OPERATIONS MANAGEMENT CO2 MATERIAL

PROJECT MANAGEMENT- CPM PERT.

Overview of CPM and PERT Methodologies
The development of CPM/PERT, also known as network analysis, occurred in two
concurrent industrial and military lines.
The identification of CPM was obtained in the mid-1950s by M.R. Walker of E.I.Du Pont de
Nemours & Co. and J.E. Kelly of Remington Rand (Critical Path Method). It was calculated
particularly for the UNIVAC-I computer. The first test was carried out in 1958 when CPM was
utilized to construct a new chemical facility. During a servicing break at the Du Pont factory close
to Louisville, Kentucky, the method was utilized in March 1959. The 125 hours of idle time were
reduced to 93 hours.
PERT (Project Evaluation and Review Technique) was created in 1958 for the POLARIS
missile programme by the Critical Appraisal Branch of the U.S. Force's Special Projects office with
support from the Lockheed Missile Systems division and the consulting firm Booz-Allen &
Hamilton. and (NORC).
The strategies fundamentally follow the same premise and are network-oriented. In that
they both result in the creation of a project's time schedule, PERT and CPM are essentially time-
oriented methodologies. The key distinction between the two methods is that although PERT
describes the timelines for the various tasks as probabilistically, CPM believed that they were
deterministic. Project scheduling strategies are the name given to these methods.
Using the activity-on-node network structure, activities in CPM were seen as a system of
increasing amount.
- One estimate of the activity's duration
- Time-dependent activity
USED IN: Effective way of increasing for repeated tasks when activity time estimations may be
predicted with a high degree of confidence since prior experience exists.
Using the activity-on-arrow network structure, activities in PERT are often seen as a matrix of
association between the presence.
- A number of time estimations
Times of improbable movement
Was using FOR: Service management, especially for one-off tasks (such as r and d),
wherein time and cost predictions are frequently ambiguous. Conditional time estimations are
employed in this strategy.
Advantages of PERT/CPM
 Beneficial at many construction project phases
 Simple conceptually
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 Give slack time and the crucial path
 Offer project information
 Helpful in keeping track of prices
Capabilities of PERT/CPM
 Activities that are distinctly defined, autonomous, and stable
 Clearly defined connections of precedent
 An excessive focus on essential pathways
Usage of PERT and CPM
Various firms have adopted these methods to tackle a variety of problems, and today even public
bodies embrace them. These include
 Fabrication of a reservoir or a drainage basin in a territory
 Building or road construction
 Upkeep or overhaul of an oil refinery or aircraft
 Space travel
 Using PERT and COST to regulate a project's costs
 Creating a machine prototype
 The creation of supersonic aircraft
2.1 Basic Steps in PERT / CPM
This PERT/CPM program schedule comprises four main stages.
1. Planning
 The initial step in the design phase is to break down the larger project into smaller tasks. These
smaller initiatives are then divided up into engagements by the unit or division for research.
 The authority and obligations associated with each activity's relationship to other activities are
specified and established, along with the relationship itself.
 As a result, there is far less chance of neglecting any activity required for the project's
completion..
1. Scheduling
o The preparation of a time schedule outlining each activity's start and end timings as well
as how it relates to other project activities is the primary goal of the scheduling phase.
o Additionally, if a program is to be done on time, the program must also include the key
route jobs that require additional care.
o The quasi business schedule must specify how often space or float hours is accessible
for use when such tasks are postponed or when little resources need to be employed effectively.
Distributing Things
 To accomplish the intended outcome, funds allocated. A item is a physically component

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 with a limited time span, such as people, money, property, or hardware.
 • A methodical approach to resource allocation is required when you have scarce
resources and conflicting requests for the same sorts of resources.
 • The decision of which concession to accept when allocating resources is often made by
management.
Controlling
 This final phase of project planning is regulating. The usage of important pathway
approaches makes it simpler to identify issues that are vital to the particular project and to
employ the administration by standards concept.
 A stronger financial and technical control over the project is exerted by periodically
obtaining progress reports and upgrading the network.
 Periodic progress reports are made using arrow diagrams and time charts. For the
remaining phase of the project, a new strategy is chosen if necessary.
Integrating PERT and CPM Foundation
All these assistive devices follows the very same six steps. Here are the stages in detail:
I. Identify the Projects and all of the key duties or activities involved. The Project should be limited
to one start engagement but one conclusion activity (because it is dreamed up of several tasks).
I.Establish connections between the activities. Choose which tasks should come first and which
should come last.
II. Create the "Network" that links each activity. There should be separate event numbers
for each Activity. Where necessary, dummy arrows are employed to prevent counting two activities
the same.
I. Give each action a time estimate and/or a cost estimate.
II. Find the network path with the longest travel time. The vital route refers to this.
Plan, schedule, monitor, and oversee projects with the help of the networking. The core tenet of
CPM/PERT is that the critical path across the product or service provides, which consists of a
small number of activities, controls the project. The management skills might just be employed
most effectively by focusing on the precise actions that impact the outcome of the structural
systems if the "important" tasks can be identified and allocated to the appropriate individuals.

Non-critical operations can be delayed, preplanned, and given flexible resource allocations without
having an impact on the project as a whole.
When creating an activity network, there are five relevant questions to consider:
Is this an activity to start?
Is this an Activity to Finish?
What Action Came Before This?

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What Action Is Taken Next?
What Activity Is This Related To?
2.2 Organization in Diagram
A developer's design features uses specific specifications.
1. Exercise
Any distinct procedure with a start and end that includes water is referred to as an activity. An
archer with its head pointing in the manner the enterprise is headed is a frequent way to illustrate
an activity. There are four groupings created from all these.
1. Preceding tasks are referred to as precursor tasks because they must be finished right before
the beginning of another task.
2. Immediately succeeding activities are referred to be successor activities because they cannot
be started until one or earlier activities have been finished.
3. The term "concurrent activity" refers to tasks that can be completed simultaneously. It should
be emphasized that a certain activity may precede or follow a specific event or it may occur
simultaneously with a particular activity or a group of activities.
1. Dummy activity: A dummy activity is a task that uses no resources whatsoever but just
illustrates how dependent we are on technology.
In order to make the activity pattern clearer in the following two scenarios, the false activity is put
into the network.
 To differentiate between activities with similar starting and ending places
 To recognize and uphold the appropriate priority connection between actions not linked by
events.
 Think of a circumstance where A and B are happening at the same time, for instance. A is
necessary for C, while both A and B are necessary for D. The graphic illustrates how a fake activity
might be used to manage this problem.
1. Event
A time point that signals the conclusion of one behavior and the beginning of another is known as
an episode. This is often symbolized in a networking by a circle, which is also referred to as a node
or link.
The occasions are divided into three groups.
1. Merge events occur when many activities arrive to one event and join it at the same time.
2. Burst event: A burst event is when several activities depart an event at once.
3) Meld and Boom Event - An behavior may simultaneously undergo a merge occasion and an
explosion occurrence, which means that it might be dependent from both other interests and many
other blast events.
Sequencing
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The preservation of precedence relations is the primary need for network development. While
creating a network, the essential elements should always be kept in mind.
• Which position(s) comes before it?
What job(s) might be able to run simultaneously?
• Which job(s) will come after it?
• What determines when a job begins and ends?
The network is the foundation for all subsequent computations, thus it must be carefully designed.
a. Guidelines of Diagram Development
Rule 1
In the networks, each function is expressed from one only and one symbol.
Rule 2

Its same final events cannot be used to compare two different occupations.
Rule 3
Every time an additional activity is introduced to the networking, the prioritised connection as in
directions diagramming remains to be verified by examining the answers to the inquiries stated
beneath.
• What action has to be taken right away in order for this action to begin?

• What actions must be taken after this activity?

