and justice’ is needed. Treating
employees well is important to achieve equity.
12. Stability of Tenure of Personnel. Employees work better if job security and career progress are
assured to them. An insecure tenure and a high rate of employee turnover will affect the
organization adversely.
13. Initiative. Allowing all personnel to show their initiative in some way is a source of strength for
the organization. Even though it may well involve a sacrifice of ‘personal vanity’ on the part of
many managers.
14. Esprit de Corps. Management must foster the morale of its employees. He further suggests that:
“real talent is needed to coordinate effort, encourage keenness, use each person’s abilities, and
reward each one’s merit without arousing possible jealousies and disturbing harmonious
relations.”

Time and motion study

A time and motion study (or time-motion study) is a business efficiency technique combining
the Time Study work of Frederick Winslow Taylor with the Motion Study work of Frank and
Lillian Gilbreth (not to be confused with their son, best known through the biographical 1950
film and book Cheaper by the Dozen). It is a major part of scientific management (Taylorism).
After its first introduction, time study developed in the direction of establishing standard times,
while motion study evolved into a technique for improving work methods. The two techniques
became integrated and refined into a widely accepted method applicable to the improvement and
upgrading of work systems. This integrated approach to work system improvement is known as
methods engineering[1] and it is applied today to industrial as well as service organizations,
including banks, schools and hospitals.[2]

Time and motion study have to be used together in order to achieve rational and reasonable
results. It is particularly important that effort be applied in motion study to ensure equitable
results when time study is used. In fact, much of the difficulty with time study is a result of
applying it without a thorough study of the motion pattern of the job. Motion study can be
considered the foundation for time study. The time study measures the time required to perform a
given task in accordance with a specified method and is valid only so long as the method is
continued. Once a new work method is developed, the time study must be changed to agree with
the new method.[3]

Time study is a direct and continuous observation of a task, using a timekeeping device (e.g.,
decimal minute stopwatch, computer-assisted electronic stopwatch, and videotape camera) to
record the time taken to accomplish a task [4] and it is often used when:[5]

• there are repetitive work cycles of short to long duration,

• wide variety of dissimilar work is performed, or
• process control elements constitute a part of the cycle.

The Industrial Engineering Terminology Standard defines time study as "a work measurement
technique consisting of careful time measurement of the task with a time measuring instrument,
adjusted for any observed variance from normal effort or pace and to allow adequate time for
such items as foreign elements, unavoidable or machine delays, rest to overcome fatigue, and
personal needs.

Work simplification

Work Simplification is a scientific approach to study work processes with a view to simplifying
the process such that the work process becomes more effecient and effective and thereby raises
productivity and reduces wastage of labor effort, materials, space, time and energy in the process
of producing a good or delivering a service.
In April 2002 the UNDG Executive Committee agencies agreed on some key principles to guide
their work on Simplification and Harmonization. A task force created to spearhead work on
Simplification and Harmonization re-affirmed a number of key principles during a consultative
meeting held here in Nairobi in October 2002 following a number of country visits. These are as
follows:
Put National Priorities at the centre of the UN Development Assistance Framework (UNDAF) –
It was agreed that the national priorities should be at the centre of the UN development
framework planning.
Enhance Programme Effectiveness – The goal of all of Simplification and Harmonization is to
increase both long and short term programme efficiency, effectiveness (including capacity
building and sustainable development) and accountability (e.g., to beneficiaries) and reduce
transaction costs for governments and UN staff. Transformation of processes should focus on
national leadership, vision and commitment including accountability and transparency keeping in
mind the ultimate goal of improving programme effectiveness.

Production Planning
Invatol provides Production Planning for small to mid size companies. Production Planning covers a wide
range of activities which include some of the following:

- Production Scheduling -
- Resource Planning -
- Material Requirements Leveling -
- Shop Floor Loading -
- Rough Cut Capacity Planning -

Effective Production Planning is essential in a manufacturing business and is the foundation on which
the manufacturing organization operates. The manufacturing environment is one of constant change
with conditions changing daily or hourly, customer emergencies, rush orders, machine breakdowns,
quality problems, the list is endless. The only constant that can be counted on is "Murphy's Law",
anything that can go wrong will. These changes don't happen once a week, they happen many times in
the production planning cycle. There is no way that a manual system can possible keep up.

