Concepts of Control

Organizational Control

The systematic process through which

managers regulate organizational activities
to make them consistent with the
expectations established in plans, targets,
and standards of performance.
 Control Process
• Establishing standards
• Measuring performance against these
standards
• Correcting deviations from standards and
plans
 Phases of Control
• Pre control – Feedforward Control

• Concurrent Control

• Post control – Feedback Control

 Types of Control
• Production Control
• Routing, Loading, Scheduling, Estimating,
Dispatching, Expediting
• Inventory Control
• Raw materials, Work in progress, finished goods
• Optimum amount of inventory
• Economic lot size for the order
• Record system to show inventory at hand.
• Quality Control
• Financial Control
 Techniques of Control
• Budgets
• Revenue expense budgets
• Time, space, material, product budgets
• Capital expenditure budgets
• Cash budgets
• Balance sheet budgets
• Break even Analysis
• Ratio analysis
• Return on investments
 Techniques of Control
• Direct Management Control
• Direct control through key result areas
• Direct control through management audit
• Control through shared values
 Types of Control
• Financial Control
 Introduction
• Feedback systems are commonplace in almost every aspect of
life
– Standing, walking, running etc… are all forms of control systems
where the central nervous system reacts to various biosensor
mechanisms
– Gene regulation is controlled by complex responses that trigger
various biological mechanisms

 In engineering applications, feedback systems arise in the

design of control systems
– Aircraft flight control, satellite altitude control
– Automotive control
– Communication systems
– Robotics

• Control is the hidden technology

– It’s everywhere, but hidden by the machinery.

9
 Introduction
• Feedback systems: Interconnection of two
systems
System 1

System 2

 E.g. Glucose concentration regulation:

 System 1 is the liver
 System 2 is the pancreas
 the output of interest, , is glucose concentration
 the input of interest, , is insulin release rate 10
 Control
What is a feedback controller?

Process

Controller

 A controller is a system designed to regulate a given process

 Process typically obeys physical and chemical conservation
laws
 Controller obeys laws of mathematics and logic (sometimes
intelligent)

e.g. - Riding a bike (human controller)

- Driving a car
11
- Automatic control (computer programmed to control)
 Control
• A controlled process is a system which is comprised of two
interacting systems:

e.g. Most controlled systems are feedback control systems

Disturbances Outputs
Process
Action Observation
intervene Controller monitor

The controller is designed to provide regulation of process outputs

in the presence of disturbances

12
 Classical Control
• Control is meant to provide regulation of process outputs about
a reference, r, despite inherent disturbances
d

r e u y
+
Controller Process
-

Classical Feedback Control System

• The deviation of the plant output, e=(r-y), from its intended

reference is used to make appropriate adjustments in the plant
input, u

13
 Feedforward Control
• Feedforward control is used to remove
the effect of measurable disturbances
Disturbance
M

Nominal Cff A P
Input +
+ Corrected
Input Input
Correction

14
 Open-loop vs. Closed-loop
• Feedback control is an example of
closed-loop control:
– The process output is sent back to the
Process
controller before affecting the process
Control

Control Process
• Open-loop control
15
 Introduction
• What is the purpose of a control
system?

“To maintain important process

Perturbations Processing
characteristics at desired targets despite
objectives
Plant
the effects of external perturbations.”

Market Safety
Economy Make $$$
Climate Environment...
Upsets...

Control 16
 Introduction
• Dynamics:

 Study of the transient behavior of

processes

• Control:

 the use of process dynamics for the

improvement of process operation and
performance

 the use of process dynamics to alleviate

the effect of undesirable (unstable) process 17
 Introduction
What do we mean by process, plant or system?