• What other activities need to take place at the same time as this activity?
When drawing a huge network, it's crucial to adopt some positive behaviour for an intuitive
network.
• Aim to stay clear of arrows that cross one another.
• Employ straight arrows.
• Avoid attempting to gauge an activity's duration by the length of its arrow.
• Make use of the left-to-right arrows. Avoid combining the vertical and standing directions.

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• If required, usage of arrows is permitted.
• Use dummies liberally in the preliminary draught, but none should be redundant in the finished
network.
• There is only once place of entrance into system, referred to as the with another, and then only
one place of extraction, defined as the final match.
2.2 Typical Network Drawing Mistakes
Technical drawings would be most frequently drawn with the 3 kinds of faults.
Dangling
Dangling in a network diagram refers to disconnecting one activity before all of the other activities
have finished. Operations (5-10) plus (6-7) weren't the cable network final functions. as depicted in
the image. Therefore, the graphic is incorrect and illustrates the flaw in hanging.
Looping or Cycling

In a network diagram, looping error is also referred to as cycle error. The fallacy of looping, which
is illustrated in the accompanying graphic, is the process of drawing an unending loop in a
network..
1. Redundancy

The mistake of redundancy is defined as the insertion of fake activity into network logic without a

need, as represented in the accompanying picture.

Both positive and negative aspects

The following benefits pertain to PERT/CPM.
• Connections (historical precedent connections) seen between components are outlined and
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made obvious using a PERT/CPM diagram.
• PERT/CPM enhances critical path identification and makes it visible,
• PERT/CPM makes it easier to identify slack, early starts, and late starts for each task.
• PERT/CPM allows for enhanced overlapping of activities and tasks where it is possible, which
may result in a project's length being shortened.
The foregoing are some drawbacks of PERT/CPM:
• There might be scores, tens, or even billions of actions and links with personal dependents.
Why the system charts are frequently cumbersome and huge, printing on special white vertical and
necessitating the printing of many pages.
Whilst coloring can help, typical PERT/CPM charts lack a timeframe, making it impossible to
indicate condition (e.g., a distinct colour for finished networks).
The PERT/CPM tables won't be used for project planning if they are too complicated.
Basic Schedules Numerical algorithms:
Critical Path in Network Analysis
The symbols employed are
(i, j) = Tail episode I and stem occurrence action
j Ei = Show's oldest recorded period of incidence
Lj = newest permitted encounter occurrence's time
j Dij = Application's anticipated timeframe for finishing (i, j)
(Es)ij = activity's earliest start time (i, j)
(Ef)ij = early activity completion time (i, j)
(Ls)ij = earliest period of activity onset (i, j)
(Lf)ij = earliest activity completion time (i, j)
The procedure is as follows
 Calculation of the Early Period (Ej): Upward Cross
Step 1
The computation starts at the base point and moves to the terminal node first. All forward pass
computations makes the straightforward assumption that the initial construction event will take
place as soon as feasible after time 0.
Step 2
i. i. This eldest event moment of the business end incident is equal to the youngest beginning
of the engagement I j), or (Es)ij = Ei.
ii. ii. The earlier timing plus the participation time equals the total completion timing of the
activities I j).
iii. i.e. (Ef)ij = (Es)ij + Dij or (Ef)ij = Ei + Dij
2. iii. The latest occurrence moment for activity j is equal to the greatest of all actions'

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 earliest completion times leading up to just that occasion, i.e., Ej = max [(Ef)ij for all
immediately preceding I j)]. either Ej = max [Ei + Dij]
calculation for the reverse path (for latest allowable time)
Step 1
Assume E = L for the last event. Keep in mind some forward pass estimations were used to
determine all E's.
Step 2
The development in three time of action is similar to such process time for activities I j).
j i.e. (Lf)ij = Lj
 Step 3
the activities time or perhaps the latest learning strategies of activity I j) Equals the greatest project
duration of I j) (Ls)ij =(Lf)ij - Dij or (Ls)ij = Lj - Dij
 Step 4
The minimal latest launch date for all actions coming from occurrence I is the development in three
time, therefore Li = min. "(Ls)ij for all direct descendants of I j)" = min [Lj - Dij] [(Lf)ij - Dij]
Calculating floats and slack periods
There are three kinds of floats
Total float – The length of time that a task might be completed after its earliest anticipated
deadline without having an impact on the project's mean length.
Mathematically
(Tf)ij = (Latest start – Earliest start) for activity ( i – j) (Tf)ij = (Ls)ij - (Es)ij or (Tf)ij = (Lj - Dij) - Ei
Free float – The amount of time that allows an activity to be finished after its earliest termination
date without having any negative effects on the application's element of a sequence.
Mathematically
(Ff)ij = (Earliest time for event j – Earliest time for event i) – Activity time for ( i,
j)
(Ff)ij = (Ej - Ei) - Dij
Independent float – The time period that an event's start can be deferred by, provided that the
prior operation has concluded at its latest completion time, while having any impact on any activity
that will start right after it..
Mathematically
(If)ij = (Ej - Li) - Dij
The negative independent float is always taken as zero.
Event slack - It is described as the interval seen between periods of the most recent and ancient
occurrence.
Mathematically
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Head event slack = Lj – Ej, Tail event slack = Li - Ei
3. Establishing the crucial route
Critical event – Important events are those that have minimal idle times. In other terms, the
occurrence I is considered crucial if Ei = Li
Critical activity – Functions are those that have practically zero volatility. In all other phrases, if a
delay in the beginning of a behavior that results in a slight delay in the full project deadline, that
activity is considered to be crucial.
Critical path – A program's critical route is the order in which crucial actions must occur. The
design phase determines the shortest amount of time needed to finish the task and serves as the
total distance in the networks between the beginning and ending events..

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 Unit 3
3.1 Worked Examples on CPM
3.2 PERT
3.3 Worked Examples
3.1 Worked Examples on CPM
Example 1
Determine the early start and late start in respect of all node points and identify
critical path for the following network.

Solution
Calculation of E and L for each node is shown in the network

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 Network Analysis Table
From the table, the critical nodes are (1, 2), (2, 5), (5, 7), (5, 8), (7, 10) and (8, 10)
From the table, there are two possible critical paths
i. 1 → 2 → 5 → 8 → 10
ii. 1 → 2 → 5 → 7 → 10
Example 2
Find the critical path and calculate the slack time for the following network

Solution
The earliest time and the latest time are obtained below

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 From the above table, the critical nodes are the activities (1, 3), (3, 5) and (5, 9)

The critical path is 1 → 3 → 5 → 9

Example 3
A project has the following times schedule

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 Construct the network and compute
1. TE and TL for each event
2. Float for each activity
3. Critical path and its duration
Solution
The network is

Float = TL (Head event) – TE (Tail event) – Duration

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The resultant network shows the critical path

The two critical paths are

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 i. 1 → 3 → 5 →7 → 8 → 9 →10
ii. 1 → 3 → 5 → 7 → 8 →10

3.2Project Evaluation and Review Technique (PERT)

A PERT analysis' main objective is to ascertain if an event will be finished by a specific date. The
PERT approach takes the uncertainty into account. The three time values are related to each
activity.
1. The optimistic time is the shortest amount of time that might be utilised to do the task. It implies
that everything goes off without a hitch. T0 exemplifies this.
2. The activity's most likely duration is an estimate of how long it would generally last. Based on
usual delays, this. The completion time will most likely be displayed with the highest frequency if a
graph between the completion time and the frequency of completions within that time period is
created. Tm suggests this.
1. Pessimistic time:
This is how long it would require finishing the task if everything went wrong. An optimistic estimate
states that just one hundred or twenty persons will require more time than this. Tp suggests this. In
PERT calculation, all values are used to obtain the percent expected value.
1. Expected time – According to the premise that the speed up the process follows
the beta distribution, it is the average amount of time an activity would need if it
were performed a significant number of times.
te = ( t0 + 4 tm + tp ) / 6
2. The variance for the activity is given by
σ2 = [(tp – to) / 6] 2
3.3 Worked Examples
Example 1

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 For the project

Find the earliest and latest expected time to each event and also critical path in
the network.
Solution

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 Te network is

The critical path is A →C →E → H → K

Example 2
A project has the following characteristics

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 Construct a PERT network. Find the critical path and variance for each event.
Solution

The network is constructed as shown below

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 The critical path = 1 → 2 → 4 → 6 → 7 →9 →10
Example 3
Calculate the variance and the expected time for each activity

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Example 4
A project is represented by the network as shown below and has the following data

Determine the following

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 1. Expected task time and their variance
2. Earliest and latest time
Solution
1.