Production planning is a complex process that covers a wide range of activities that insures that
material, capacity and human resources are available when needed. If I had to choose one
definition for production planning I think Yogi Berra said it best "if you don't know where you
are going, you might not get there", or more accurately, you probably won't get there. The only
way to effectively know where you are going is to have a good process to generate a production
plan or production scheduling document.

The production planning document typically starts with a sales forecast, or sales plan usually
supplied by the marketing group. From the production planning document all other process's
start. The production planning document can include material, labor, capacity, training and
should include a backup plan should things go wrong. Each area of planning is dependent on the
other and must be done in unison. It makes no sense to bring in material if production can't
produce, or plan production if materials are not available. It requires a collaborative effort
between different departments to effectively bring all aspects of the process together.

UNIT-III
Inventory control
INTRODUCTION
An inventory is a list of items or goods. Inventory and stock control are used
interchangeably in business circle. There are various types of inventory depending
upon the context or situations. For example, inventory in a library means the list of
books, journals, periodicals, furniture, fans, etc. A typical firm carries different
kinds of inventories such as: raw materials and purchased parts; partially ompleted
goods called work-in-process (WIP); finished-goods or merchandise in retail tores;
replacement parts,tools, and supplies; and goods-in-transit to warehouses or
customers (called pipeline inventory). Generally a firm has about 30 percent of its
current assets and as much as 90 percent of its working capital invested in
inventory. Because inventories may represent a significant portion of total assets, a
reduction of inventories can result in a significant increase in return on investment
(ROI)—a ratio of profit after taxes to total assets. In this chapter we will discuss
the purpose of inventories, basic requirements of inventory management, different
models of inventory control, and other related issues.

PURPOSE OF INVENTORIES

Before discussing different issues related to inventory control, we should discuss:

what is the purpose of holding stocks in the first place? Inventories serve the
following purposes:
To meet anticipated demand
To smooth production requirements
To decouple components of the production-distribution system
To protect against stock-outs
To take advantage of order cycles
To hedge against price increases
To ensure against scarcity of materials and permit operations.

OBJECTIVE OF INVENTORY MANAGEMENT

The overall objective of inventory management is to achieve satisfactory levels of

customer service while keeping inventory costs within reasonable limits. In this
context, a decision maker must make two fundamental decisions: the timing of the
order and size of orders (i.e., when to order and how much to order).
The performance of inventory management can be measured in the following
terms:
Customer satisfaction
Inventory turnover
Days of inventory on hand
INVENTORY COST INFORMATION
Three basic costs associated with inventory management are: holding or inventory
carrying cost, ordering or set-up cost, and shortage cost.
Holding or carrying costs relate to having the items physically in storage. Costs
include the cost due to interest, insurance, taxes, depreciation, obsolescence,
deterioration, spoilage, pilferage,breakage, and warehousing costs (heat, light, rent,
security). They also include opportunity costs associated with having funds which
could be used elsewhere tied up in inventory. Note that it is the variable portion of
these costs that is pertinent.
Ordering costs are the costs of ordering and receiving inventory. They are the
costs that vary with the actual placement of an order. These include determining
how much is needed, preparing invoices,shipping costs, inspecting goods upon
arrival for quality and quantity, and moving the goods to temporary storage.
Ordering costs are generally expressed as a fixed dollar amount per order,
regardless of order size.

Shortage costs result when demand exceeds the supply of inventory on hand.
These costs can include the opportunity cost of not making a sale, loss of customer
good will, late charges, and similar costs. Furthermore, if the shortage occurs in an
item carried for internal use (e.g., to supply an assembly line), the cost of lost
production or downtime is considered a shortage cost. Such cost can easily run into
hundreds of dollars a minute or more. Shortage costs are sometimes difficult to
measure, and they may be subjectively estimated.