A process (plant or system), P, is an operation that takes an INPUT or

a DISTURBANCE and gives an OUTPUT

u
y
P
d

Information Flow

INPUT: (u) Something that you can manipulate

DISTURBANCE: (d) Something that comes as a result of some outside
phenomenon
OUTPUT: (y) An observable quantity that we want to regulate
18
 Examples
• The speed of an automobile

Aerodynamic Force of
Friction Engine
Inputs Output
Friction
Process Speed
Engine

19
 Example
• Cruise Control

Friction
Process Speed
Engine

Controller
Human or Computer

20
 Classical Control
• Control is meant to provide regulation of process outputs about
a reference, r, despite inherent disturbances
d

r e u y
+
Controller Process
-

Classical Feedback Control System

• The deviation of the plant output, e=(r-y), from its intended

reference is used to make appropriate adjustments in the plant
input, u

21
 Control
• Process is a combination of sensors and actuators

• Controller is a computer (or operator) that performs the required

manipulations d

Computer Actuator
r e y
+
C A P
-
Process

Sensor
e.g. Classical feedback control loop

22
 Examples

• Driving an automobile
Driver Steering
r + e y
C A P
-
Automobile
M
Visual and tactile measurement

Actual trajectory
Desired trajectory y
r

23
 Examples
• Stirred-Tank Heater
Tin, w

Heater
Q T, w
TC
Thermocouple
Tin, w

TR Controller Heater
e y
+
C A P
-
Tank
M

24
Thermocouple
 Examples
• Measure , adjust

Controller Heater

+
C A P
-
Tank
M
Thermocouple

Feedback control

Controller:
where

Q: Is this positive or negative feedback?

25
 Examples
• Measure Ti, adjust Q

Ti
M

C A P
+ Q
Qi + Q

Feedforward Control

26
 Feedforward Control
• Feedforward control is used to remove
the effect of measurable disturbances
Disturbance
M

Nominal Cff A P
Input +
+ Corrected
Input Input
Correction

27
 Control Nomenclature
• Identification of all process variables

– Inputs (affect process)

– Outputs (result of process)

• Inputs

– Disturbance variables
• Variables affecting process that are due to
external forces
– Manipulated variables
• Things that we can directly affect
28
 Control Nomenclature
• Outputs
– Measured
• speed of a car
– Unmeasured
• acceleration of a car
– Control variables
• important observable quantities that we want to
Disturbancesregulate Other
• can be measured
Manipulated or unmeasured
Process Control

Controller
29
 Examples
 The speed of an automobile

Force of
Friction
Engine
Variables
• Engine force: u
• Car speed: v
• Friction force: ffric
• Aerodynamic forces: faero
• Road inclination:

30
 Example

Variables Inputs Outputs

Disturbances Manipulated Measured Unmeasured
Control

Task: Classify the variables

31
 Examples
• Quarter-car model (simple car
suspension model)

Variables:
 Displacement:
 Displacement change:
 Road conditions:
 Shock absorber forces:
 Suspension system forces:
 Forces acting on wheel:

32
 Example

Variables Inputs Outputs

Disturbances Manipulated Measured Unmeasured
Control

Task: Classify the variables

33
 Example

w i , Ti
Pc L

wc, Tci h T
wc, Tco
Po
Variables w o, To
T
• wi, wo: Tank inlet and outlet mass flows
• Ti, To: Tank inlet and outlet temperatures
• w c: Cooling jacket mass flow
• P c: Position of cooling jacket inlet valve
• Po : Position of tank outlet valve
• Tci, Tco: Cooling jacket inlet and outlet
temperatures
• h: Tank liquid level 34
 Example

Variables Inputs Outputs

Disturbances Manipulated Measured Unmeasured
Control
wi
Ti
Tci
wc
h
wo
To
Pc
Po

Task: Classify the variables

35
Process Control and Modeling

• In designing a controller, we must

– Define control objectives
– Develop a process model
– Design controller based on model
– Test through simulation
d
r – Implement
e to real process
u y
Controller Process
– Tune and monitor
Model

Design
Implementation 36
 Control System Development
Control development is usually carried out following these
important steps
Define Objectives

Develop a process
model
Design controller
based on model
Test by
Simulation

Implement and Tune

Monitor
Performance
Often an iterative process, based on performance we may 37
decide to retune, redesign or remodel a given control system
Control System Development
• Objectives
– “What are we trying to control?”