2.
Earliest time
E1 = 0
E2 = 0 +7.8 = 7.8
E3 = 0 +20 = 20
E4 = 0 +33 = 33
E5 = 7.8 + 18 = 25.8
E6 = max [7.8 + 20, 20 + 9] = 29
E7 = max [33 + 9.8, 25.8 + 8, 29 + 4] = 42.8
Latest time
L7 = 42.8
L6 = 42.8 – 4 = 38.8
L5 = 42.8 – 8 = 34.3
L4 = 42.8 – 9.8 = 33
L3 = 38.8 – 9 = 29.8
L2 = min [34.8 – 18, 38.8 – 20] = 16.8
L1 = min [16.8 – 7.8, 29.8 – 20, 33 - 33] = 0
Exercise
1. What is PERT?
2. For the following data, draw network. Find the critical path, slack time after
calculating the earliest expected time and the latest allowable time

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 [Ans. Critical path: 1 → 3 → 7 → 10 → 12 →13]
3. A project schedule has the following characteristics

Construct a PERT network and find out

a. The earliest possible time
b. Latest allowable time
c. Slack values
d. Critical path
4. Explain the following terms
a. optimistic time
b. Most likely time
c. Pessimistic time
d. Expected time
e. Variance
5. Calculate the variance and the expected time for each activity
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 PRODUCTIVITY & QUALITY TOOLS
Productivity & Quality Tools
A productivity specialist always strives to achieve high productivity and quality. To be able to do
this, he/she must have the knowledge and competencies in different productivity and quality (P&Q)
tools which will help in improving the effectiveness and efficiency of an organization. P&Q tools are
grouped into two major groups – basic and advanced. Basic tools help an organization to identify
procedures, ideas, cause and effect, and other issues relevant in improving its performance, while
advanced tools involves more complex processes such as measurement techniques, statistical
data analysis, lean concepts, and the business excellence frameworks.

Basic
1. 5S – A systematized approach to organize work areas, keep rules and standards, and maintain
discipline. It utilizes workplace organization and work simplification techniques.


 Seiri (Sort) – Take out unnecessary items and dispose

 Seiton (Sytematize) – Arrange necessary items in good order
 Seiso (Sweep) – Clean your workplace
 Seiketsu (Sanitize) – Maintain high standard of housekeeping
 Shitsuke (Self-discipline) – Do things without being told or ordered
5. Quality Circle– involves a small group of employees from the same workplace organized to
identify problems and suggest solutions to work-related issues. A quality circle, also known as
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 Work Improvement Team, Synergy Team, and Support Team, has seven basic features: voluntary
in nature; small in size; homogenous in membership; projects within control; systematic and
scientific in approach, continuing in activity and universal in application.
6. Suggestion Scheme – A systematic approach to solicit innovative ideas for improvement. It
promotes two-way communication between management and employees wherein good ideas are
recognized and rewarded to encourage active participation. However, grievance, bargaining and
policy issues are not part of the themes for suggestions.
7. Practical IE – offers simple but systematic techniques to analyze operations, processes and
integrated systems with a view to improving efficiency, effectiveness and economy, and makes
inefficiencies visible. Among the practical IE techniques are:
 Method study – systematic examination of doing work in order to develop and apply easier and
more effective methods and reduce costs
 Work measurement – used to obtain time data for method study and establish standard time to
perform tasks
8. Quality Management – An approach to ensure that the desired quality of a good or service is
delivered. It covers quality planning, quality assurance, quality control and quality improvement.
ISO 9000 standards provide guidelines on how to establish QM systems.
9. Inventory Management – Approach to oversee and control the ordering, storage and use of
supplies, materials, components and other items that the organization will use for the production of
goods and services.
10. Energy Conservation – Reducing energy consumption through using less of an energy service.
11. Value Analysis/Value Engineering – An approach to improve the value of an item or process by
first understanding the functions of the item and their value, then by identifying its constituent
components and their associated costs. It then seeks to find improvements to the components by
either reducing their cost or increasing the value of their functions.
12. Productive Maintenance – A maintenance management approach that looks at maintenance as a
productive function, and considers that it should be the concern of every unit in the organization. It
aims to eliminate big losses on equipment effectiveness e.g. setup time, breakdown, speed losses,
waiting time, etc. All levels in the organization must cooperate in ensuring the productive
functioning of equipment and physical facilities.
13. Knowledge Management – An integrated approach of creating, sharing, and applying knowledge
to enhance productivity, profitability and growth.
14. Ergonomics – Making better use of human capacities (economize motions) and protect workers
from hazards and other poor work conditions that negatively affect worker’s occupation health and
productivity. Principles: – Safety – Comfort – Ease of use – Productivity – Aesthetics

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15. Green Procurement- Purchasing products and services that cause minimal adverse
environmental impacts. It incorporates human health and environmental concerns into the search
for high quality products and services at competitive prices.
Advanced
13. ICT/ Digital Era Government/ E-Government – Involves the use of computer technology and
conversion of manual records into computer files to automate data and transaction processing thus
minimizing or removing manual work and intervention that is susceptible to corruption
14. Shared Services – A strategy to “move out” major support processes out of individual units by
“concentrating them” in order to improve cost efficiencies, service levels, and responsiveness.
15. Re-engineering –Strategic review, analysis, and redesign of structure, workflows, and processes
to achieve higher efficiency, effectiveness and economy.
16. Total Quality Management and Business Excellence – A managerial approach centered on
quality based on participation of all members and aimed at continually improving performance over
the long term by focusing on customers while addressing the needs of all stakeholders.
17. Lean Management – A management philosophy that seeks to maximize value to customers, both
internal and external while simultaneously removing wasteful activities and practices.
18. Operations Research – Employing scientific and mathematical techniques to determine optimal
or near-optimal solutions to complex decision making:


