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Unit 1

INDUSTRIAL ENGINEERING & MANAGEMENT1
Unit 1: INTRODUCTION: Definition of Industrial Engineering (IE) - Development, Applications, Role of an
industrial engineer, Differences between production management and industrial engineering, Quantitative tools of IE
and productivity measurement. Concepts of management, importance, functions of management. Scientific
Management – Taylor’s principles. Theory X and Theory Y. Fayol’s principles of management.

Definition:
Industrial Engineering is defined as: “The special field of engineering concerned with the design,
improvement and installation of integrated systems of people, materials, equipment and energy.It
draws upon specialized knowledge and skill in the mathematical, physical and social sciences
together with the principles and methods of engineering analysis and design to specify, predict
and evaluate the results to be obtained from such systems.”

Thus, industrial engineering is an engineering approach to the detailed analysis of the use
and cost of the resources of an organization. The main resources are men, money,
materials, equipment and machinery. The industrial Engineer carries out such analysis in
order to achieve the objectives (to increase productivity, profits etc) and follow the
policies of the organization.
Essentially, the industrial engineer is engaged in the design of a system and his function
is primarily that of management.
If an industrial engineer had to focus on only one concept to describe his field of interest
and objective, it would have to be productivity improvement.
Productivity improvement implies:
(i) a more efficient use of resources;
(ii) less waste per unit of input supplied;
(iii) higher levels of output for fixed level of input supplied etc.
The inputs may be:
(i)
Human efforts;
(ii)
Energy in any of its numerous forms;
(iii)
Materials;
(iv)
Invested capital etc.

1 Prepared by Prof. T.S.Nageswara Rao, Department of Management Studies, DVR &
Dr. HS MIC College of Technology, Kanchikacherla as a class notes. Adapted from
various sources.
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government and military operations.Unit 1 HISTORY & DEVELOPMENT OF INDUSTRIAL ENGINEERING • • • • • Industrial engineering had its roots in Industrial Revolution (around 1750).. (1) Advisor/Consultant The Industrial Engineer is available to others for interpretation of data. It was nourished by individuals who sought to advance organization and management principles at an early date. It achieved maturity after World War II. ROLES OF AN INDUSTRIAL ENGINEER The following are the different types of roles and functions an industrial engineer may need to take on. (2) Advocate/Activist The Industrial Engineer promotes a process or approach actively. came the beginning of management and management thinking. Even today. public utilities. Before 1940. Later on. (3) Analyst The Industrial Engineer separates a whole into parts and examines them to explore for insights and characteristics. industrial engineering finds major applications in manufacturing plants and industries. purchasing. industrial relations etc. the use of industrial engineering spread to nonmanufacturing activities such as construction. transportation. finance. industrial engineering was applied mainly to manufacturing industries for improving methods of production. With the growth in the size of industries. advances in metal cutting and the production of machine tools. It emerged as a separate discipline and was formalized in the late 19 th and early 20 th centuries. air-line operations and maintenance. especially in the textile industry. the departments utilizing industrial engineering concept are marketing. then steam engine. The Industrial Revolution resulted from the advent of new inventions. and to review it. These led to factories with large number of workers. In an industry. besides production. (4) Boundary Spanner 2 . to develop work standards or to formulate production control and wage policies. The important steps and mile stones in the development of Industrial Engineering are : (a) Division of Labour (Adam Smith) (b) Scientific Management (Frederick Taylor) (c) Analytical Calculating Machine (Charles Babbage) (d) Method Study (Frank and Lillian Gilbreth) (e) Operations Research (f) Value Engineering & Systems Analysis (g) Human Engineering (or) Ergonomics.

(7) Designer/Planner The Industrial Engineer produces the solution specifications. (12) Project Manager The Industrial Engineer operates. 3 . (8) Expert The Industrial Engineer provides a high level of knowledge. (5) Motivator The Industrial Engineer provides stimulus and skill availability to a group or an individual. (11) Measurer The Industrial Engineer obtains data and facts about the existing conditions. (10) Innovator/Inventor The Industrial Engineer seeks to produce a creative or advanced technology solution. (6) Decision-maker The Industrial Engineer selects a preference from among many alternatives for the topic of concern. (14) Negotiator The Industrial Engineer helps the management in the negotiations with workers. (9) Coordinator and Integrator The Industrial Engineer coordinates the activities of various personnel. skill and experience on a specific topic.Unit 1 The Industrial Engineer bridges the information gap between industrial engineering and user. (13) Trainer/Educator The Industrial Engineer trains employees with the skills and knowledge of industrial engineering. supervises and evaluates projects.

