UNIT-1 Industrial Management

UNIT– I (Part-1)

INTRODUCTION: Definition of industrial engineering (I.E), development, applications, role of

an industrial engineer, quantitative tools of IE and productivity measurement. Concepts of
management, importance, functions of management, scientific management, Taylor’s principles,
Fayol’s principles of management.

Definition of industrial engineering

Industrial Engineering (IE) is a branch of engineering that focuses on optimizing complex

processes, systems, or organizations. The primary goal is to improve efficiency, productivity,
and quality while reducing waste and costs. Industrial engineers use a combination of
mathematical, physical, and social sciences to design, improve, and implement integrated
systems that include people, materials, information, equipment, and energy.

1. Development of Industrial Engineering

The development of industrial engineering can be traced back to the early stages of
industrialization in the 18th and 19th centuries, particularly with the rise of mass production
techniques. Key milestones include:

 Early Foundations: Before becoming a formal field, industrial engineering was

influenced by the work of engineers like James Watt and Richard Arkwright, who
invented mechanical devices for efficient production.
 Scientific Management Movement: In the early 20th century, Frederick Taylor
pioneered the concept of "scientific management" that focused on analyzing work
processes to increase efficiency. This led to the development of time and motion studies.
 The Rise of Human Factors and Ergonomics: The early to mid-20th century saw an
increasing focus on human factors engineering, which examined the interaction between
workers and machines, leading to ergonomic designs that improved safety, comfort, and
productivity.
 System Optimization: The advent of computers in the late 20 th century allowed
industrial engineers to implement complex algorithms and models for system
optimization, which led to advances in areas like supply chain management, inventory
control, and quality management.
 Lean Manufacturing and Six Sigma: During the 1980s and 1990s, the concepts of lean
manufacturing (developed in Japan) and Six Sigma (developed by Motorola) became
significant in industrial engineering, emphasizing waste reduction, process improvement,
and quality control.

2. Applications of Industrial Engineering

Industrial engineering is applied in nearly every sector, as the principles of optimization and
system design can improve efficiency in a wide variety of contexts. Some notable applications
include:

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a. Manufacturing:

 Production Planning and Control: Industrial engineers develop systems for efficient
production scheduling, minimizing downtime, and reducing production costs.
 Lean Manufacturing: Implementing lean principles to eliminate waste, reduce cycle
times, and improve product quality.
 Automation and Robotics: Industrial engineers design automated systems and
workflows to improve production rates and consistency.

b. Supply Chain and Logistics:

 Inventory Management: Industrial engineers design systems that balance supply and
demand while minimizing holding costs and stockouts.
 Warehouse Optimization: Use of layout designs and algorithms to maximize storage
space, minimize travel time, and increase throughput.
 Logistics Optimization: Industrial engineers design distribution networks that optimize
transportation routes, fuel consumption, and overall delivery efficiency.

c. Healthcare:

 Process Optimization: Improving the flow of patients, reducing waiting times, and
optimizing resource allocation in hospitals and clinics.
 Healthcare Systems Design: Industrial engineers design systems that integrate clinical
workflows, supply chain management, and patient scheduling for improved care delivery.
 Healthcare Ergonomics: Designing hospital environments that promote both worker and
patient safety.

d. Service Industries:

 Customer Service Optimization: Using data analytics to predict demand and optimize
staffing levels for call centers, retail stores, and customer service departments.
 Queue Management: Industrial engineers optimize the flow of customers through lines
or digital systems, ensuring that wait times are minimized.

e. Energy and Sustainability:

 Energy Efficiency: Industrial engineers design systems to reduce energy consumption in

manufacturing plants, buildings, and transportation.
 Sustainability Projects: Using data analysis to optimize resource utilization (e.g., water,
electricity) in order to reduce waste and environmental impact.

f. Construction:

 Project Management: Using project management techniques to ensure that construction

projects are completed on time, within budget, and to specification.

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 Resource Allocation: Industrial engineers optimize the scheduling and allocation of

labor, materials, and equipment for construction sites.

3. Role of an Industrial Engineer

Industrial engineers are responsible for improving efficiency and productivity in various
industries. The key responsibilities include:

a. System Design and Analysis:

Industrial engineers design and analyze systems for optimal performance, which may involve
processes, people, equipment, and technology. They ensure that all components work together
efficiently and effectively to meet organizational goals.

b. Process Improvement:

They constantly look for ways to enhance processes, reduce waste, and streamline operations.
They may use techniques like value stream mapping, kaizen (continuous improvement), or
Six Sigma to identify inefficiencies and propose solutions.

c. Optimization:

Industrial engineers often work with mathematical models and simulation tools to find the most
efficient ways of allocating resources (labor, machines, materials) and solving problems like
scheduling, resource allocation, and network design.

d. Data Analysis and Decision Making:

Industrial engineers analyze large datasets to make informed decisions. They use tools like data
analytics, statistical process control (SPC), and predictive analytics to forecast outcomes and
guide operational decisions.

e. Project Management:

Industrial engineers play a vital role in overseeing projects. They ensure that projects adhere to
timelines, budgets, and quality standards, and often act as liaisons between different departments
or teams.

f. Human Factors and Ergonomics:

Industrial engineers focus on designing work environments that maximize worker safety,
comfort, and productivity. This includes ergonomic assessments of tools, machinery, and
workstations, as well as the design of efficient workflows.

g. Quality Control:

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They are involved in developing and maintaining quality standards, using methodologies like Six
Sigma, Total Quality Management (TQM), and ISO 9000 to ensure products and services
meet the desired standards.

h. Cost Reduction and Efficiency Improvement:

Industrial engineers aim to reduce operational costs through process improvements, resource
optimization, and automation. They use techniques such as cost-benefit analysis, econometric
modeling, and simulation to make recommendations.

i. Sustainability and Environmental Concerns:

Increasingly, industrial engineers are focusing on sustainable practices, such as reducing energy
consumption, minimizing waste, and designing eco-friendly processes.