 Mathematical optimization
 Queuing studies
 Simulation
 Econometric analysis
 Data envelopmental analysis
PRODUCTIVITY CONCEPTS
What Is Productivity and How to Measure It Explained
What Is Productivity?
Productivity, in economics, measures output per unit of input, such as labor, capital, or any
other resource. It is often calculated for the economy as a ratio of gross domestic product (GDP)
to hours worked.
Labor productivity may be further broken down by sector to examine trends in labor growth,
wage levels, and technological improvement. Corporate profits and shareholder returns are
directly linked to productivity growth.
At the corporate level, productivity is a measure of the efficiency of a company's production
process, it is calculated by measuring the number of units produced relative to employee labor
hours or by measuring a company's net sales relative to employee labor hours.
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KEY TAKEAWAYS
 Productivity, in economics, measures output per unit of input.
 When productivity fails to grow significantly, it limits potential gains in wages, corporate
profits, and living standards.
 The calculation for productivity is output by a company divided by the units used to
generate that output.
 Auto giant Toyota and online marketplace king Amazon are prime examples of businesses
with an impressive level of productivity.
 Productivity in the workplace refers simply to how much "work" is done over a specific
period of time.
Productivity
Understanding Productivity
Productivity is the key source of economic growth and competitiveness.
A country’s ability to improve its standard of living depends almost entirely on its ability to
raise its output per worker (i.e., producing more goods and services for a given number of hours
of work). Economists use productivity growth to model the productive capacity of economies and
determine their capacity utilization rates. This, in turn, is used to forecast business cycles and
predict future levels of GDP growth.
In addition, production capacity and utilization are used to assess demand and inflationary
pressures.
4 Types of Productivity Measures
Labor Productivity
The most commonly reported productivity measure is labor productivity published by
the Bureau of Labor Statistics. This is based on the ratio of GDP to total hours worked in the
economy. Labor productivity growth comes from increases in the amount of capital available to
each worker (capital deepening), the education and experience of the workforce (labor
composition), and improvements in technology (multi-factor productivity growth).1
However, productivity is not necessarily an indicator of the health of an economy at a given
point in time. For example, in the 2009 recession in the United States, output and hours worked
were both falling while productivity was growing (hours worked were falling faster than output). 2
Gains in productivity can occur both in recessions and in expansions—as it did in the late
1990s—so one needs to take economic context into account when analyzing productivity data.3
Total Factor Productivity
There are many factors that impact a country’s productivity. Such things include investment
in plant and equipment, innovation, improvements in supply chain logistics, education, enterprise,
and competition.

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 The Solow residual, which is usually referred to as total factor productivity, measures the
portion of an economy’s output growth that cannot be attributed to the accumulation of capital and
labor.
It is interpreted as the contribution to economic growth made by managerial, technological,
strategic, and financial innovations.
Also known as multi-factor productivity (MFP), this measure of economic performance
compares the number of goods and services produced to the number of combined inputs used to
produce those goods and services. Inputs can include labor, capital, energy, materials, and
purchased services.4
Capital Productivity
Capital as a productivity measure looks at how efficiently physical capital is being used to
create goods or services. Physical capital includes tangible items, such as office equipment, labor
materials, warehouse supplies, and transportation equipment (cars and trucks).
Capital productivity is calculated by subtracting liabilities from physical capital. You then
divide the sales number by the difference. A higher capital productivity number shows that
physical capital is being used efficiently in the creation of goods and services while a lower capital
productivity number shows the opposite.
Material Productivity
Measuring productivity by materials looks to measure output by the materials consumed.
Materials consumed can be heat, fuel, or chemicals in the process to create a good or service. It
analyses the output generated per unit of material consumed.
Productivity and Investment
When productivity fails to grow significantly, it limits potential gains in wages, corporate
profits, and living standards. Investment in an economy is equal to the level of savings because
investment has to be financed from savings. Low savings rates can lead to lower investment rates
and lower growth rates for labor productivity and real wages. This is why it is feared that
when savings rates in the U.S. are low, it could hurt productivity growth in the future.
A big question is what role quantitative easing and zero interest rate policies (ZIRP) have
played in encouraging consumption at the expense of saving and investment. For instance,
during periods of lax monetary policy where credit is accessible and affordable, consumers are
more likely to incur debt and decrease savings in pursuit of mortgages, loans, or other major
purchases. It is only when monetary policy is tightened and rates rise that the economy
encourages saving and ultimately future investment.
 Productivity is largely determined by the technologies available and management's willingness
and know-how to make process improvements.

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 Companies can also choose to spend money on short-term investments and share
buybacks rather than investing in long-term capital. Some economists call for corporate tax
reform to better incentivize investment in manufacturing, infrastructure, or long-term assets. For
now, entities may still pursue long-term investment endeavors to maximize efficiency and
productivity; however, for some, it may be easier and worth more to pursue short-term capital
strategies.
Last, some economists may argue the pre-pandemic society will continue to bolster
productivity growth in the future. The reasoning behind this theory is workers can now focus more
on "higher-value" tasks relying on technology, mobility, and scalability. As more entities shift away
from strictly on-premises operations, greater infrastructure investments are needed to handle a
hybrid or fully-remote entity.
How to Calculate Productivity
The calculation for productivity is straightforward: divide the outputs of a company by the
inputs used to produce that output. The most regularly used input is labor hours, while the output
can be measured in units produced or sales.
For instance, if a factory produced 10,000 widgets last month while being billed for 5,000
hours’ worth of labor, productivity would simply be two widgets per hour (10,000 / 5,000).
Sales can also be used as a measure of output. For that factory, let's say 10,000 widgets
translate into $1 million dollars in sales. One simply needs to divide the $1 million figure by 5,000
labor hours in order to get the productivity number: $200 in sales for each hour of labor.
Real-World Example
Auto manufacturing giant Toyota offers a prime example of high-end productivity in real
life. The company has very humble beginnings but has grown to become one of the largest and
most productive car manufacturers in the world. Its "Toyota Production System" (TPS) is one of
the main reasons for that.5
TPS includes a few of the following principles:
 An environment of constant learning and improvement
 Standardizing systems for consistent quality
 The elimination (not just reduction) of waste
By enacting TPS practices into its manufacturing every day, Toyota ensures the company is
continually improving, operating at a high standard, and resources are not being lost.
What Are the 4 Essential Components of Productivity?
Productivity can be looked at in a variety of ways, particularly if one is referring to the
productivity of an individual or of a corporation. For an individual, the four essential components
of productivity include (1) strategy, or the ability to plan, (2) focus, or the ability to pay attention to
one task at a time, (3) productive choosing, or the ability to choose the most important tasks and

29
make the right choices, and (4) consistency, the ability to work at a consistent pace and
incorporate all of the above in your tasks.
What Is Productivity in the Workplace?
Productivity in the workplace refers simply to how much "work" is done over a specific
period of time. Depending on the nature of the company, the output can be measured by things
like customers acquired, phone calls made, and, of course, sales gained. An overarching goal of
a company should be to maximize productivity without sacrificing product quality and being
efficient with company resources.
How Can You Improve Personal Productivity?
Some basic ways to increase personal productivity on a daily basis include:
 Listing tasks in order of importance and tackling them one by one
 Completing your most hated tasks before all the others
 Taking well-calculated breaks to boost overall production
 Exercising regularly
 Eating a healthy diet
What Factors Affect Productivity?
In the workplace, factors that affect productivity include compensation (salary/wage), work
environment, training, career development opportunities, wellness, diversity, increased
responsibility, and management quality.
How Do You Show Productivity at Work?
Ways to show productivity at work are setting goals, focusing on one task at a time,
meeting deadlines, being on time, taking breaks, focusing on the largest tasks first, blocking out
your calendar, having productive meetings, and delegating tasks.
The Bottom Line
The concept of productivity is simple: at a given level of input, there is a given level of
output. More productive societies and processes will yield more output at the same level of input.
Whether it is viewed from an economic standpoint, company standpoint, or personal standpoint,
being able to measure and track productivity can be crucial to long-term success.