TYPES OF INVENTORY CONTROL TECHNIQUES

Inventory can be controlled by these two techniques:
(a) Qualitative techniques,
(b) Quantitative techniques.
6.3.1 QUALITATIVE TECHNIQUES

They consist of selective control methods based on Pareto 80-20 principle, which
states that there are a critical few and trivial many. According to this all the items
of an industry are classified into some broad groups on certain basis and the
attention is paid to their control accordingly. It is not practical to monitor
inexpensive items with the same intensity of care as very expensive items. Some of
the popular classifications selective control techniques are as follows:

• ABC classification
• FSN classification

• VED classification

ABC classification
ABC stands for ‘always better control’. The items on hand are classified into A, B,
and C types on the basis of the value in terms of capital or annual dollar usage (i.e.,
dollar value per unit multiplied by annual usage rate), and then allocates control
efforts accordingly. Thus, the items with high value and low volume are kept in A-
type, items with low value and high volume are kept in C-type, and the items with
moderate value and moderate volumes belong to the B-type. A-type items are
given the maximum attention while ordering for purchase, and C-type the least. B-
type gets the moderate attention. Typically, three classes of items are called: A
(very important), B (moderately important), and C (least important).

FSN Classification
In this method, the items are classified according to the rate of consumption. Thus,
the materials can be fast (F), slow (S) and non-moving types (N). F-type materials
get the maximum attention, and the Ntype the minimum for their control and
procurement. Let us apply this concept in our kitchen as they say charity begins at
home. Let the different items in our home be: rice, pulses, salt, sugar,
tea,vegetables,fruits, medicine, cosmetics, shaving blades, wound plasters, and dry-
fruits. According to FSN, they can be classified as
F = Rice, pulse, salt, sugar, tea are consumed almost daily at relatively faster rate
and they need more attention to avoid stock-out situation in the house specially if
some unexpected guests happen to drop in from somewhere.

S = Fruit, dry fruits are consumed at a moderate speed and need moderate
attention.

N = Medicine, shaving blades, wound plasters, cosmetics are consumed at a very

negligible rate and need less attention. They can be bought once and can be
consumed leisurely when need arises.

VED Classification
The materials are classified according to its criticality in the production system.
Thus, materials can be vital (V), essential (E) and desirable (D) types. Maximum
attention is paid to the procurement and control of vital items and less to the
desirable ones. It is so because the lack of vital items can bring the production of
the plant down and the plant will run into losses. For example, based on VED
classification, the 1000 items of a steel plant can be classified as

V = 200—Much attention is given to the vital items.

E = 300—Moderate attention is given to these items.

D = 500—Less attention is given to these items.

QUANTITATIVE TECHNIQUES OR MODELS

They can be split into two types depending on the demand rate and the nature of
demand as shown in Table 6.3.
• Deterministic models, and
• Probabilistic or non-deterministic models
Deterministic Models
In this the demand of an item is known and fixed, but in probabilistic models the
demand of an item is not known (stochastic). Under the deterministic situation,
we have the following models of inventory control:
EOQ Model with Reorder Point
In the basic model, we discussed ‘how much should be ordered’? In this model we
will discuss ‘when to order’? The determinant of when to order in a continuous
inventory system is the reorder point, the inventory level at which a new order is
placed. The following ordering policies are followed:
Periodic Review. An ordering policy that requires reviewing the inventory level at
fixed points in time to determine how much to order on the basis of the amount of
inventory on hand at that time.
Continuous Review. An ordering policy that requires reviewing the inventory
continuously to determine when the recorder point is reached.