4. Skills and Tools Used by Industrial Engineers

Industrial engineers utilize a range of technical, analytical, and interpersonal skills, including:

 Mathematics and Statistical Analysis: For process modeling, optimization, and data-
driven decision-making.
 Simulation Software: Tools like Arena, SIMUL8, or FlexSim are used for modeling
and simulating complex systems.
 Operations Research: Techniques like linear programming, integer programming, and
queuing theory to optimize processes.
 Project Management: Knowledge of methodologies like Agile, Lean, or Waterfall for
efficient project execution.
 CAD Software: For designing layouts, systems, and simulations (e.g., AutoCAD,
SolidWorks).
 Quality Tools: Six Sigma, SPC, FMEA (Failure Modes and Effects Analysis).
 Communication and Teamwork: Industrial engineers must communicate effectively
with cross-functional teams, management, and external stakeholders.

5. Future Trends in Industrial Engineering

As industries continue to evolve, industrial engineers will play an increasingly important role in
areas such as:

 Artificial Intelligence and Automation: The integration of AI and machine learning

into industrial engineering systems, from autonomous robots in manufacturing to
predictive analytics in supply chain management.
 Sustainability: More focus on developing environmentally sustainable practices, such as
circular economy models, green manufacturing, and renewable energy systems.
 Big Data and Advanced Analytics: The ability to analyze large volumes of data to
predict trends, optimize operations, and improve decision-making.

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 Industry 4.0: The advent of cyber-physical systems, IoT (Internet of Things), and smart
factories, which will require industrial engineers to design and manage highly automated,
interconnected systems.

In summary, industrial engineering is a dynamic and multi-disciplinary field that is integral to

the functioning of modern economies. Industrial engineers solve problems related to efficiency,
productivity, and resource optimization across various industries. Their role in designing
systems, improving processes, and ensuring sustainability makes them key players in the success
of organizations worldwide

Quantitative tools of Industrial engineering and productivity measurement

Quantitative tools of Industrial engineering and productivity measurement play a crucial role in
improving efficiency, reducing costs, enhancing productivity, and ensuring overall process
optimization.

Here are some of the key quantitative tools used in Industrial Engineering and productivity
measurement:

1. Work Measurement

 Time Study: Involves observing and recording the time taken for a worker to complete a
specific task. This helps in determining the standard time for tasks, improving
productivity, and designing efficient work processes.
 Method Study: Analyzes how tasks are performed and identifies the most efficient
method for carrying them out, using techniques like flow diagrams, process charts, and
worker observations.

2. Statistical Process Control (SPC)

 Control Charts: Used to monitor the performance of a process over time, to detect any
variations that may indicate problems. Common types include X-bar charts, R-charts, and
P-charts.
 Process Capability Analysis: Determines how well a process is performing compared to
its specifications or desired standards, often using metrics like Cp, Cpk, Pp, and Ppk.

3. Queuing Theory

 A mathematical approach to the analysis of waiting lines (queues), used to model systems
with customer arrivals, service times, and service capacity. Queuing models help in
optimizing resource allocation, such as staffing levels in service operations, production
systems, or transportation systems.

4. Linear Programming (LP)

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 Optimization Techniques: Linear programming is used for resource allocation problems

where the objective is to maximize or minimize an outcome (such as cost, profit, or time)
subject to constraints. Common applications include production planning, transportation,
and supply chain optimization.
 Simplex Method: A widely used algorithm to solve linear programming problems.

5. Total Quality Management (TQM) Tools

 Pareto Analysis: A statistical technique used to identify the most significant problems or
causes based on the Pareto Principle (80/20 rule), where 80% of problems are caused by
20% of the factors.
 Fishbone Diagram (Ishikawa): A cause-and-effect diagram used to identify and analyze
the root causes of a problem in a process.
 Six Sigma (DMAIC): A data-driven methodology for improving processes by
eliminating defects, which includes Define, Measure, Analyze, Improve, and Control
(DMAIC) phases.

6. Simulation Modeling

 Simulation techniques, such as Monte Carlo Simulation, are used to model and analyze
complex systems where uncertainty exists. These simulations help in predicting
outcomes, testing various scenarios, and assessing the impact of different decisions on
system performance.
 Discrete Event Simulation (DES): Used to model systems where events occur at
discrete points in time, such as manufacturing systems, inventory management, or
transportation systems.

7. Forecasting Techniques

 Time Series Analysis: Involves using historical data to predict future trends. Techniques
include moving averages, exponential smoothing, and ARIMA models.
 Regression Analysis: A statistical method used to predict the value of a dependent
variable based on one or more independent variables, often used in demand forecasting
and production planning.

8. Inventory Control Models

 Economic Order Quantity (EOQ): A formula used to determine the optimal order
quantity that minimizes total inventory costs, including ordering and holding costs.
 Just-In-Time (JIT): A production strategy that aims to reduce in-process inventory and
associated carrying costs by receiving goods only as they are needed in the production
process.

9. Capacity Planning and Utilization

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 Capacity Planning Models: Used to determine the optimal level of capacity required to
meet demand. This includes calculating both theoretical and effective capacity and using
models like the Gantt chart for visual scheduling.
 Overall Equipment Effectiveness (OEE): A performance metric used to evaluate how
well a manufacturing operation is utilized. OEE is a product of availability, performance
efficiency, and quality rate.

10. Lean Manufacturing Tools

 Value Stream Mapping (VSM): A tool for visualizing the flow of materials and
information in a production process, identifying areas for improvement in terms of waste
reduction.
 5S (Sort, Set in order, Shine, Standardize, Sustain): A methodology to organize the
workplace, reduce waste, and improve efficiency.
 Kaizen (Continuous Improvement): A philosophy that encourages small, incremental
improvements in processes.

11. Productivity Measurement

Labor Productivity: Measures the output per labor hour (e.g., units produced per worker hour)
and is commonly used to gauge worker efficiency.

Total Factor Productivity (TFP): A more comprehensive measure that accounts for the
productivity of all inputs, including labor, capital, and materials

Multi-Factor Productivity (MFP): Measures the efficiency of multiple input factors, such as
labor, capital, and materials, in producing output.

 Machine Productivity: Measures the output produced per unit of machine time.