• Process modeling
– “What do we need?”
• Mechanistic and/or empirical

• Controller design
– “How do we use the knowledge of process behavior to reach our
process control objectives?”
– What variables should we measure?
– What variables should we control?
– What are the best manipulated variables?
– What is the best controller structure?

38
Control System Development
• Implement and tune the controlled
process
– Test by simulation
– incorporate control strategy to the process
hardware
– theory rarely transcends to reality
– tune and re-tune

• Monitor performance
– periodic retuning and redesign is often
necessary based on sensitivity of process
or market demands 39
40
 Advanced Organizer

M anaging E ngineering and Technology

M anagem ent F unctions M anaging Technology P ersonal Technology

P lanning R esearch Tim e M anagem ent

D esign E thics
D ecision M ak ing
P roduction C areer
O rganizing
Q uality
Leading
M ark eting
C ontrolling
P roject M anagem ent
 Definition of “Controlling”

• “compelling events to conform to plans”

-- Goetz

• “Control techniques and actions are

intended to insure, as far as possible,
that the organization does what
management wants it to do.”
 Steps in the Control Process

2. Measuring
Actual Performance
1. Establish 4. Corrective
Standards Action
3. Comparing
Performance with
Standards
Planning Controlling
 Steps in the Control Process

• Establish Standards
– Technical: Quality, Quantity
– Market: Sales, ROI, Earning Expectation
– Planning: Objectives, Schedules, Budgets,
Policies
– Historical
 Steps in the Control Process

• Establish Standards—by Benchmarking

– Internal Benchmarking: productivity
– External Benchmarking
• Financial Ratios
• Performance Metrics
• Best Practices
• Critical Success Factors
• Target Pricing
• Balanced Scorecard: new products, new projects,
patents, new partners, new customers, new
technology
 Steps in the Control Process

• Measuring Actual Performance

– Data collection and analysis
– Time study, work sampling, performance rating
• Comparing Performance with Standards
– Establish limits of tolerance
– Note variations (deviation within limits) and
exceptions (deviation outside limits)
– Provide recognition and warning
 Steps in the Control Process

• Corrective Action
– Short-term: Consultants, temporary workers
– Long-term: Training, modifying procedures and
policies
 Closed-Loop vs. Open-Loop Control

• Closed-loop control (also known as automatic

or cybernetic control) monitors and manages a
process by means of a self-regulating system.
Open-loop control (or non-cybernetic control)
requires an external monitoring system and/or an
external agent to complete the control loop.
 Timing of Control

• Feed-back control
• Screening or concurrent control
• Feed-forward (or preliminary or steering)
control
 Timing of Control

• Feedback Control (Output)

– Measures system output and variance with
predetermined standard
– Adjusts system to maintain variance within a
specified range
 Timing of Control

• Screening Control (Concurrent)

– Control applied concurrently with effort being
controlled
 Timing of Control

• Feedforward Control (Steering or

Preliminary)
– Attempts to predict the impact of current
actions/events
– Current decisions are refined to facilitate goal
attainment
 Characteristics of Effective Control

• Effective
• Efficient
• Timely
• Flexible
• Understandable
• Tailored
• Highlight deviations
• Lead to corrective action
 Types of Control

• Financial

• Human Resource

• Social
 Financial Controls

Financial statements provide the basic

information for the control of cash and
credit, which are essential to the survival of
a company.
• The balance sheet
• The income statement
• The cash flow statement
 Balance Sheet

Balance sheet shows the firm's financial position at

a particular instant in time (a financial "snapshot.“)

Total Assets = Total Liability + Owner’s Equity

 Balance Sheet

Assets are what the company "owns"

• Current assets (assets that can be converted into
cash within a year)
• Fixed assets (property, plant, and equipment at
original cost, less the cumulative depreciation of
plant and equipment [but not land] and depletion
of natural resources since they were purchased)
• Tangibles and Intangibles
 Balance Sheet

• Liabilities are what the firm "owes"

– Current liabilities (must be paid within a year)
– Long-term debt
• Net worth or Equity
– Original investment (what was paid in for
common and preferred stock)
– Retained earnings (the cumulative profits over
the years after dividends are paid).
 TABLE 8-1 Balance Sheet,
Sterling Chemicals, Inc.,
December 31, 2005