Economic-Order-Quantity (EOQ) Inventory Model

It assumes that the inventory pertains to one and only one item. The inventory is
replenished in batches rather than being replaced continuously over time. The
demand is deterministic and occurs at a known rate of R units per time period. The
lead time L is deterministic and known. Shortages are not allowed. That is, there
must always be enough inventory on hand to meet the demand. Ordering occurs in
a fixed quantity Q when the inventory reaches a certain reorder point Ro.
Supply Chain Management

Introduction

This chapter aims to give the supply chain management side of the
theoretical background for the supply chain modeling efforts which are
described in chapters and . Supply chain management is a vast area.
This chapter will emphasize the aspects of customer service and
inventory management, and how these are interrelated with flexibility.
Though the notion of agent-based computer systems have not yet been
presented, the nature of the Integrated Supply Chain Management
Project has been a decisive factor on the arrangement of the chapter.
The chapter is structured as follows: Section gives a first introduction to the term supply
chain, Section treats some important issues of supply chain management, and Section deals
with approaches to meet current challenges and improve supply chain performance.

Definition
There seems to be a universal agreement on what a supply chain is. Jayashankar et al. [25]
defines a supply chain to be a network of autonomous or semi-autonomous business entities
collectively responsible for procurement, manufacturing, and distribution activities associated
with one or more families of related products.

Lee and Billington has a similar definition:

A supply chain is a network of facilities that procure raw materials, transform them into
intermediate goods and then final products, and deliver the products to customers through a
distribution system.

And Ganeshan and Harrison [12] has yet another analogous definition:
A supply chain is a network of facilities and distribution options that performs the functions of
procurement of materials, transformation of these materials into intermediate and finished products,
and the distribution of these finished products to customers.

In this paper we use the term supply chain as it is defined by the last of the quotes above.
Figure: An Example of a Supply Chain.

Figure shows an example of a supply chain. Materials flow downstream, from raw material
sources through a manufacturing level transforming the raw materials to intermediate products
(also referred to as components or parts). These are assembled on the next level to form products.
The products are shipped to distribution centers and from there on to retailers and customers.

Appendix presents some of the supply chain related terminology used in the thesis. Many of
the terms used in the following will therefore not be explained further.

Issues in Supply Chain Management

The classic objective of logistics is to be able to have the right products in the right quantities (at
the right place) at the right moment at minimal cost. Figure (from NEVEM-workgroup [19])
translates this overall objective into four main areas of concern within supply chain management.
Figure: Hierarchy of Objectives.

The two middle boxes in the lower row of Fig. , delivery reliability, and delivery times, are
both aspects of customer service, which is highly dependent on the first box, flexibility, and on
the last box, inventory. These terms and their interrelations are discussed on Section .

Some important pitfalls of inventory management are described in Section . Some effects of
the globalization of supply chains are described in Section . But first, in Section supply
chain management is divided into three levels of decision making. And in Section the use of
metrics to evaluate supply chain performance is described.

Decisions on Three Levels

Supply chain management decisions are often said to belong to one of three levels; the strategic,
the tactical, or the operational level. Since there is no well defined and unified use of these
terms, this Section describes the how they are used in this thesis. Figure shows the three level
of decisions as a pyramid shaped hierarchy. The decisions on a higher level in the pyramid will
set the conditions under which lower level decisions are

made.
Figure: Hierarchy of Supply Chain Decisions.
On the strategic level long term decisions are made. According to Ganeshan and Harrison [12],
these are related to location, production, inventory, and transportation. Location decisions are
concerned with the size, number, and geographic location of the supply chain entities, such as
plants, inventories, or distribution centers. The production decisions are meant to determine
which products to produce, where to produce them, which suppliers to use, from which plants to
supply distribution centers, and so on. Inventory decisions are concerned with the way of
managing inventories throughout the supply chain. Transport decisions are made on the modes of
transport to use.

Decisions made on the strategic level are of course interrelated. For example decisions on mode
of transport are influenced by decisions on geographical placement of plants and warehouses,
and inventory policies are influenced by choice of suppliers and production locations. Modeling
and simulation is frequently used for analyzing these interrelations, and the impact of making
strategic level changes in the supply chain.