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 Efficiency and Utilization: Efficiency measures how well resources are used, while
utilization tracks the proportion of the time that equipment or labor is actively engaged in
productive tasks.

12. Network Analysis Tools (PERT/CPM)

 Program Evaluation and Review Technique (PERT): A tool for scheduling and
coordinating tasks in a project, considering uncertainty in the duration of tasks.
 Critical Path Method (CPM): A project management tool used to determine the longest
sequence of dependent tasks and the minimum project completion time.

13. Cost-Benefit Analysis

 A technique used to evaluate the financial performance of an investment or project by

comparing the total expected costs to the total expected benefits, often expressed as a
ratio.

14. Decision Analysis and Decision Trees

 Decision trees are used to visualize and analyze decisions under uncertainty, helping
decision-makers evaluate the potential outcomes of different actions and their associated
probabilities.

15. Balanced Scorecard

 A strategic planning and management tool used to measure organizational performance

from multiple perspectives: financial, customer, internal processes, and learning &
growth. It helps align business activities to the vision and strategy.

Concepts of management
Management is a universal phenomenon. It is a very popular and widely used term. All
organizations - business, political, cultural or social are involved in management because it is the
management which helps and directs the various efforts towards a definite purpose.

Definition: “Management is knowing exactly what you want men to do and then seeing that they
do it the best and cheapest ways”. F.W.Taylor

“Management is an art of getting things done through and with the people in formally organized
groups. It is an art of creating an environment in which people can perform and individuals and
can co-operate towards attainment of group goals”. Koontz and O Donell

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

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

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

Dynamic nature of principle: Based on integration and supported by practical evidences,

management h a s f o r m e d c e r t a i n principles. However, these principles are flexible in
nature and change with the changes in the environment in which an organization exists.

Relative, not absolute principles: Management principles are relative, not absolute, and they
should be applied according to the need of the organization. Each organization may be different
from others. The difference may exist because of time, place, socio-cultural factors, etc.
Management - Science or Art: There is a controversy whether management is science or art.
However, management is both a science and art.

Management as profession: Management has been regarded as profession by many while many
have suggested that it has not achieved the status of a profession.

Functions of Management
According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to
control”. Whereas Luther Gullick has given a keyword “POSDCORB”
where
P stands for Planning,
Ostands for Organizing,
Sstands for Staffing,
Dstands for Directing,
Costands for Co-ordination,
Rstands for reporting &
Bstands for Budgeting.

But the most widely accepted are functions of management given by KOONTZ and O DONNEL
i.e. Planning, Organizing, Staffing, Directing and ‟ Controlling.

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1. Planning

It is the basic function of management. It deals with chalking out a future course of action &
deciding in advance the most appropriate course of actions for achievement of predetermined
goals. According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how
to do. It bridges the gap from where we are & where we want to be”. A plan is a future course of
actions. It is an exercise in problem solving & decision making. Planning is determination of
courses of action to achieve desired goals. Thus, planning is a systematic thinking about ways &
means for accomplishment of pre-determined goals. Planning is necessary to ensure proper
utilization of human & non-human resources. It is all pervasive, it is an intellectual activity and it
also helps in avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing

It is the process of bringing together physical, financial and human resources and developing
productive relationship amongst them for achievement of organizational goals. According to
Henry Fayol, “To organize a business is to provide it with everything useful or its functioning
i.e. raw material, tools, capital and personnel s”. To organize a business ‟ involves determining
& providing human and non-human resources to the organizational structure.

Organizing as a process involves:

Identification of activities
 Classification of grouping of activities
 Assignment of duties
 Delegation of authority and creation of responsibility
 Coordinating authority and responsibility relationships
3. Staffing
It is the function of manning the organization structure and keeping it manned. Staffing has
assumed greater importance in the recent years due to advancement of technology, increase in

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size of business, complexity of human behavior etc. The main purpose o staffing is to put right
man on right job i.e. square pegs in square holes and round pegs in round holes. According to
Kootz& O Donell, “Managerial function of staffing involves manning the ‟ organization
structure through proper and effective selection, appraisal & development of personnel to fill the
roles designed un the structure”.
Staffing involves:
 Manpower Planning (estimating man power in terms of searching, choose the
person and giving the right place)
 Recruitment, Selection & Placement
 Training & Development
 Remuneration
 Performance Appraisal
 Promotions & Transfer
4. Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and staffing
are the mere preparations for doing the work. Direction is that inert-personnel aspect of
management which deals directly with influencing, guiding, supervising, motivating sub-ordinate
for the achievement of organizational goals.
Direction has following elements:
Supervision
 Motivation
 Leadership
 Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the act of
watching & directing work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work.
Positive, negative, monetary, non-monetary incentives may be used for this
purpose.
Leadership- may be defined as a process by which manager guides and influences the work of
subordinates in desired direction.
Communications- is the process of passing information, experience, opinion etc from one
person to another. It is a bridge of understanding.
5. Controlling
It implies measurement of accomplishment against the standards and correction of deviation if
any to ensure achievement of organizational goals. The purpose of controlling is to ensure that
everything occurs in conformities with the standards. An efficient system of control helps to
predict deviations before they actually occur. According to Theo Haimann, “Controlling is the
process of checking whether or not proper progress is being made towards the objectives and
goals and acting if necessary, to correct any deviation”. According to Koontz & O Donell
“Controlling is the measurement & correction of ‟ performance activities of subordinates in
order to make sure that the enterprise objectives and plans desired to obtain them as being
accomplished”.
Therefore controlling has following steps;
Establishment of standard performance

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Measurement of actual performance

Comparison of actual performance with the standards and finding out deviation if any
 Corrective action

Levels of Management
The term “Levels of Management‟ refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of the
business and work force increases and vice versa. The level of management determines a chain
of command, the amount of authority & status enjoyed by any managerial position. The levels of
management can be classified in three broad categories:
1. Top level / Administrative level
2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers
Managers at all these levels perform different functions. The role of managers at all the three
levels is discussed below:
Top Level of Management
It consists of board of directors, chief executive or managing director. The top management is
the ultimate source of authority and it manages goals and policies for an enterprise. It devotes
more time on planning and coordinating functions.