Assets
Current assets
Cash $150,000
Securities (at cost) 100,000 $250,000
Accounts receivable 400,000
Inventories (at lower of cost or market)
Raw materials and supplies 200,000
Work in progress 180,000
Finished goods 300,000 680,000
Prepaid expenses 30,000
Total current assets 1,360,000
Property, plant, and equipment 4,500,000
Less accumulated depreciation 2,400,000
Net property, plant, and equipment 2,100,000
Total Assets $3,460,000
 TABLE 8-1 Balance Sheet,
Sterling Chemicals, Inc.,
December 31, 2005
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $100,000
Installments due within 1 year 30,000
Federal income and other taxes 250,000
Other accrued liabilities 120,000
Total current liabilities 500,000
Long-term debt 1,000,000
Total Liabilities $1,500,000
Stockholders' equity
Capital stock 500,000
Retained earnings 1,460,000 1,960,000
Total liabilities and equity $3,460,000
 Income Statement

Income statement (also called a profit and

loss or revenue and expense statement) shows
the financial performance of the firm over a
period of time (usually three months or a
year).
 TABLE 8-2 Income Statement
Sterling Chemicals, Inc.,
December 31, 2005

Gross sales $3,200,000

Less returns and allowances 150,000
Net sales $3,050,000
Less expenses and costs of goods sold
Cost of goods sold 2,000,000
Depreciation and depletion 250,000
Selling expenses 100,000
General and admin. expenses 200,000 2,550,000
Operating profit 500,000
Plus interest and other income 60,000
Gross income 560,000
 TABLE 8-2 Income Statement
Sterling Chemicals, Inc.,
December 31, 2005

Gross income 560,000

Less interest expense 20,000
Income before taxes 540,000
Provision for income taxes 260,000
Net income 280,000
Retained earnings January 1, 2005 1,500,000
1,780,000
Dividends paid 320,000
Retained earnings December 31, 2005 1,460,000
 Cash Flow Statement

Cash flow statement (or sources and

uses of funds statement) shows where
funds come from (net profit plus
depreciation, increased debt, sale of stock,
sale of assets) and what they are used for
(plant and equipment, debt reduction,
stock repurchase, and dividends).
 Cash Flow Statement
(Income Statement)

Operating Revenue
Int. Depr. Taxable
Operating Costs on
Payments to suppliers, Income
Debt
Employees, and others

After-tax Income
Cash Flow Tax
Net
Income
Interest Payments to Debt Holders Div.
RE
 Cash Flow Statement

Disposal of New Debt/ Depr. RE

Sources: Properties Capital

Uses: Increase in Working Capital

Working Capital = Current Assets – Current Lib.

Capital Expenditures

Repayment of debt & equity

Others
 Cash Flow Statement

The letters labeling the

boxes stand for Uses,ses A L
Sources,
ources Assets,
ssets and
Liabilities (broadly
defined). The pluses S  +
(minuses) indicate

U + 
increases (decreases)
in assets or liabilities.
 Ratio Analysis

Financial ratios are ratios of two financial numbers

taken from the balance sheet and/or the income
statement.
• compared with average values for the industry
the firm is in to evaluate relative financial health,
and
• compared with earlier values from the same firm
to evaluate trends.
 Liquidity Ratios

Liquidity ratios measure the ability to meet short-

term obligations.
C urrent A ssets
C urrent ratio 
C urrent Liabilitie s

C urrent A ssets - Inventory

A cid test ratio 
C urrent Liabilitie s
 Leverage Ratios

Leverage ratios identify the relative importance

of stockholders and outside creditors as a source
of the enterprise's capital.