• Linear Programming. and Integer Programming are examples.g. (9) Queuing Models • Used to predict the performance of service systems involving queues.. 4 . (7) Game Theory • Provides a systematic approach to decision-making in competitive environments and a frame work for the study of conflict. (6) Markov Chains • Used for predicting the outcome of processes where systems or units change their condition over time (e. (5) Dynamic Programming • An approach to decisions that are sequential in nature or can be reformulated so as to be considered sequential. • The best known models are PERT and CPM. consumers change their preference for certain brands of products). (4) Network Models • Family of tools designed for the purpose of planning and controlling complex projects. Assignment model. Transportation Problem.Unit 1 QUANTITATIVE TOOLS USED IN INDUSTRIAL ENGINEERING (1) Decision Matrices • Allocation and investment problems involving a relatively small number of possible solutions (2) Decision Trees • Allocation and investment problems involving several decision periods (3) Mathematical Programming • Attempts to maximize the attainment level of one goal subject to a set of requirements and limitations. (8) Inventory Models • Used for inventory control problems to decide the optimal order quantity that will minimize the annual inventory cost.

Productivity Measures (a) Labour Productivity The inputs are aggregated in terms of labour hours. (c) Capital Productivity 5 .g.000 buses and the daily revenue is Rs 2 crores. land and building. PRODUCTIVITY       Productivity is defined as the ratio between output and input. (B) For Workers (i) Higher wages (ii) Better working conditions (iii) Higher standard of living and (iv)Job security and satisfaction (C) For Customers  Reduced prices of articles. If by using 200 workers. the company is able to produce goods worth Rs 20 lakhs daily. the daily productivity of a bus is Rs 2. (b) Direct Labour Cost Productivity The inputs are aggregated in terms of direct labour costs. Similarly.000. labour etc. equipment and machinery. materials. in APSRTC. if there are 10. the daily labour productivity is Rs 10. Output means the amount produced or the number of items produced.. Every organization (whether manufacturing or service) is interested in determining and increasing its labour productivity and productivity of machinery. The Motivation to Increase Productivity (A) For Management (i) To earn good profits (ii) To repay the debts acquired from different sources (iii) To sell more and (iv)To stand better in the market.000. e.Unit 1 (10) Simulation Models • Used for the analysis of complex systems when all other models fail. Inputs are the various resources employed.

(e) Energy Productivity The input is the amount of energy consumed. the numerators are usually weights of product. (3) Plant. by reducing scrap. higher productivity can be achieved through proper use of materials i. suitable material handling and storage facilities and proper packaging. 6 . properly trained workers.Unit 1 The inputs may be the charges during the period to depreciation or the book value of capital investment.  Productivity of materials can also be increased by using correct process. simple attachments and other devices. and by proper maintenance of the machinery. (2) Labour  A little change in the design of component parts so as to facilitate final assembly can increase the number of products assembled per day with the same amount of labour.  Total production times can be reduced considerably by improving machine setting up methods. (d) Direct Cost Productivity The inputs are all items of direct cost associated with resources aggregated on a monetary value basis.e.. the denominator is the weight of raw material consumed. Increasing Productivity of Resources • Increasing productivity implies getting more output from the same amount of input. Equipment and Machinery  Productivity can be increased through the use of improved tools. (1) Material  Industries in which the cost of raw material is a big percentage of the cost of finished goods. (f) Raw Material Productivity In this formulation. a little change in the design of the component or component layout may save a lot of material.  Sometimes.

It tells how to manage..Unit 1 (4) Land and Buildings  A suitable plant layout can accommodate more machinery in the same space and thus raise productivity. construction and inside conditions of a building definitely increase productivity. plant. i. process.. with less attention paid to the analysis and design of productive systems.) and (2) Development of the control systems to manage inventories. The functions of production management also include consideration of control system such as: (1) (2) (3) (4) (5) (6) (7) Inventory control policies Quality control policies Production-schedule control policies Productivity and cost control policies Constructing control systems Implementing and operating control systems Modifying policies and designs. Industrial engineering deals with the analysis. equipment etc. design and control of productive systems. how to direct It does not focus on how to manage but human efforts in a production environment focuses only on designing the system.  Proper orientation. Example: Training of a pilot Example: Designing an aircraft 7 . (A productive system is any system that produces either a good or service).e. PRODUCTION MANAGEMENT Production management centers on two major areas: (1) Design of the production system (which includes product. Differences between Production Management and Industrial Engineering Production Management Industrial Engineering Production management attempts to familiarize a person with concepts and techniques specific to the analysis and management of a production activity. product quality. production schedules and productivity.