The role of the top management can be summarized as follows –

a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets, procedures,
schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.
g. It provides guidance and direction.
h. The top management is also responsible towards the shareholders for the performance of
the enterprise.
Middle Level of Management
The branch managers and departmental managers constitute middle level. They are responsible
to the top management for the functioning of their department. They devote more time to
organizational and directional functions. In small organization, there is only one layer of middle
level of management but in big enterprises, there may be senior and junior middle level
management.

Their role can be emphasized as –

a. They execute the plans of the organization in accordance with the policies and
directives of the top management.
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b. They make plans for the sub-units of the organization.

c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or department.
f. It also sends important reports and other important data to top level management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower level managers towards better
performance.

Lower Level of Management

Lower level is also known as supervisory / operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,
“Supervisory management refers to those executives whose work has to be largely with personal
oversight and direction of operative employees”. In other words, they are concerned with
direction and controlling function of management.

Their activities include –

a) Assigning of jobs and tasks to various workers.

b) They guide and instruct workers for day to day activities.
c) They are responsible for the quality as well as quantity of production.
d) They are also entrusted with the responsibility of maintaining good relation in the
organization.
e) They communicate workers problems, suggestions, and recommendatory appeals etc to
the higher level and higher level goals and objectives to the workers.
f) They help to solve the grievances of the workers.
g) They supervise & guide the sub-ordinates.
h) They are responsible for providing training to the workers.
i) They arrange necessary materials, machines, tools etc for getting the things done.
j) They prepare periodical reports about the performance of the workers.
k) They ensure discipline in the enterprise.
l) They motivate workers.
m) They are the image builders of the enterprise because they are in direct contact with the
workers.

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

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Taylor’s Principles: Taylor through his principles of scientific management initiated a

system in which there would be an effective and fruitful coordination and cooperation between
the management and the workers.

1. Development of Science for each part of men’s job (replacement of rule of thumb)
a. This principle suggests that work assigned to any employee should be observed,
analyzed with respect to each and every element and part and time involved in it.
b. This means replacement of odd rule of thumb by the use of method of enquiry,
investigation, data collection, analysis and framing of rules.
c. Under scientific management, decisions are made on the basis of facts and by the
application of scientific decisions.
2. Scientific Selection, Training & Development of Workers
a. There should be scientifically designed procedure for the selection of workers.
b. Physical, mental & other requirement should be specified for each and every job.
c. Workers should be selected & trained to make them fit for the job.
d. The management has to provide opportunities for development of workers having
better capabilities.
e. According to Taylor efforts should be made to develop each employee to his greatest
level and efficiency & prosperity.
3. Co-operation between Management & workers or Harmony not discord
a. Taylor believed in co-operation and not individualism.
b. It is only through co-operation that the goals of the enterprise can be achieved
efficiently.
c. There should be no conflict between managers & workers.

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d. Taylor believed that interest of employer & employees should be fully harmonized so
as to secure mutually understanding relations between them.
4. Division of Responsibility
a. This principle determines the concrete nature of roles to be played by different level of
managers & workers.
b. The management should assume the responsibility of planning the work whereas
workers should be concerned with execution of task.
c. Thus planning is to be separated from execution.
5. Mental Revolution
a. The workers and managers should have a complete change of outlook towards their
mutual relation and work effort.
b. It requires that management should create suitable working condition and solve all
problems scientifically.
c. Similarly workers should attend their jobs with utmost attention, devotion and
carefulness. They should not waste the resources of enterprise.
d. Handsome remuneration should be provided to workers to boost up their moral.
e. It will create a sense of belongingness among worker.
f. They will be disciplined, loyal and sincere in fulfilling the task assigned to them.
g. There will be more production and economical growth at a faster rate.
6. Maximum Prosperity for Employer & Employees
a. The aim of scientific management is to see maximum prosperity for employer and
employees. b. It is important only when there is opportunity for each worker to attain his
highest efficiency
c. Maximum output & optimum utilization of resources will bring higher profits for the
employer & better wages for the workers.
d. There should be maximum output in place of restricted output.
e. Both managers & workers should be paid handsomely.
Principle of Management by Exception: Taylor suggested that only major or significant
deviations between the actual performance and standard performance should be brought to the
notice of top management. Top management should pay more attention to those areas of work
where standards and procedures could not be established and where there is a significant
variation between standard performance and actual performance.
Fayol’s principles of management
Administrative Management Theory (Henry Fayol and Others): Henry Fayol is called as father
of Modern Management He established the pattern of management and the pyramidal form of
organization. He pointed out that technical ability is more dominating on the lower level of
management managerial ability is more important on the higher level of management.

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14 Principles of Management described by Henry Fayol

1. Division of work
a. Henri Fayol has stressed on the specialization of jobs.
b. He recommended that work of all kinds must be divided & subdivided and allotted to
various persons according to their expertise in a particular area.
c. Subdivision of work makes it simpler and results in efficiency.
d. It also helps the individual in acquiring speed, accuracy in his performance.
e. Specialization leads to efficiency & economy in spheres of business.
2. Authority & Responsibility
a. Authority & responsibility are co-existing.
b. If authority is given to a person, he should also be made responsible.
c. In a same way, if anyone is made responsible for any job, he should also have
concerned authority.
d. Authority refers to the right of superiors to get exactness from their sub-ordinates
whereas responsibility means obligation for the performance of the job assigned.
e. There should be a balance between the two i.e. they must go hand in hand.
f. Authority without responsibility leads to irresponsible behavior whereas responsibility
without authority makes the person ineffective.