On the tactical level medium term decisions are made, such as weekly demand forecasts,
distribution and transportation planning, production planning, and materials requirement
planning. The operational level of supply chain management is concerned with the very short
term decisions made from day to day. The border between the tactical and operational levels is
vague. Often no distinction is made, as will be the case in this thesis.

UNIT-IV
Quality control

INTRODUCTION
Quality is a very frequently used term by almost all of us. However, it is very
difficult to define quality in a unique way. Some believe that quality products are
invariably costly products. For some quality signifies the degree of perfection. In
fact, quality, like beauty, lies in the beholder’s eyes. But technically speaking,
Quality is the totality of features and characteristics of a product or service that
bear on its ability to satisfy stated or implied needs. A quality product is not
necessarily a good product. In fact all products have quality, though the level of
quality may be very low in some products and very high in others. It is not always
true that a product with high quality will also be costly. Conversely, many times an
expensive product is low in quality. A cup of tea or coffee taken in a highway cafe
may taste better than what one gets in a five star hotel-though the cost in the two
places will be remarkably different.

TYPES OF INSPECTION
Inspection can be either preventive or corrective. Preventive inspection is
concerned with discovering defects, the cause of defects, and helping in the
removal of such causes. Corrective (remedial) inspection,on the other hand, deals
with sorting out good parts from the bad ones.

Statistical process control (SPC) is the application of statistical methods to the

monitoring and control of a process to ensure that it operates at its full potential to
produce conforming product. Under SPC, a process behaves predictably to produce
as much conforming product as possible with the least possible waste. While SPC
has been applied most frequently to controlling manufacturing lines, it applies
equally well to any process with a measurable output. Key tools in SPC are control
charts, a focus on continuous improvement and designed experiments.

Much of the power of SPC lies in the ability to examine a process and the sources
of variation in that process using tools that give weight to objective analysis over
subjective opinions and that allow the strength of each source to be determined
numerically. Variations in the process that may affect the quality of the end
product or service can be detected and corrected, thus reducing waste as well as the
likelihood that problems will be passed on to the customer. With its emphasis on
early detection and prevention of problems, SPC has a distinct advantage over
other quality methods, such as inspection, that apply resources to detecting and
correcting problems after they have occurred.

In addition to reducing waste, SPC can lead to a reduction in the time required to
produce the product or service from end to end. This is partially due to a
diminished likelihood that the final product will have to be reworked, but it may
also result from using SPC data to identify bottlenecks, wait times, and other
sources of delays within the process. Process cycle time reductions coupled with
improvements in yield have made SPC a valuable tool from both a cost reduction
and a customer satisfaction standpoint.

Statistica1 quality control (SQC) is the term used to describe the set of statistical
tools used by quality professionals. Statistical quality control can be divided into
three broad categories:
1. Descriptive statistics are used to describe quality characteristics and
relationships.Included are statistics such as the mean, standard deviation, the
range,and a measure of the distribution of data.
2. Statistical process control (SPC) involves inspecting a random sample of the
output from a process and deciding whether the process is producing products with
characteristics that fall within a predetermined range. SPC answers the question of
whether the process is functioning properly or not.
3. Acceptance sampling is the process of randomly inspecting a sample of goods
and deciding whether to accept the entire lot based on the results.
Acceptancesampling determines whether a batch of goods should be accepted or
rejected.
Statistical process control methods extend the use of descriptive statistics to
monitor the quality of the product and process. As we have learned so far, there
are common and assignable causes of variation in the production of every
product. Using statistical process control we want to determine the amount of
variation that is common or normal.Then we monitor the production process to
make sure production stays within this normal range. That is, we want to make
sure the process is in a state of control. The most commonly used tool for
monitoring the production process is a control chart. Different types of control
charts are used to monitor different aspects of the production process. In this
section we will learn how to develop and use control charts.
Developing Control Charts
A control chart (also called process chart or quality control chart) is a graph that
shows whether a sample of data falls within the common or normal range of
variation.
A control chart has upper and lower control limits that separate common from
assignable causes of variation. The common range of variation is defined by the
use of
control chart limits.We say that a process is out of control when a plot of data
reveals that one or more samples fall outside the control limits.
Figure 6-3 shows a control chart for the Cocoa Fizz bottling operation. The x axis
represents samples (#1, #2, #3, etc.) taken from the process over time. The y axis
represents the quality characteristic that is being monitored (ounces of liquid).
The center line (CL) of the control chart is the mean, or average, of the quality
characteristic that is being measured. In Figure 6-3 the mean is 16 ounces. The
upper control limit (UCL) is the maximum acceptable variation from the mean for
a process that is in a state of control. Similarly, the lower control limit (LCL) is the
minimum acceptable variation from the mean for a process that is in a state of
control. In our example, the upper and lower control limits are 16.2 and 15.8
ounces, respectively. You can see that if a sample of observations falls outside the
control limits we need to look for assignable causes.
SEQUENTIAL SAMPLING METHOD
Sequential sampling is a non-probability sampling technique wherein the researcher picks a single or a
group of subjects in a given time interval, conducts his study, analyzes the results then picks another
group of subjects if needed and so on.

