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Management Control System in Manufacturing Organization

Management Control System in Manufacturing Organization


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Published by: manisha on Dec 12, 2008
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Introduction Types of Control Control Process Control Technique Qualities of Effective Control System About Sumul Dairy Control Mechanism in Sumul Dairy


The modern manufacturing environment intense international competition, rapid turnover and obsolescence, increased use significant organizational changes in manufacturing technologies

is characterized by product innovation, of automation, and response to new

It is generally accepted that these changes in the manufacturing environment should be accompanied by changes in performance evaluation and reward systems to derive higher performance. However, it is very complicated to identify the required design of a management control system in such a new environment.


Henry Fayol: Control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued and the principles established

Koontz and O’Donnell: Controlling implies measurement of accomplishment against the standard & the correction of deviations to assure attainment of objectives according to plans.

The Cycle of Control
The Cycle of Control

Plan Correct




Types of Control

Organizational Control ( Administrative Control )-formal rules and standard operating procedures

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Informal Group Control - based on principle of mutual Controls Individual level Control ( Self Control )- the result of control exercised by the individual on himself or her self

Political Control- socio economic environment

Control Process
The Control Process
Standard Attained?


Compare Performance to Standard Objectives

Do Nothing

Variance Acceptable?


Do Nothing

Measure Standard Performance

Standard Acceptable?


Identify Causes

Revise Standard Correct Performance

Robbins et al., Fundamentals of Management, 4th Canadian Edition ©2005 Pearson Education Canada, Inc.

Control Technique
Traditional Control Techniques: Personal observation.  Statistical reports and analysis.  Break-even analysis.  Budgetary control.  Cost control.  Production control.  Inventory control Advance control techniques: Management Audit.  Return on Investment.  Responsibility Accounting  Programme Evaluation and Review Techniques (PERT).  Critical Path Method (CPM).  Management Information Systems (MIS).  Zero-based Budgeting.

Qualities of Effective Control System
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Corrective Action Accuracy Timeliness Economy Flexibility Understandability Reasonable Criteria Strategic Placement Emphasis on Exceptions Multiple Criteria

About Sumul Dairy

The Surat District Co. operative Milk Producers' Union Ltd., SUMUL is trade name and literally meaning sound price, came into existence on August 22, 1951. Sumul or Surat Milk Union Limited, which is now renamed as The Surat District Co-operative Milk Union Ltd, is one among the 12 district unions which acts as manufacturing units of dairy products for Gujarat Co-operative Milk Marketing Federation Limited, the marketers of Amul and Dhara brand of products.

Objective of Sumul dairy

To provide year round milk market for their surplus milk and to earn reasonable returns for the milk to improve their quality of life. To procure milk and process it into good quality milk and milk products to market it at most economically and efficiently to give maximum overall net returns to the producers and general satisfaction to the consumers. To provide essential technical inputs and services to the producers at their door steps in an economic and efficient manner and also in a way most acceptable to them to increase milk production and to reduce the cost of production.

Control Mechanism in Sumul Dairy

Control is necessary to measure & to monitor the performance of each activity done by human being or machine.

Input: They procure milk from various villages of Surat District. Milk is main input for the dairy product. Besides this, other inputs like pasteurization machinery, pouches for packaging etc.
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They use different system as a control mechanism Procurement System Animal husbandry system Milk chilling system


Capacity utilization: They use 99.999% of total capacity. In pouch section they are having 110% capacity utilization.

Machinery maintenance: Rated capacity of machinery is the important aspect. For the purpose of maintaining quality, they need all the system work properly.

Marketing: Their goal is to give 87 paisa per liter to the rural area. They manage all the expenses from 13 paisa per liter. In this 13 paisa per liter, they also include expense related to marketing activities

Budgeting process

They set department wise objectives. Each dept. having their own cost. In month of March every year they exercise the budget.

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Every dept. submit their variables to A.G.M finance A.G.M. finance makes the list of activity and divides all the cost in fixed & variable cost.

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From the past data, they see the scope of improvement area Then they decide key performance area (at board level) Purchase committee consider the budget

Environmental variable:

They follow ISO 14000 for environmental control. Energy conservation is the crucial part. Every year they process 20% more milk than previous year & reduce 3% of energy conservation

Key Parameter for control

They segregate all control parameter as department wise, area wise and person wise. For the purpose of control they use the equation given below: OEE (Overall equipment efficiency) = Availability Rate of Men and Machinery (%) * Performance rate of Men and Machinery against desired capacity * Quality Rate For any dairy the benchmark of OEE is 87%. But in the case of Sumul Dairy the OEE is 92%. From above all, we can say that the system in this dairy is well organized and well controlled.

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Individuals play the game, but teams win championships.

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