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3. Discipline
a. According to Fayol, “Discipline means sincerity, obedience, respect of authority &
observance of rules and regulations of the enterprise”.
b. This principle applies that subordinate should respect their superiors and obey their
order.
c. It is an important requisite for smooth running of the enterprise.
d. Discipline is not only required on path of subordinates but also on the part of
management.
e. Discipline can be enforced if –
- There are good superiors at all levels.
- There are clear & fair agreements with workers.
- Sanctions (punishments) are judiciously applied
4. Unity of Command
a. A sub-ordinate should receive orders and be accountable to one and only one boss at a
time.
b. In other words, a sub-ordinate should not receive instructions from more than one
person because –
- It undermines authority
- Weakens discipline
- Divides loyalty
- Creates confusion
- Delays and chaos
- Escaping responsibilities
- Duplication of work
- Overlapping of efforts
c. Therefore, dual sub-ordination should be avoided unless and until it is absolutely
essential.
d. Unity of command provides the enterprise a disciplined, stable & orderly existence.
e. It creates harmonious relationship between superiors and sub-ordinates.
5. Unity of Direction

a) Fayol advocates one head one plan which means that there should be one plan for a
group of activities having similar objectives.
b) Related activities should be grouped together. There should be one plan of action for
them and they should be under the charge of a particular manager.

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c) According to this principle, efforts of all the members of the organization should be
directed towards common goal.
d) Without unity of direction, unity of action cannot be achieved.
e) In fact, unity of command is not possible without unity of direction.
6. Sub-Ordination of Individual Interest to General Interest
a. An organization is much bigger than the individual it constitutes therefore interest of
the undertaking should prevail in all circumstances.
b. As far as possible, reconciliation should be achieved between individual and group
interests.
c. But in case of conflict, individual must sacrifice for bigger interests.
d. In order to achieve this attitude, it is essential that –
- Employees should be honest & sincere.
- Proper & regular supervision of work.
- Reconciliation of mutual differences and clashes by mutual agreement.
For example, for change of location of plant, for change of profit sharing ratio, etc.
7. Remuneration
a) The quantum and method of remuneration to be paid to the workers should be fair,
reasonable, satisfactory & rewarding of the efforts.
b) As far as possible it should accord satisfaction to both employer and the employees.
c) Wages should be determined on the basis of cost of living, work assigned, financial
position of the business, wage rate prevailing etc.
d) Logical & appropriate wage rates and methods of their payment reduce tension &
differences between workers & management creates harmonious relationship and
pleasing atmosphere of work.
Fayol also recommended provision of other benefits such as free education, medical & resident
Equity
a. Equity means combination of fairness, kindness & justice.
b. The employees should be treated with kindness & equity if devotion is expected of
them.
c. It implies that managers should be fair and impartial while dealing with the
subordinates.
d. They should give similar treatment to people of similar position.
e. They should not discriminate with respect to age, caste, sex, religion, relation etc.
f. Equity is essential to create and maintain cordial relations between the managers and
sub-ordinate.
g. But equity does not mean total absence of harshness.

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h. Fayol was of opinion that, “at times force and harshness might become necessary for
the sake of equity”
8. Centralization & De-Centralization
a. Centralization means concentration of authority at the top level. In other words,
centralization is a situation in which top management retains most of the decision making
authority.
b. Decentralization means disposal of decision making authority to all the levels of the
organization. In other words, sharing authority downwards is decentralization.
c. According to Fayol, “Degree of centralization or decentralization depends on no. of
factors like size of business, experience of superiors, dependability & ability of
subordinates etc.
d. Anything which increases the role of subordinate is decentralization & anything which
decreases it is centralization.
e. Fayol suggested that absolute centralization or decentralization is not feasible. An
organization should strike to achieve a lot between the two.
9. Scalar Chain
a. Fayol defines scalar chain as ’The chain of superiors ranging from the ultimate
authority to the lowest”.
b. Every orders, instructions, messages, requests, explanation etc. has to pass through
Scalar chain.
c. But, for the sake of convenience & urgency, this path can be cut shirt and this short cut
is known as Gang Plank.
d. A Gang Plank is a temporary arrangement between two different points to facilitate
quick & easy communication as explained below:

In the figure given, if D has to communicate with G he will first send the communication
upwards with the help of C, B to A and then downwards with the help of E and F to G which will

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take quite some time and by that time, it may not be worth therefore a gang plank has been
developed between the two.

10. Order

a. This principle is concerned with proper & systematic arrangement of things and
people.
b. Arrangement of things is called material order and placement of people is called social
order.
c. Material order- There should be safe, appropriate and specific place for every article
and every place to be effectively used for specific activity and commodity.
d. Social order- Selection and appointment of most suitable person on the suitable job.
There should be a specific place for everyone and everyone should have a specific place
so that they can easily be contacted whenever need arises.
11. Equity
a. Equity means combination of fairness, kindness & justice.
b. The employees should be treated with kindness & equity if devotion is expected of
them.
c. It implies that managers should be fair and impartial while dealing with the
subordinates.
d. They should give similar treatment to people of similar position.
e. They should not discriminate with respect to age, caste, sex, religion, relation etc.
f. Equity is essential to create and maintain cordial relations between the managers and
subordinate.
g. But equity does not mean total absence of harshness.
h. Fayol was of opinion that, “at times force and harshness might become necessary for
the sake of equity
12. Stability of Tenure
a.Fayol emphasized that employees should not be moved frequently from one job
position to another i.e. the period of service in a job should be fixed.
b. Therefore employees should be appointed after keeping in view principles of
recruitment & selection but once they are appointed their services should be served.
c. According to Fayol. “Time is required for an employee to get used to a new work &
succeed to doing it well but if he is removed before that he will not be able to render
worthwhile services”.
d. As a result, the time, effort and money spent on training the worker will go waste.
e. Stability of job creates team spirit and a sense of belongingness among workers which
ultimately increase the quality as well as quantity of work.