ADVANTAGES OF SEQUENTIAL SAMPLING

• The researcher has a limitless option when it comes to sample size and sampling schedule. The
sample size can be relatively small of excessively large depending on the decision making of the
researcher. Sampling schedule is also completely dependent to the researcher since a second
group of samples can only be obtained after conducting the experiment to the initial group of
samples.
• As mentioned above, this sampling technique enables the researcher to fine-tune his research
methods and results analysis. Due to the repetitive nature of this sampling method, minor
changes and adjustments can be done during the initial parts of the study to correct and hone
the research method.
• There is very little effort in the part of the researcher when performing this sampling technique.
It is not expensive, not time consuming and not workforce extensive.

DISADVANTAGES OF SEQUENTIAL SAMPLING

• This sampling method is hardly representative of the entire population. Its only hope of
approaching representativeness is when the researcher chose to use a very large sample size
significant enough to represent a big fraction of the entire population.
• The sampling technique is also hardly randomized. This contributes to the very little degree
representativeness of the sampling technique.
• Due to the aforementioned disadvantages, results from this sampling technique cannot be used
to create conclusions and interpretations pertaining to the entire population.
• TQM is a philosophy which applies equally to all parts of the organization.
 Total quality management:
Total Quality Management (TQM) is an approach that seeks to improve quality and performance
which will meet or exceed customer expectations. This can be achieved by integrating all
quality-related functions and processes throughout the company. TQM looks at the overall
quality measures used by a company including managing quality design and development,
quality control and maintenance, quality improvement, and quality assurance. TQM takes into
account all quality measures taken at all levels and involving all company employees.

Principles of TQM

TQM can be defined as the management of initiatives and procedures that are aimed at achieving
the delivery of quality products and services. A number of key principles can be identified in
defining TQM, including:

• Executive Management – Top management should act as the main driver for TQM and
create an environment that ensures its success.
• Training – Employees should receive regular training on the methods and concepts of
quality.
• Customer Focus – Improvements in quality should improve customer satisfaction.
• Decision Making – Quality decisions should be made based on measurements.
• Methodology and Tools – Use of appropriate methodology and tools ensures that non-
conformances are identified, measured and responded to consistently.
• Continuous Improvement – Companies should continuously work towards improving
manufacturing and quality procedures.
• Company Culture – The culture of the company should aim at developing employees
ability to work together to improve quality.
• Employee Involvement – Employees should be encouraged to be pro-active in identifying
and addressing quality related problems.

Points regarding tqm:

• TQM can be viewed as an extension of the traditional approach to quality.

• TQM places the customer at the forefront of quality decision making.
• Greater emphasis on the roles and responsibilities of every member of staff within an
organization to influence quality.