QUALITY CIRCLE-KAIZEN-VALUE ANALYSIS AND VALUE ENGINEERING –

Quality Circle | Quality Circle meaning | Steps | Objectives
A Quality Circle or Quality Control Circle is a group of people from the same area,
coming together voluntarily to identify, analyze the work area problems, and find effective
solutions.
The quality circle members present the solutions to management and implement them after
approval. Review and follow-up of implementation are also the responsibility of the QC members.
30
Quality Circle projects provide better results when combined with Lean
Manufacturing and TQM best practices.
What is a Quality Circle? Quality Circle definition
 Quality Circle is a voluntary group of 4 to 6 members.
 Members are usually from one section or department.
 One senior member acts as a facilitator
 Identify a problem in the work area, meet and discuss the problem regularly, ideally once a
week.
 Identify and implement solutions in a standardized methodology.
History of Quality Circle
Dr. Kaoru Ishikawa (1915-89) known as “Father of Quality Circle” for his role in starting Quality
Control Circles(QCC) in Japan in the 1960s to improve Quality, Productivity, and the work
environment.
QCC is known as  Quality Circles in India and in many nations. Quality Circles term was
most accessibly defined by Dr. K. Ishikawa in his book, ” What is Total Quality Control?
Toyota liked the quality circle idea and started this concept throughout their production system and
other areas of the manufacturing process. Companies around the world realize the importance of
this concept and began implementing this strategy. The quality circle concept got more popular in
the 1960s, 1970s, 1980s and now being used worldwide in the industries along with TQM and
Lean Manufacturing best practices to improve quality and productivity.
Why Quality Control Circle?
 Workforce knows best about the work area.
 With proper support, most of their problems will be solved by themselves.
 QC Circle raises morale and team spirit.
 Work becomes safer and easier.
 Improve quality and efficiency of work
How does the QC circle work?
Training on problem-solving tools and techniques like 7 QC tools, 8D, 5Whys, and  etc. must
be given to the workforce for effective implementation of QC Circles projects in an organization.
The quality circle steps include:
 Step 1: Training on 7 QC tools and
 Step 2: Forming and naming quality circles-
 QC circles are formed with 4 to 6 members.
 One member acts as a leader by rotation.
 One supervisor acts as a facilitator.
 Step 3: Identify Quality Circle themes

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  Step 4: Select a project based on priority.
 Step 5: Find the best solution using standardized methodology.
Quality Circle Structure
QC structure include:
 QC Administrator
 Facilitator
 Leader
 Members

The main role and responsibilities of each one are:

QC Circle member
 Participate in the discussions.
 Weekly meeting adherence.
 Brainstorm and select problems.
 Discuss and sort out useful ideas.
 Implement and check the benefits.
 Present to the top management.
QC Circle leader
 Responsible for weekly meetings.
 Agenda for a weekly meeting.
 Lead roll-on presentation to top management
QC facilitator
 Generally the area supervisor.
 Key role in presenting the project- act as a teacher, Coach, Guide, & Motivator.
 Coordinate with the departments.
 Responsible for the effectiveness of the circle.
QC administrator
 A bridge between top management and the QCC members.
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  Project planning – Annually/Monthly.
 Monitoring weekly meetings.
 Taking responsibility for QCC related training.
 Arranging monthly management presentations
 Rewards / Recognition
Quality Circle Steps
1. Defining the Problem
2. Analyzing the Problem
3. Identifying the Cause
4. Finding out the Root Cause
5. Data Analysis on Root Cause
6. Developing Solution
7. Foreseeing Possible Resistance
8. Trail, Implement and Checking Performance
9. Regular Implementation
10. Follow – up / Review
Quality Circle Tools | Quality Circle Techniques
The workers should be given in-depth exposures to basic 7 qc tools of quality, Poka Yoke
and Kaizen techniques.
The most common QC tools and techniques used in QC Circle projects to analyze the
problem, discover the root causes and helps to implement the effective countermeasures are:
7 QC Tools
 Check sheet
 Fishbone diagram or Cause and effect diagram
 Pareto chart
 Control Chart
 Histogram or Frequency distribution chart
 Stratification of data
 Scatter diagram
There are some other potential quality tools used in quality circles techniques to analyze and
solve the quality problems effectively:
 Process flow diagram
 Bar graph or charts
 Process mapping tools
 Run Chart
 Why-Why Analysis

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Kaizen: The kaizen principle or objective is the continuous improvement in the product and
process quality by eliminating waste and creating values.
Guidelines for Quality Circles Success
Once the Quality Circles are initiated in any organization, it is the responsibility of the top
management to nurture them and pay attention to all relevant aspects related to QC project.
 The QC member should attend the meeting regularly, punctually, and work in groups in the
desired manner.
 Circle members should participate actively in the discussions and learn the techniques and
new things taught to them.
 Training on 7 QC tools and kaizen must be given to all circle members.
 The circle must select the leader from within its own members.
 A circle must have one facilitator and QC administrator who guide and support QC projects.
 The Quality Circle meeting’s discussion points must be maintained in a record book and
should be verified by the coordinator in the organization for correction and effectiveness.
 Circle follows the agenda without wasting time and listening to others while putting their
points of view and suggestions.
 Quality circle members must maintain proper records about their activities.
The following points must be covered in the QC record book:
 QC Circle theme, section, department, and organization address.
 Meeting date, time, duration, and place of meeting.
 Quality Circle movement start date, when the circle was formed, and date of inauguration.
 The number of problems identified by them since functioning, their classification, and the
number of problems solved so far.
Introduction

Today, every industrial organization come across words like Total Quality Management,
Kaizen, Kanban, Quality Circles etc; and laudatory references to the excellence of the Japanese
style of management. In order to understand and evaluate what these mean, it is relevant here to
look at the Japanese approach to management as opposed to our understanding of the mere
familiar conservative, authoritarian style of management.
The Japanese management approaches to excellence in achievement in any sphere is the
front line human being who actually does the job or performs. The individual must be given a
feeling of being in an extended family at his workplace through an appeal to tribal togetherness
superimposed on a corporate structure.
Every organization of industrial sector and from top management executives to shopfloor
level workers is now aware regarding concept of ‘quality’. It is the buzzword in industrial world.
As with every new concept, ‘quality’ too, has entered in the Indian industry with its own concepts
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 like, TQM, Kaizen, Quality circle etc. Therefore, it is necessary to understand these concepts,
because HRD activities are directly related with these concepts in almost all the industrial
organizations. The researcher has explained these concepts and the relationship among these
concepts in the following paragraphs.
3.1 Concept of Kaizen
‘Kaizen’ is a Japanese word which means continuous improvement. Improvement
or innovations has been the cornerstone of all development. Moreover, Kaizen means
continuing improvement in personal life, home life, social life and also working life. When
applied to the workplace kaizen means continuing improvement involving every one-
managers and workers alike.
Human beings are in a constant state of flux-thinking about ways and means by
which processes can be made faster, more efficient, more useful. People make these
improvements everyday, either at the workplace or at home. It is really very rare that an
individual does not think of improvements. Kaizen provides an opportunity to bring about
improvement. Workers are given the freedom to innovate at their workplace without
breaking rules and regulations and also without expecting rewards. It requires no
investment and once the improvements are made, however small they might be, they are
reported on a regular basis. While improvements are important, regular work cannot be
dispensed with.1
Organized kaizen activities involving everyone in a company, managers and
workers in a totally integrated efforts towards improving performance at every level. This
improved performance is directed toward satisfying such cross functional goals as
quality, cost, scheduling manpower development and new product development. It is
assumed that these activities ultimately lead to increased customer satisfaction.
When the Process or technique, by which a particular task is accomplished, is
altered for the better and yields positive results, then the alteration to routine can be
termed as improvement. Kaizen originates from the Japanese words “kai” meaning
“Change” and “Zen” meaning “for the better”. Change for the better becomes an ongoing
process when every person keeps making improvements (no matter how small), very
frequently. These small improvements help workers to grow by stretching their
capabilities.
Workers working in organizations often feel that their potential is not fully tapped.
But when Kaizen is introduced, then they can contribute much more and in the process
also achieve personal growth. One of the objectives of kaizen is to stimulate team spirit.
Improvements made by collaborating with others and considered superior and hence
rated higher than improvements carried out alone. Kaizen stimulates creativity and thus