(4) Management provides new ideas and vision to the organisation to do better. with satisfaction for employer. even if it possesses large amount of money. (7) Management provides stability to the enterprise by changing and modifying the resources in accordance with the changing environment of the society. (2) Management creates a vital. it is necessary to guide. it will be all confusion and nobody will know what to do and when to do it. (6) Only management can meet the challenge of change. because without management. excellent machinery and expert man-power. (6) Management harmonises the individual’s goals with the organizational goals to minimize the conflicts in the organization. (8) Management helps in personality development thereby raising efficiency and productivity. Importance of Management (1) No enterprise can survive without management. (5) Management is a unifying force.Unit 1 CONCEPT OF MANAGEMENT • Management may be labelled as the art of getting work done through people. materials and capital. directing and controlling. (3) Management coordinates activities of different departments in an enterprise and establishes team spirit among the employees. It integrates human and other resources to achieve the desired objectives. coordinate and control human efforts towards fulfillment of the goals of the enterprise. • For getting the work done (of an enterprise) through efforts of other people. FUNCTIONS OF MANAGEMENT 8 . • The goals of the enterprise are fulfilled through the use of resources like men. direct. organising. Characteristics of Management (1) Management is goal-oriented. materials and machinery. staffing. dynamic and life-giving force to the enterprise. money. Managers at various levels possess varying degrees of authority. employees and the public. (4) Management represents a system of authority – a hierarchy of command and control. (3) Management is a process comprising of functions such as planning. (2) Management works as a catalyst to produce goods using labour. (5) Management tackles business problems and provides a tool for the best way of doing things.

(ii) Planning. Staffing is a continuous process. Without planning. profit etc.. trained. Forecasting Forecasting estimates the future work or what should be done in future. materials. Staffing involves the developing and placing of qualified people in various jobs in the organization. the activities of an organisation will lead to confusion. Directing involves motivating. economic and systematic way of making decisions today which will affect the future e.) to the best advantage. (iii) Motivation and (iv) Supervision. (vi) Coordinating. (v) Directing. materials. (ii) Communication. (vii) Controlling and (viii) Decision-making. Organizing Organizing is the process by which the structure and allocation of jobs is determined. Some functions are basic to managerial activities and are applicable to all business enterprises. purchase. Planning Planning is a rational. time etc and establishing a framework in which responsibilities are defined and authorities are laid down. Directing thus involves: (a) Giving instructions to the subordinates. The aim is to have appropriate persons to move in to vacated positions or newly created positions in the organization.Unit 1 • • • (1) • • • (2) • • • (3) • • • (4) • • • (5) • • • One way to look at the process of management is to identify the basic functions which make up the process. and (c) Supervising the subordinates to make certain that the work done by them is as per the plan established. promoted and compensated. Organizing involves determining activities required to achieve the company’s activities. jobs. (i) Leadership 9 . Directing involves: (i) Leadership. Forecasting begins with the sales forecast and is followed by production forecast and forecasts for costs. machines etc. (b) Guiding the subordinates to do their work. Forecasting is a necessary preliminary to planning. Prior planning is very essential for utilizing the available facilities (men. (iii) Organising: (iv) Staffing. grouping these activities in a logical basis and finally assigning persons to the job designed. Staffing Staffing is the process by which staff are selected. what is to be done in the future. The functions used to describe the process of management are: (i) Forecasting. finance. and where it will be done. who will do it. Directing Directing is the process by which performance of subordinates is guided towards the common goals of the organization. guiding and supervising subordinates toward company objectives.g. Organizing means organizing people.

. rules are not violated and objectives have not been unknowingly shifted. extra increments. Communication may include verbal or written orders. recognition. sales. regulate their activities on the job. (ii) Communication Communication is the process by which ideas are transmitted. and regulate their communications. received and understood by others for the purpose of carrying out desired results. dissatisfaction and sometimes even strikes. (iv) Supervision Supervision is necessary in order to ensure: (a) that the work is going on as per the plan established.Unit 1 • • • • • • • • Leadership is the quality of the behaviour of the managers whereby they inspire confidence and trust in their subordinates. 10 . get maximum cooperation from them and guide their activities in an organized effort. • Controlling involves: (i) the monitoring of programme activities to make sure that end objectives are being met and (ii) the initiation of corrective action as required to overcome problems. • Ineffective coordination between different functions of a business enterprise such as production. reports. (b) that the workers are doing as they were directed to do. instructions etc. if required. (iii) Motivation Motivation means inspiring the subordinates to do a work or to achieve company objectives effectively and efficiently. cash awards etc. Leadership is more than personal ability and skill. Motivation could be classified as: (a) Financial motivation such as salary. bonus. verifies their conformity with the predetermined plan and takes corrective action. if any. misunderstanding. and (b) Non-financial motivation such as promotion. • Controlling is a continuous process which measures the progress of operations. An ineffective communication leads to confusion. hindering the accomplishment of objectives. • Controlling is necessary to ensure that orders are not misunderstood. (6) Coordinating • Coordinating means achieving harmony of individual effort towards the accomplishment of company’s objectives. • Coordination involves making plans that coordinate the activities of subordinates. praise etc. administration can ruin the enterprise. (7) Controlling • Controlling is the process that measures current performance and guides it towards some pre-determined goal.