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13. Initiative
a. Workers should be encouraged to take initiative in the work assigned to them.
b. It means eagerness to initiate actions without being asked to do so.
c.Fayol advised that management should provide opportunity to its employees to suggest
ideas, experiences& new method of work.
d. It helps in developing an atmosphere of trust and understanding.
e. People then enjoy working in the organization because it adds to their zeal and energy.
f. To suggest improvement in formulation & implementation of place.
g. They can be encouraged with the help of monetary & non-monetary incentives.
14. Espirit De’ Corps
a. can be achieved through unity of command
b. It refers to team spirit i.e. harmony in the work groups and mutual understanding
among the members.
c. Spirit De Corps inspires workers to work harder. ‟
d.Fayol cautioned the managers against dividing the employees into competing groups
because it might damage the moral of the workers and interest of the undertaking in the
long run.
e. To inculcate Espirit De Corps following steps should be undertaken –
- There should be proper co-ordination of work at all levels
- Subordinates should be encouraged to develop informal relations among
themselves.
- Efforts should be made to create enthusiasm and keenness among subordinates
so that they can work to the maximum ability.
- Efficient employees should be rewarded and those who are not up to the mark
should be given a chance to improve their performance.
- Subordinates should be made conscious of that whatever they are doing is of
great importance to the business & society.
UNIT– I (Part-2)

PLANT LAYOUT: Factors governing plant location, types of production layouts, advantages
and disadvantages of process layout and product layout, applications, quantitative techniques for
optimal design of layouts.

Plant location:
Plant location is a strategic decision several factors influence this decision. The main objective of
any business is to optimize its cost and revenue that is, minimize its costs and maximize its
returns. The degree of significance for the selection of location for any enterprise mainly

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depends on its size and nature large scale industries requiring huge amount of investment there
are many considerations other than the local demand in the selection proper plant location these
plants cannot be easily shifted to other place and an error of judgment in the selection of site can
be vary expensive to the organization. However, small-scale industry mainly selects the site
where in accordance with its capacity; the local market is available for its products. It can easily
shift to other place when there is any change in the market.The following figure give an Idea.

Factors governing plant location

1. Nearness to Market: If the plant is located close to the market the cost of transportation can
be minimized. This also helps the producers to have direct knowledge of the requirements of the
customers.
2. Nearness to supply of raw materials: As far as possible the site selected should be near the
source of raw materials, so that the cost of transportation can be minimized and storing cost can
be reduced due to shorter lead time.
3. Availability of labour: Availability of right kind of labour force in required number at
reasonable rates is also a deciding factor in selection of site
4. Transport and communication facilities: Generally, industries have a tendency to locate the
industrial units near the railway station, highway or port areas. Availability of power and fuel:
Coal, electricity, oil and natural gas are the important sources of power in the industries.
Ex: Tata iron and steel industry is established near the coalmines of Bihar. Climatic conditions:
Climatic conditions largely affect certain production processes and also the efficiency of the
employees.
Ex: Textile mills require moist climate that why these plant located at Mumbai and Ahmedabad.
5. Availability of water: Water is used in industries for processing as in paper in chemical
industries, for generation of power in hydroelectric power, plants and also required for drinking
sanitary purpose also.
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6. Ancillary industries: Many industries such as processing and assembly industries are not
producing al the parts of their product but purchase some of the parts from ancillary industries
producing it.
7. Financial and other aids: For the development of backward regions central as well as state
government provide certain incentives and facilities such as cash- subsides, concession financial
Assistance, land, power and other facilities at cheaper rates, tax concession etc.
Types of production layouts
1. Product or line layout: This type of layout is developed for product-focused systems. In this
type of layout only one product, or one type of product, is produced in a given area. In case of
product being assembled, this type of layout is popularly known as an assembly line layout. The
work centers are organized in the sequence of appearance. The raw material centre at one end of
the line and goes from one operation to another rapidly with minimum of work -in-process
storage and material handling

2. Process or Functional layout: This type of layout is developed for process focused systems.
The processing units are organized by functions into departments on the assumption that certain
skills and facilities are available in each department similar equipments and operations are
grouped together, e.g., milling, foundry, drilling, plating, heat treatment etc. The use of process-
focused systems is very wide in both manufacture and other service facilities such as hospitals,
large offices, municipal services, etc.

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3. Cellular or group layout: It is special type of functional layout in which the facilities are
clubbed together into cells. This is suitable for systems designed to use the concepts, principles
and approaches of group technology. Such a layout offers ‟ the advantages of mass production
with high degree of automation even if the numbers of products are more with flexible
requirement. In such a system the facilities are group in to cells which are able to perform similar
type of functions for a group of products.

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4. Job Shop Layout: It is a layout for a very general flexible system that is processing job
production, The preparation of such a layout is dependent on the analysis of the possible
populations of orders and is a relatively, complex affair.

5. Project or Fixed position Layout: This is the layout for project type systems in which the
major component is kept at a fixed position and all other materials, components, tools machines,
work etc. are brought and assembly or fabrication is carried out. This type of layout is now not
used very commonly as the machines required for manufacturing work are big and complicated.
The fixed position layout is used only when it is difficult to move the major component and
fabrication is to be carried out. Ex: production of ships.

Factors influencing plant layout

1. Management policy: Management has to decide on many matters e.g. nature and quality of
products, size of the plant, integration of production process, plans for expansion, amount of
inventory in stock, employee facilities

2. Manufacturing process: The type of manufacturing process e.g. synthetic/analytical,

continuous/intermittent and repetitive/non-repetitive, will govern the type of plant layout.

3. Nature of product: Small and light products can be moved easily to the machines, whereas
for heavy and bulky products the machines may have to be moved.

4. Type of equipment: The use of single purpose and multi-purpose machine substantially
affects the plant layout. Similarly, noisy and vibrating machines require special attention in the
plant layout decision.

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5. Types of buildings: The plant layout in a single storey building will be different from that in a
multi storey building. The covered areas, the number of storey s, elevators ‟ and stairs, parking
and storage area all affect the layout.

6. Availability of total floor area: The allocation of space for machines, work-benches, sub-
store aisles etc., is made on the basis of the available floor area use of overhead spa ce is made in
case of shortage of space.

7. Arrangement of materials handing equipment: Provide sufficient aisles for free movement
of material handling equipment such as hand truck, fork truck etc. Service facilities: The layout
of factory must include proper service facilities required for the comfort and welfare of workers.
These include canteen, lockers, drinking water, first aid etc.

8. Possibility of future expansion: Plant layout is made in the light of future requirement and
installations of additional activities.