35
aids in self-development of workers.
It should be noted that many small improvements are preferred to a single, major
improvement. Kaizen is a motivational system. Its primary aim is to achieve 100 percent
motivation in the people and create an atmosphere that encourages continuous
improvement. Kaizen deals with feelings that need to be carefully nurtured. The main
thrust is on cultivating an attitude that is improvement.2
The concept of kaizen is crucial to understanding the differences between the
Japanese and Western approaches to HRD and management, Japanese industries
become the gentle giant of the East and got a competitive edge over the West because
of kaizen and its process-oriented way of thinking. On the other hand, Indian industries
implementing kaizen with a view to get more competitive and achieve total quality is
exactly the opposite of what Japan did. The cause and effect relationship is exactly the
opposite in the case of Japan and India.3
Indian industries need to follow the example of Japanese customer satisfaction is
where it’s at. Only if the customer is satisfied, then an organization can grow. Today,
with the globalization and liberalization upon us, superlative quality in all stages of
production is the need of the hour, and by applying the principles of kaizen, any
organization can surely achieve it. Kaizen is a concept which covering most of these
“uniquely Japanese” practices that have recently achieved such worldwide fame. These
practices are -1) Customer orientation 2) Total Quality Management 3) Quality Circles 4)
Suggestion Scheme 5) Discipline in the work place. 6) Cooperative relationship between
workers and management etc (4)
In order of importance, the improvements are broadly grouped as-1) normal work
done by a different method (highest importance)2) normal work which could not be done
due to lack of non-availability of time and 3) work that is totally unrelated to the normal
job (least importance). Most often, workers carryout their daily work in set, laid down
procedure. Then, one worker introduces a change. It is only to be expected that such
developmental work will eat into his already tight schedule. Therefore, one has first to
reduce the time taken for completing regular tasks on hand, for, if the regular schedule is
not adhered to, other improvements will only overload the workers. This is against the
basic principles of kaizen and hence the innovation that speeds up or improves routine
work is accorded highest priority.
In nutshell, since, kaizen is an ongoing process and involves everyone in the
organization, everyone in the management hierarchy is involved in some aspects of
kaizen. The aspects related to the top management, supervisors and workers at
shopfloor level are explained in the following table.

36
 Table No. - 3.1
Aspects of kaizen related to top management supervisors and workers
Top Management Supervisors Workers at
Shopfloor level
Be determined to Use kaizen in Engage in kaizen
introduce kaizen functional through the
as a corporate roles suggestion system
strategy and small
group activities
Provides support Improve Practice discipline
and direction for communication in the workshop
kaizen by allocating with workers and
resources sustain
high morale
Establish policy Support small group Engage in continuous
for kaizen and activities (such as self development to
cross functional Quality circles) and become better
goals. the individual problem solvers.
suggestion
system.
Realize kaizen Introduce discipline Enhance skills and
goals through in the workshop job performance
policy expertise
deployment and with cross education.
audits
Build systems, Provide ---
procedures and kaizen
structures, suggestion
conducive
to kaizen.
3.2 Concept of Total Quality Management (TQM)
Total Quality Management (TQM) is an approach / philosophy that is becoming
more popular since the early 1980’s. It is mainly aimed at maximizing the productivity
and minimizing the cost. Also it focuses on improving the value and ethics of the
organization, for organizational excellence. Since, individual workers are the basic
structural and functional unit of the organization; total quality management is not only a
37
process of quality control to produce quality products from natural and produced
resources, but also to produce ‘quality humans’.
Total Quality Management is important because it is about building quality from
the beginning and making quality everyone’s concern and responsibility. The term
Quality Management = Quality + Management. Quality, both in terms of people and
management makes it total quality management. Since individuals were key to
successful attainment of quality goals and assets depends on people to create value,
organizations can rise only to the limits of their people’s capacities, skills and
motivations.
Total quality management is the approach to integrate all aspects of quality
assurance with managerial efforts towards enhanced customer satisfaction and
employee contentment while protecting and increasing the shareholders interest. The
word ‘Total’ in Total Quality Management differentiates this approach from the traditional
inspection, quality control, or quality assurance approach. TQM is an overall approach
formulated at the top management level and diffused throughout the organization. All
employees right from the CEO to daily rated workers at the lowest level are involved in
the TQM process.
Quality in TQM not only signifies defect-free products. TQM is really more
concerned with quality service than quality products. In TQM ‘Quality’ is defined as
‘meeting and exceeding customer expectations’.
The term ‘management’ in TQM emphasizes that this is a management approach,
not just a narrow quality control or quality assurance functions. It is a people-oriented
approach and everyone in the organization must be involved in it.
Total Quality Management encompasses all aspects of management such as
decision making, problem solving, integration of quality planning, quality implementation
and quality improvement strategies throughout he organization. It is a dynamic process
involving all levels of employees. Total quality management requires that people assume
leadership throughout the organization.
There are a number of approaches and techniques being used by organizations,
but all of them can not and in fact, should not be implemented simultaneously. The TQM
approach emphasizes planned changes through human processes. Therefore if the
techniques are implemented without proper ‘needs – assessment’, they may stifle
progress. This shows the role of Human Resource Development (HRD) in making a
decision to implement TQM and for further facilitation of the efforts is crucial.
Most Total Quality Management failures result from the ‘under- consideration of
individual factors (forced participation, threats to / from management control, no working

38
human resources development model, or other people problems) so it becomes
important for Human Resource Development to perform total Quality Management. So
the first step in total quality management as stated earlier is about developing Total
quality individuals, instilled with integrity, ethics and or deeper values, for individual, and
organization.
Total Quality Management has been defined in a variety of ways, meaning a
quest for excellence, creating the right attitudes and controls to make prevention of
defects possible and optimize customer satisfaction by increased efficiency and
effectiveness. Oakland defines; “TQM” is an approach to improving the effectiveness and
flexibility of organization as a whole. Total Quality Management can be viewed as a
process, where in the top management along with other people in an organization worker
to improve the product quality, work environment continuously at all stages, at all levels
with the aim of improving customers and employees satisfaction.
To many organizations, TQM means a total operation philosophy, which covers
every aspects of organization and set of guiding principles that respect the foundation of
a continuously improving organization. TQM is the application of scientific principles to
an organization, all the processes within an organization and the degree to which the
needs of the customer are met now and in the future.9
Total Quality Management is a pragmatic, long term systems approach initiated
and driven by the top management to bring about a total cultural change and interlink
and integrate every one, every function, every process and every activity of an
organization through cross function involvement and participation of people to meet
the dynamic needs of the customer and to create loyal but at the same time a
diversified customer base.
There are some important features which are as follows-
1) Continuous improvement embodies the fundamental principle of Total Quality
Management. Both incremental and breakthrough improvement are
encouraged by using improvement tools and techniques and learning from within
the organization and through external benchmarking. Training reinforces this role
for everyone in the organization.
2) Total Quality Management focuses every aspect of the organization’s activity
towards customer-oriented right first time approach. The entire organization
understands the internal working relationship and the interdependence of each
worker and process as customers and suppliers.
3) Total Quality Management calls for pro-active and systematic reviews and
measurement of key processes that add value.