Total D ebt
D ebt - to - assets ratio 
Total A ssets

Total D ebt
D ebt - to - equity ratio 
Total E quity
 Activity Ratios

Activity ratios (also known as operating ratios) show

how effectively the firm is using its resources.
C ost of good sold
Inventory turnover 
Inventory

N et sales
A sset turnover 
Total assets

N et sales
A ccounts receivable turnover 
A ccounts receivable
 Profitability Ratios
Profitability ratios describe the organization's
profit.
N et incom e
P rofit m argin 
N et sales

N et incom e
R eturn on total assets 
Total assets

N et incom e - D ividends (P .S .)
E arning per share 
N o. of shares outstandin g
 Budgets

Financial budgets describe where the firm intends

to get its cash for the coming period and how it
intends to use it.
• Cash budgets
• Capital expenditure budgets
• Balance sheet budget
 Responsibility Centers

• Expense or cost centers (expense budget)

• Revenue center (revenue budget)
• Profit centers (profit budget)
 Budgeting Process

• Top-down approach
• Bottom-up approach
• Combination
 Cost Accounting

Allocating cost among products

Product A Product B Total
Production 4,000 1,000 5,000
Direct Labor $40,000 $10,000 $50,000
Overhead $4,000 $1,000 $5,000
Set-up Cost $4,000 $4,000 $8,000
Total Cost $48,000 $15,000 $63,000
Unit Cost $12 $15
 Audits of Financial Data

Audits are investigations of an organization's

activities to verify their correctness and identify
any need for improvement.
• accounting and financial systems and records
• internal or external.
 Nonfinancial Controls

Human Resource Controls

To assure that human and organizational
performance conform to expectations.
• Performance appraisal (individual)
• Management audit (group) (Figure 8-2)
• Human resource accounting (group)
• Social controls.
 Nonfinancial Controls

Human Resource Controls

Low Skills

Productivity

High Skills

Amount of Supervision
 Non-financial Controls

Social Controls
• Standards
• Comparison with outcomes
• Corrective action
 Non-financial Controls

• Effectiveness of research activities

• Systems for release of drawing release
• Inventory control
• Quality control
• Project control
Controlling - the definition

• Regulation of activities so
performance conforms to
organisational goals and standards
(p. 492)
• highlight behaviours that are needed
and discourage ones that are not
Why is Control Important?

• Related to planning, organising, and

leading
• Builds on the planning function
allowing monitoring and adjusting
• Supports organising and leading
function by ensuring resources are
used for organisational objectives
 Control Systems

• set of mechanisms to increase the

likelihood of achieving organisational
standards and goals (p. 493)
• Examples of Control Systems
include quantity produced, expenses
on resources, profit margins, quality,
etc.
 Role of Controls

• Controls can assist managers with

the following challenges
– Coping with uncertainty
– Detecting irregularity in quality, costings,
staff turnover, etc.
– Identifying problems
– Handling complex situations
– Decentralising authority (giving mgrs
more latitude)
Levels of Control (p. 495)

• These control methods are inter-

related
– Strategic Control - strategic planning -
Top mgmt
– Tactical Control - tactical planning -
Middle mgmt
– Operational Control - operational
planning - lower mgmt
 Strategic Control

• monitoring critical environmental

factors which could affect the viability
of strategic plans
• mainly for top-level managers
(organisation-wide perspective)
• Concentration on “long” time frames
 Tactical Control

• focuses on assessing implementation

of tactical plans at department levels

• middle managers who focus on dept-

level objectives, programs, and
budgets
 Operational Control

• overseeing operating plan

implementation, monitoring day-to-
day results and taking corrective
action when needed
• lower-level managers’ responsibility
• includes scheduling, budgets, rules,
etc.
Steps in the Control Process

• Determine areas to control

• Establish standards
• Measure performance
• Compare performance against
standards
• Recognise positive performance
• Take corrective action if necessary
• Adjust standards and measures as
necessary
Deciding What to Control
(p. 500)

• Resource dependence (managers must

consider controls where they depend
others for resources to reach the
operational goals) - p. 499
• Whether controls are needed or not
– High dependence on the resource
– Expected resource of flow will be unacceptable
• Whether controls are feasible or not
– Control-process feasibility
– Cost acceptability
Alternatives to Control

• Change the dependence relationships so

control is not needed

• Change the nature of the dependence to

one that is more feasible or cost-effective

• Eliminate dependence altogether