Advantages and Disadvantages of Process Layout

Advantages
1. In process layout machines are better utilized and fewer machines are required.
2. Flexibility of equipment and personnel is possible in process layout.
3. Lower investment on account of comparatively less number of machines and lower cost of
general purpose machines.
4. Higher utilization of production facilities.
5. A high degree of flexibility with regards to work distribution to machineries and workers.
6. The diversity of tasks and variety of job makes the job challenging and interesting.
7. Supervisors will become highly knowledgeable about the functions under their department.
Disadvantages
1. Backtracking and long movements may occur in the handling of materials thus, reducing
material handling efficiency.
2. Material handling cannot be mechanised which adds to cost.
3. Process time is prolonged which reduce the inventory turnover and increases the inprocess
inventory.
4. Lowered productivity due to number of set-ups.
5. Throughput (time gap between in and out in the process) time is longer.
6. Space and capital are tied up by work-in-process.

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Advantages and Disadvantages of Product Layout

Advantages
1. The flow of product will be smooth and logical in flow lines.
2. In-process inventory is less.
3. Throughput time is less.
4. Minimum material handling cost.
5. Simplified production, planning and control systems arepossible.
6. Less space is occupied by work transit and for temporary storage.
7. Reduced material handling cost due to mechanised handling systems and straight flow.
8. Perfect line balancing which eliminates bottlenecks and idle capacity.
9. Manufacturing cycle is short due to uninterrupted flow of materials.
10. Small amount of work-in-process inventory.
11. Unskilled workers can learn and manage the production.
Disadvantages

1. A breakdown of one machine in a product line may cause stoppages of machines in the
downstream of the line.
2. A change in product design may require major alterations in the layout.
3. The line output is decided by the bottleneck machine.
4. Comparatively high investment in equipments is required.
5. Lack of flexibility. A change in product may require the facility modification.
Applicationsof Process Layout

1. Manufacturing Industries

 Custom Fabrication: Machine shops producing custom or low-volume parts use process layouts,
with equipment like lathes, milling machines, and grinders grouped by function.
 Heavy Equipment Manufacturing: Production of large, specialized equipment that requires non-
repetitive processes.
 Tool and Die Manufacturing: Facilities where tools, dies, and molds are manufactured often use
process layouts to accommodate diverse machining operations.

2. Service Industries

 Hospitals and Healthcare Facilities: Different departments like radiology, pathology, surgery,
and pharmacy are arranged based on their specialized functions.

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 Educational Institutions: Classrooms, laboratories, and libraries are organized by activity rather
than a sequential process.
 Retail Stores: Departments in large retail outlets (e.g., electronics, clothing, groceries) are
grouped by function, providing flexibility for varied customer needs.

3. Metalworking and Fabrication

 Job Shops: Small-scale metalworking operations producing custom parts or prototypes, where
machines are grouped by type (e.g., cutting, welding, painting).
 Repair and Maintenance Workshops: Facilities where equipment and machinery are serviced,
requiring flexible machine arrangements.

4. Food Processing

 Bakeries: Process layouts allow for separate areas for mixing, baking, decorating, and packaging,
depending on the variety of baked goods.
 Custom Catering Services: Kitchens where meals are prepared to meet unique customer
requirements often adopt process layouts.

5. Textile and Apparel Manufacturing

 Custom Tailoring: Tailors and designers organize their workshops into functional areas (e.g.,
cutting, sewing, pressing) to accommodate different garment designs.
 Small Batch Clothing Production: For orders requiring variety, process layouts allow flexibility in
production.

6. Automotive Repairs

 Service Centers: Car repair workshops organize areas for specific tasks like engine repairs, tire
servicing, and painting to handle diverse repair jobs efficiently.
 Customization Centers: Facilities providing vehicle customizations (e.g., audio systems,
interiors) use a process layout for functional grouping.

7. Research and Development

 Laboratories: R&D facilities arrange equipment by function to support varied experiments and
research projects, such as testing, analysis, and fabrication.
 Prototyping Centers: Workshops for creating prototypes often group tools by functionality to
support iterative development.

8. Printing and Publishing

 Custom Printing Services: Printing shops offering personalized items like business cards,
banners, or posters use process layouts for flexibility.
 Bookbinding and Design: Different stages like layout design, printing, cutting, and binding are
grouped by their function.

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9. Warehousing and Logistics

 Distribution Centers: Process layouts are used to organize receiving, sorting, packing, and
shipping areas.
 Custom Packaging: Facilities where products require specialized packaging based on client
specifications.

10. Small-Scale Manufacturing

 Furniture Workshops: Small furniture manufacturers arrange equipment for cutting, sanding,
assembling, and finishing.
 Artisanal Production: Workshops for pottery, jewelry, or handmade goods adopt process
layouts to accommodate diverse production tasks.

Applicationsof Product Layout

1. Manufacturing Industries

 Automobile Assembly: Used in car manufacturing plants to produce vehicles through a

sequential series of operations like welding, painting, and assembly.
 Electronics: Production of consumer electronics (e.g., televisions, smartphones, and
laptops) benefits from streamlined workflows in product layouts.
 Appliances: Factories producing washing machines, refrigerators, and air conditioners
rely on product layouts for repetitive and high-speed assembly.

2. Food and Beverage Production

 Bottling Plants: In beverage industries, product layouts are ideal for tasks like filling,
capping, labeling, and packaging.
 Processed Foods: The production of items like canned goods, packaged snacks, or frozen
meals follows sequential steps in a product layout.

3. Pharmaceutical Industry

 Medicine Production: Sequential tasks like mixing, filling capsules, sealing, and
packaging medicines are suited to a product layout.
 Packaging: Tablets, syrups, and other products are often packaged in standardized units
using automated product layouts.

4. Textile and Apparel Manufacturing

 Garment Production: Product layouts are used to ensure efficiency in cutting, stitching,
and assembling clothing items.
 Fabric Production: Processes like weaving, dyeing, and finishing often utilize product
layouts.

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5. Consumer Goods Manufacturing

 Toys and Plastic Products: Sequential manufacturing of toys, plastic utensils, and other
consumer goods aligns with product layout designs.
 Personal Care Products: Items such as soaps, shampoos, and cosmetics are produced
and packaged on assembly lines.