39
 4) Total Quality Management philosophy is to guide a Process of change and
starts at the top. Total Quality Management ensures that quality be recognized as
a corporate strategic priority, along with financial and other priorities.
5) Total Quality Management is about achieving results by process-based
approaches and focuses on the customer.10
The training of all the workers is the fundamental building blocks for successful
implementation of Total Quality Management in the entire organization. Training of Total
Quality Management help to workers to—
a) Develop an understanding of the fundamentals of quality
b) Create awareness and perspective of the important quality issues.
c) Provide tools to help for build and use quality system to achieve business
objectives.
d) Provide an opportunity for free communication
e) Generate creative ideas which are helpful in diagnosing and solving quality
problems.
f) Facilitate development of mutual understanding and cooperation among different
workers from various departments.
g) Improve the morale and human relation climate in the organization.
h) Create awareness in workers regarding quality problems and challenges.
i) Develop the knowledge base and pertinent skills in workers which are needed to
solve the problems.
From the above discussion it is clear that, Total Quality Management is an
intangible investment, not regarded as such by the economists, is equally, if not more
important for economic growth. The philosophy of Total Quality Management stresses a
systematic, integrated, consistent organization-wide perspective, involving everyone and
everything. It focuses primarily on total satisfaction for both the internal and external
customers within a organizational environment that seeks continuous improvement of all
systems and process. Total Quality Management emphasizes on the use of all people,
usually in multifunctional teams to bring about improvement from within the organization.
It stresses optimal life-cycle costs and uses measurement within a disciplined
methodology in achieving improvements. The key aspects of Total Quality management
are the prevention of defects and emphases on quality in design.
It is also relevant here to study the relation between kaizen and Total Quality
Management, Kaizen and Quality Circles, Kaizen and suggestion schemes, Kaizen and
Innovations.
3.3 Relation between Total Quality Management and Kaizen

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 Kaizen has grown into a full-fledged management tool for involving everyone in
the organizational activities. Such organizational wide activities are often referred to as
Total Quality management. Total Quality Management and kaizen activities are
involving every one in the company, mangers and workers alike. Total Quality
Management and it is never quite the same from one day to next day.
Total Quality Management is a movement centered on the improvement and the
cost reduction. When speaking of “Quality” one tends to think first in terms of product
quality. In Total Quality Management the first and foremost concern is with the quality of
people. Installing quality into people has always been fundamental to Total Quality
Management. The three building blocks of business are hardware, software and
“humanware”. Only after the humanware is squarely in place; should the hardware and
software aspects of business be concerned. Building quality into people means
achieving objectives of Kaizen strategy and helping workers to become quality
conscious. Both fundamental and cross functional problems arise in the work
environment, and workers must be helped to identify these problems. Then they must be
trained in the use of problem-solving tools, so that, they can deal with the problems they
have identified. Once a problem has been solved, the result must be standardized to
prevent recurrences. By going through this never ending cycle of improvement, the
people can become kaizen minding and build the discipline to achieve kaizen in their
work. Management of any organization can change the work culture by building quality
into workers, but this can be done only through training of kaizen and Total Quality
Management concepts.11
3.4 Kaizen and Suggestion Scheme
Management makes a concerted effort to involve workers in Kaizen activities
through ‘suggestions’. Thus, the ‘suggestion system’ is an integral part of the
establishment of management system. The number of workers’ suggestions is regarded
as an important criterion in reviewing the performance of these workers’ supervisor.
It is not uncommon for top management of a company to spend a whole day
listening to presentations of activities by ‘Quality Circles’ and to giving awards based on
predetermined criteria. Management is willing to give recognition to workers’ efforts for
improvements and makes it concern visible wherever possible. Often the number of
suggestions is posted individually on the wall of the workplace in order to encourage
competition among workers.
Thus, through suggestions, employees or workers of shopfloor level can
participate in kaizen in the work place and play a vital role in upgrading standards.12
3.5 Kaizen and innovation

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 One big difference between kaizen and Innovation is that kaizen does not
necessarily call for a large investment to implement it. It does not call for a great deal of
continuous efforts and commitment. The difference between the two opposing concepts
may be linked to that of staircase and slope. Thus, whenever an innovation is achieved,
it must be followed by a series of kaizen efforts to maintain and improve it. Kaizen
strategists believe that standards are by nature tentative, akin to stepping stones with
one standard leading to another as continuing improvement efforts are made. (13)
‘Suggestion Scheme’ is an incentive which provides opportunity to satisfy. Self-
expression, needs for social approval through recognition and even need for many which
is so basic in modern societies. For management of an organization it may provide
valuable suggestions from workers.
3.6 Implications of Quality Circles for Kaizen
Management is usually concerned with such issues as productivity and quality.
Any serious discussion of quality, for instance, soon finds itself entangled in such issues
as how to define quality, how to measure it and how to relate it to benefits. There are as
many definitions of quality as there are people defining it, and there is no agreement on
what quality is or should be. The same is true of productivity. It means different things to
different people. Perceptions of productivity are miles apart, and management and
labour are often at odds over this very issue.
Whenever and wherever improvements are made in business, these
improvements are eventually going to lead to improvements in such areas as quality and
productivity. The starting point to improve is to recognize the need. If problem is
recognized, there is no recognition of the need for improvement. Kaizen emphasizes
problem-awareness and provides clues for identified problems to be solved, thus kaizen
is also a problem-solving process. In fact, kaizen requires the use of various problem-
solving tools. Improvement reaches new heights with every problem that is solved.
In order to consolidate the new level however, the improvement must be
standardized. Thus, Kaizen also requires standardization. Such terms as QC (Quality
Control), Quality Circles and Total Quality Management often appear in connection with
Kaizen. To avoid confusion, it may be helpful to clarify these terms here. The work
quality has been interpreted in many different ways and there is no agreement on what
actually constitutes “Quality”.
In its broadest sense, quality is any thing that can be improved. In this context,
quality is associated not only with products and services but also with the way people
work, the way machines are operated, and the way systems and procedures are dealt
with. It includes all aspects of human behavior. This is why it is more useful to talk about

42
 kaizen than talk about quality or productivity.
Deming also introduced the “Deming Cycle,” one of the Crucial Quality Control
tools for assuring continuous improvement (i.e Kaizen ). The Deming Cycle is also called
the deming wheel or PDCA (i.e. Plan-D-Check-Action) Cycle
Figure No. 3.1
Deming Cycle

Design

Research Deming Wheel Production

Sales

Above Figure shows that Dr. Deming stressed the importance of constant
interaction among research, design, production and sales. In order for organization to
arrive at better quality that satisfies customers. He taught that this wheel should be rated
on ground of quality, first perceptions and quality. First responsibility with this process,
Deming argued, the company could win consumer’s confidence, acceptance and
prosper.
A Quality Circle is defines as a small group that voluntarily performs
quality-control activities within the workshop. The Quality Circes are only part of a
companywide programme; it is never the whole of Total Quality Management. Quality
Circle has grown into a full-fledged management tool for Kaizen involving everyone in
the organization. Such organization-wide activities are often referred to as Total Quality
Management. Total Quality Management and Kaizen activities are involving everyone in
the organization, managers and workers alike.
Value Engineering – A Technique for Improvement
Value Engineering – A Technique for Improvement
Value engineering is a systematic application of recognized techniques which (i) identify the
function of a product or service, (ii) establish a value for that function, and (iii) provide the
necessary function reliably at the least overall cost. The value of a function is defined as the
relationship of cost to performance. Hence maximum value = maximum performance / minimum

43
cost. In all cases, the needed function is to be achieved at the lowest possible life cycle cost
consistent with requirements and / or performance, maintainability, safety and aesthetics. Value
engineering is a management technique which seeks the best functional balance between cost,
quality, and performance of a product, project, process, system or service (Fig 1).

Fig 1 Role of value engineering

Value engineering is an organized / systematic approach directed at analyzing the function
of systems, equipment, facilities, services, and supplies for the purpose of achieving their essential
functions at the lowest life-cycle cost consistent with required performance, reliability, quality, and
safety. The implementation of the value engineering process on a problem typically increases
performance, quality, reliability, safety, durability, effectiveness, or other desirable characteristics.
Value engineering technique is very important and useful in driving down the product cost which
helps the organization to retain its market share and to sustain its profitability.
Value engineering is a systematic and creative technique to improve competitiveness of the
organization. It is aimed at satisfying consumer needs by means of a specific procedure for
invention (or modification) which is functional (the purpose), economic (what it costs), and
multidisciplinary (how). In other words, value analysis identifies the activities necessary for a
process to develop a product or service, and finds the most economic way to accomplish it. This
method permits the effective identification of that part of process cost which does not contribute to
ensure the process quality. The improvement of the process is not to put into jeopardy the quality
of the product, especially in terms of the safety and reliability of the product. Value engineering can
make an existing process profitable or optimize the effectiveness and the profitability of a process
at the time of its design. Fig 2 shows the value engineering process.