All staff are empowered

UNIT-V
Environmental pollution is any discharge of material or energy into water, land, or air that
causes or may cause acute (short-term) or chronic (long-term) detriment to the Earth's ecological
balance or that lowers the quality of life. Pollutants may cause primary damage, with direct
identifiable impact on the environment, or secondary damage in the form of minor perturbations
in the delicate balance of the biological food web that are detectable only over long time periods.

Until relatively recently in humanity's history, where pollution has existed, it has been primarily
a local problem. The industrialization of society, the introduction of motorized vehicles, and the
explosion of the human population, however, have caused an exponential growth in the
production of goods and services. Coupled with this growth has been a tremendous increase in
waste by-products. The indiscriminate discharge of untreated industrial and domestic wastes into
waterways, the spewing of thousands of tons of particulates and airborne gases into the
atmosphere, the "throwaway" attitude toward solid wastes, and the use of newly developed
chemicals without considering potential consequences have resulted in major environmental
disasters, including the formation of smog in the Los Angeles area since the late 1940s and the
pollution of large areas of the Mediterranean Sea. Technology has begun to solve some pollution
problems (see pollution control), and public awareness of the extent of pollution will eventually
force governments to undertake more effective environmental planning and adopt more effective
antipollution measures.

Air Pollution Control Act

Before the Air Pollution Control Act of 1955, air pollution was not considered a national environmental
problem.

The Air Pollution Control Act of 1955 (Pub.L. 84-159, ch. 360, 69 Stat. 322) was the first
United States Clean Air Act enacted by Congress to address the national environmental problem
of air pollution on July 14, 1955. This was "an act to provide research and technical assistance
relating to air pollution control."[1] The act "left states principally in charge of prevention and
control of air pollution at the source."[2] The act declared that air pollution was a danger to public
health and welfare, but preserved the "primary responsibilities and rights of the states and local
government in controlling air pollution."[3] The act put the federal government in a purely
informational role, authorizing the United States Surgeon General to conduct research,
investigate, and pass out information "relating to air pollution and the prevention and abatement
thereof."[4] Therefore, The Air Pollution Control Act contained no provisions for the federal
government to actively combat air pollution by punishing polluters. The next Congressional
statement on air pollution would come with the Clean Air Act of 1963.

The Air Pollution Control Act was the culmination of much research done on fuel emissions by
the federal government in the 1930s and 1940s. Additional legislation was passed in 1963 to
better fully define air quality criteria and give more power in defining what air quality was to the
secretary of Health, Education, and Labor. This additional legislation would provide grants to
both local and state agencies. A replacement, the United States Clean Air Act (CAA), was
enacted to substitute the Air Pollution Control Act of 1955. A decade later the Motor Vehicle Air
Pollution Control Act was enacted to focus more specifically on automotive emission standards.
A mere two years later, the Federal Air Quality Act was established to define "air quality control
regions" scientifically based on topographical and meteorological facets of air pollution.

California was the first state to act against air pollution when the metropolis of Los Angeles
began to notice deteriorating air quality. The location of Los Angeles furthered the problem as
several geographical and meteorological problems unique to the area exacerbated the air
pollution problem.

Water pollution control act:

The Clean Water Act is the primary federal law in the United States governing water
pollution.[1] Commonly abbreviated as the CWA, the act established the goals of eliminating
releases of high amounts of toxic substances into water, eliminating additional water pollution by
1985, and ensuring that surface waters would meet standards necessary for human sports and
recreation by 1983.

The principal body of law currently in effect is based on the Federal Water Pollution Control
Amendments of 1972[2] and was significantly expanded from the Federal Water Pollution
Control Amendments of 1948. Major amendments were enacted in the Clean Water Act of
1977[3] and the Water Quality Act of 1987.[4]

The Clean Water Act does not directly address groundwater contamination. Groundwater
protection provisions are included in the Safe Drinking Water Act, Resource Conservation and
Recovery Act, and the Superfund act.