6. Automotive Components

 Tires and Batteries: Production lines for car tires and batteries are structured in product
layouts for uniformity and precision.
 Engine Parts: The manufacturing of engine components like pistons, crankshafts, and
gear assemblies benefits from this layout.

7. Electronics and Semiconductor Manufacturing

 Chip Fabrication: Sequential steps in wafer processing, assembly, and testing follow a
product layout.
 Assembly of Circuit Boards: Production lines for printed circuit boards (PCBs) align
with the product layout for consistency.

8. Packaging Industries

 Carton Assembly and Filling: Standardized processes for creating and filling cartons for
a variety of products.
 Labeling and Sealing: Ideal for high-volume, repetitive tasks in industrial packaging.

9. Automotive Repairs and Maintenance

 Quick Service Bays: Facilities offering services like oil changes, tire rotations, and brake
checks use product layouts to ensure efficiency in servicing.

10. Large-Scale Printing

 Newspapers and Magazines: Printing and binding are performed in sequential steps.
 Packaging Labels: High-volume label production follows a fixed layout to maintain
accuracy.

QUANTITATIVE TECHNIQUES FOR OPTIMAL DESIGN OF LAYOUTS

The design of optimal layouts—whether product, process, or hybrid—requires the use of

quantitative techniques to analyze, evaluate, and configure the layout for maximum efficiency.
These techniques aim to minimize costs, reduce travel distances, optimize space utilization, and
improve workflow. Below are common quantitative methods used for layout design:

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1. Linear Programming (LP)

 Purpose: Optimizes resource allocation while meeting specific constraints.

 Application: Used to determine the optimal placement of departments or workstations to
minimize costs such as transportation or handling.
 Example: Minimizing the total distance traveled between departments in a factory or
warehouse.

2. Facility Layout Problem (FLP)

 Purpose: Models the arrangement of departments or facilities to optimize objectives like

travel time or cost.
 Techniques:
o Quadratic Assignment Problem (QAP): Assigns facilities to locations to
minimize distance and costs.
o Branch and Bound Methods: Solves facility layout problems by systematically
exploring all possible layouts.
 Application: Commonly used in manufacturing and warehouse design.

3. Systematic Layout Planning (SLP)

 Purpose: Combines qualitative and quantitative factors to design layouts.

 Steps:
1. Define relationships between departments or areas.
2. Assign weights to relationships based on importance.
3. Generate multiple layout alternatives and evaluate them quantitatively.
 Application: Used in both product and process layout planning.

4. Simulation Modeling

 Purpose: Creates virtual models of layouts to analyze performance under different

scenarios.
 Tools: Software like Arena, FlexSim, or AnyLogic.
 Application: Simulates workflow, material handling, and employee movements to test
layouts for bottlenecks or inefficiencies.
 Benefits: Offers insights into dynamic factors like equipment downtime and variable
demand.

5. Heuristic Methods

 Purpose: Provides practical solutions when exact methods are computationally intensive.
 Common Heuristics:
o Clustering Algorithms: Groups related tasks or departments.

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o CRAFT (Computerized Relative Allocation of Facilities Technique):

Iteratively improves layouts by swapping departments to reduce costs.
 Application: Used for large and complex facilities where exact optimization is
impractical.

6. Genetic Algorithms (GAs)

 Purpose: Mimics natural selection to find near-optimal solutions for layout problems.
 Application: Ideal for solving nonlinear and complex layout problems like facility
location or workstation arrangement.
 Benefits: Handles multiple objectives, such as minimizing travel distance while
maximizing adjacency preferences.

7. Material Flow Analysis (MFA)

 Purpose: Analyzes material movement within a facility to minimize transportation effort.

 Tools: From-to charts and spaghetti diagrams to visualize flow patterns.
 Application: Used to optimize the placement of workstations or departments based on
material flow requirements.

8. Multi-Criteria Decision Analysis (MCDA)

 Purpose: Evaluates and ranks layout alternatives based on multiple criteria.

 Techniques:
o Weighted Scoring Models: Assign weights to factors like cost, flexibility, and
adjacency.
o Analytic Hierarchy Process (AHP): Breaks down decisions into hierarchies and
assigns priorities to criteria.
 Application: Used when multiple conflicting objectives must be balanced.

9. Network Models

 Purpose: Uses graph theory to model and optimize connections between facilities.
 Techniques:
o Shortest Path Algorithms: Optimizes routes for material handling.
o Maximum Flow Models: Analyzes the flow of materials or goods through the
system.
 Application: Logistics, transportation systems, and warehouse layouts.

10. Layout Optimization Software

 Tools: Specialized software automates the optimization of layouts using built-in

algorithms.
 Examples:
o AutoCAD for detailed design and space planning.
o OptiLayout and Layout-iQ for facility planning.

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o FlexSim for dynamic simulation.

 Application: Quickly generates and evaluates layout scenarios.

11. Integer Programming (IP)

 Purpose: Solves facility layout problems by using integer variables to represent decisions
like department locations.
 Application: Often applied to discrete layouts where departments or facilities must
occupy fixed, non-overlapping spaces.

12. Data Envelopment Analysis (DEA)

 Purpose: Evaluates the efficiency of different layout configurations based on input-

output data.
 Application: Used in scenarios where multiple layouts with varied performance metrics
need comparison.

13. Cost-Distance Analysis

 Purpose: Minimizes the cost of material handling by analyzing distance and frequency of
movement between departments.
 Application: Used to arrange workstations or storage areas for efficient material flow.

14. Spanning Tree Algorithms

 Purpose: Minimizes total connection costs for networks like material handling systems
or aisle layouts.
 Application: Useful for designing optimal warehouse or storage facility layouts.

Combining Techniques:

In practice, many of these techniques are combined for comprehensive layout optimization. For
example:

 Simulation models can validate heuristic solutions.

 Genetic algorithms can refine layouts derived from linear programming or heuristic
methods.

These quantitative approaches enable efficient, cost-effective, and scalable layout designs across
various industries and applications.

///=*The End*=///

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