44
Fig 2 Value engineering process
Value engineering is a structured and systematic problem solving methodology. It is a
process designed to find creative alternative solutions. It is applied in a workshop environment by
a multi-disciplinary team. It promotes the substitution of materials and methods with less expensive
alternatives, without sacrificing functionality. It is focused solely on the functions of various
components and materials, rather than their physical attributes. It is the review of new or existing
products during the design phase to reduce costs and increase functionality to increase the value
of the product. The value of an item is defined as the most cost-effective way of producing an item
without taking away from its purpose.
History of value engineering
Value engineering was conceived at General Electric Company in early 1940s. At that time
due to the World War II, there were shortages of skilled labour, raw materials, and component
parts. To overcome theses shortages, Lawrence Miles, Jerry Leftow, and Harry Erlicher at General
Electric looked for acceptable substitutes. They noticed that these substitutions frequently reduced
costs, improved the product, or both. What started out as an accident out of necessity, was turned
into a systematic process. The new methodology was so successful that it was possible to produce
goods at greater production and operational efficiency and at lower costs. As a result of its
success, GE formed a special group led by Larry Miles to refine the methodology.
In 1954, the U.S Navy Bureau of Ships used the value analysis process to cost
improvement during design. They called it ‘value engineering’. The value engineering was used
formally in the US Department of Defence in 1961. In the 1960’s, Mr. Charles Bytheway developed
an additional component to the basic method. During his work for Sperry UNIVAC, he created a
functional critical path analysis procedure that highlighted the logic of the activity under value
study. A diagramming procedure called the ‘Functional Analysis System Technique’ (FAST) was
adopted as a standard component of the ‘value method’.
In 1985, the value engineering process had gained world-wide acceptance. It spawned an
international organization, Society of American Value Engineers (SAVE) International), dedicated
to its practice, and the certification of competent practitioners. In 1997, SAVE International
approved a standard for value engineering methodology. Besides value analysis, value
engineering is also sometimes known as ;value management’ and ‘value methodology’.

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Phases of value engineering study
A typical value engineering exercise can reduce the total cost of a product by 5 % to 40 %.
A value engineering study normally encompasses three stages. Stage 1 consists of preparation.
During stage 2, multi phase job plan is carried out. Stage 3 consists of documentation,
implementation and audits.
Value engineering exercise is normally carried out by systematically following a multi stage
job plan which is known as ‘value analysis job plan’.  The job plan is carried out by a
multidisciplinary team to improve the value through the analysis of functions. The job plan normally
consists of six phases. However some teams vary the job plans in four to eight phases to fit their
constraints. The six phases of a value engineering exercise are given below.
Information phase – In this phase, the team members understand the current state of the project
and constraints / requirements if they are there. All team members participate to determine the true
needs of the project and to identify the areas of high cost and low worth.  The team reviews and
defines the current conditions of the project and identifies the goal of the studies.
Function analysis phase – During this phase, the team understand the project from a functional
perspective such as what the project is to do, rather than how the project is presently conceived.
The team defines the project functions. It analyzes the functions to determine which need
improvement, modification, elimination, or creation to meet the goal of the project. The function
describes what something does and function analysis is the process where the team reviews the
functions of the project / process / system to determine those which can be improved. Function
Analysis can be enhanced through the use of the diagramming procedure FAST. FAST applies
intuitive logic to test functions, create a common language for the team, and test the validity of the
functions in the project / process / system.
Creative phase – During this phase the team generates a quantity of ideas related to other ways
to perform the functions. The team lists creative ideas generated from its review of the project with
the aim of obtaining a large number of ideas through brainstorming and association of creative
proposals. The team employs creative techniques to identify other ways to perform the functions of
the project / process / system.
Evaluation phase – During this phase, the team reduces the quantity of ideas which have been
identified to a short list of ideas with the greatest potential to improve the project and meet the
objectives of the value engineering study. All the creative ideas are analyzed and the team selects
the best ideas for further development. The team follows a structured evaluation process to select
those ideas which offer the potential for value improvement while delivering the functions of the
project / process / system, and considering performance requirements and resource limits.
Development phase – During this phase, the team further analyzes and develops the short list of
ideas. It also develops those with merit into value alternatives. The team prepares alternative

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designs with capital and / or life cycle cost comparisons of original designs and proposed
alternatives. All recommendations are supplemented with written descriptions, sketches, basic
design concepts, technical information, and cost summaries. The team develops the selected
ideas into alternatives (or proposals) with a sufficient level of documentation to allow decision
makers to determine if the alternative is to be implemented.
Presentation phase / implementation – The objective of this phase is to present the value
engineering study report consisting of alternatives to the decision makers. The team leader
develops a report and / or presentation which documents and conveys the adequacy of the
alternatives developed by the team.
The report is presented and submitted to the management and other project stakeholders who are
to make decision. The report includes a statement of the follow up necessary to ensure
implementation. Typical flowsheet of the value engineering process is given in Fig 3.

Fig 3 Typical flowsheet of value engineering process

Applicability
Value engineering can be applied during any stage of a development cycle of a project /
process / system, although the greatest benefits are typically achieved early in development during
the conceptual stages. Fig 4 shows potential savings from a value engineering study. Value
engineering can be applied as a quick response study to address a problem or as an integral part
of an overall organizational effort to stimulate innovation and improve performance characteristics.
Value engineering can also be used to enhance the quality programs, new product development
activities, manufacturing processes, and architectural and engineering designs of the organization.

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Fig 4 Potential savings from value engineering study
Value engineering study can be applied in several areas. The typical applications of the value
engineering to various types of the projects / processes / systems include the following.
Construction projects – Construction projects can benefit by identifying improvements for various
project phases namely concept development, preliminary design, final design, procurement, and
construction.
Manufactured products – All kind of products can be studied with a focus on either the design of
the product or the manufacturing process. A product can be the subject of a value engineering
study at any time during the life of the product. A value engineering study can be applied at the
onset of the product development to better understand the needs of the customer, identify the
functions necessary to satisfy those needs, and develop the initial concept. Throughout the
development, value engineering can be used to refine and enhance the concept, based on the
latest facts.
Organizational systems and processes – organizational systems and processes can be the
subject of value engineering studies. Many elements of a system or a process can be improved
through the application of value engineering. This can be from the development of the business
plans or organizational studies for improving the existing processes if the organization.
Service organizations – Value engineering can be gainfully employed to improve system,
processes and procedures in the service organizations.
Benefits of value engineering study
Value engineering guides the organization towards innovative solutions. By shifting from
conventional solutions to the innovative solutions, not only the organization gets benefitted but
additional value for the customer is also created as shown in Fig 5. The figure shows the case
where the value engineering has been applied to the components which the organization is
producing for its customers.

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Fig 5 Benefits of value engineering
Value engineering helps the organization to learn (i) in improving the career skills of the
employees, (ii) in identifying the symptoms and then separating them from the problems, (iii) in
solving root cause of the problems and capturing of the opportunities, (iv) in becoming more
competitive by improving benchmarking process and (v) in taking command of a powerful problem
solving methodology and use it in any situation.
Value engineering benefits the organization in several ways. Some of these benefits are (i)
lowering of the operation and maintenance cost, (ii) improvements in the quality management, (iii)
improving the resource efficiency, (iv) simplification of the procedures, (v) minimization of the
paperwork, (vi) lowering of the employee costs, (viii) increasing procedural efficiency, (vii)
optimizing of the expenditures, (viii) developing value attitudes in the employees, and (ix)
competing more successfully in the market place.

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