organize and control the workers’ performance. it required that management should plan.Unit 1 (8) Decision-making • Decision making is the process by which a course of action is consciously chosen from available alternatives for the purpose of achieving desired results. (ii) (iii) (iv) (v) (vi) (vii) Scientific Management removed the workers’ judgment in planning. in 1910. standardizing and improving human effort at the operative level in order to maximizing output with minimum input. Achieve support and cooperation from workmen by arranging better working conditions. who were not prepared to discard the old style of working in favour of scientific approach. service conditions and guidance and by giving them greater economic rewards which in turn are obtained through increased efficiency and productivity. Train and develop each workman in the most efficient method for doing the job. Basic Approach of Scientific Management (i) Analyse work scientifically. • The primary emphasis of scientific management was on planning. Opposition to Scientific Management • Primary resistance to scientific management came from the managements. Investigate all aspects of work on a scientific basis rather than using rules of thumb. Divide the work so that workmen and management share almost equally in the daily performance of each task. Develop one best way of doing a job (using time and motion studies). workers do their jobs as per the standards laid down and management does planning. • The basic assumption here is that “MAN IS ECONOMIC IN NATURE” • Scientific Management is the result of applying scientific knowledge and the scientific methods to the various aspects of management. Provide specific guidelines for worker performance. THEORY OF SCIENTIFIC MANAGEMENT (Frederic Taylor) • Frederick W Taylor proposed the concept of scientific management. • An outstanding quality of a successful manager is his ability to make sound and logical decisions. 11 . Select workers best suited to perform the specific tasks. organizing and controlling his own task performance. Rather.

12 . they do not want to take any responsibility and do not want to improve the wok through interest but wait for formal directions/instructions. creative and have the capability of decision-making. They also actively participate in decision-making. (iii) The workers feel responsible for the work for which they are appointed. (iv) The workers are active. (ii) Most employees are less ambitious. (iv) Motivation occurs only at the physiological and safety levels. THEORY Y The assumptions of Theory Y are: (i) Work is as natural as play or leisure. THEORY X The assumptions of Theory X are: (i) Employees inherently (= naturally) dislike work and always try to avoid it. They think that they are considered as cogs in the wheel. Based on the above assumptions. (vi) Workers feel that they are of less importance in an organization. if the conditions are favourable. (iii) Most people need to be coerced (compelled). (v) Most people have little capacity for creativity. controlled and threatened with punishment to get them to work and achieve goals.Unit 1 • Another cause for opposition was that the scientific management treated workers like cogs in a well-oiled machine and that the system destroyed humanistic practices in industry. and decision making. Theory X suggests that workers are to be directed. controlled and punished to achieve the desired results. (ii) The workers are committed to the objectives of the organization. They are self-controlled and no coercion (= force) is required. THEORY X and THEORY Y (Douglas McGregor) • Management researcher Douglas McGregor’s research suggested that managers’ assumptions about worker motivation tended to fall into one of two categories. • McGregor felt that such assumptions exert a heavy influence on how managers operate: The two theories are: (1) Theory X (Traditional Theory) and (2) Theory Y (Modern Theory). problem solving.

13 . (2) Authority & responsibility.Unit 1 (v) Motivation occurs through self-actualization and satisfaction. • The fourteen principles are: (1) Division of work. • He added that these principles apply not only to business but also to political. Thus. (11) Equity. a French industrialist is known as the ‘father of modern management theory”. the management must create an environment suitable for the employees to excel. (vii) When conditions are favourable. (vi) The intellectual potentials of most individuals are only partially utilized in most organizations. Theory X is more appropriate. • For example. (10) Order. (9) Scalar chain. THEORY X (or) THEORY Y? • McGregor felt that in some situations Theory X assumptions may be more appropriate than those of Theory Y. (5) Unity of direction. (13) Initiative and (14) Espirit de Corps. (1) DIVISION OF WORK • Division of work or work specialization results in efficient use of resources and increases productivity. self-controlled and are participative in nature. the work is not ‘as natural as play’. when people are being asked to perform tasks they would strongly prefer not to perform. He joined a coal-and-iron company as an apprentice mining engineer and reached the top position of Managing Director. charitable. religious. Here. This is applicable to both managerial and technical functions. • Fayol outlined a number of principles that he found useful in running his large organization. PRINCIPLES OF MANAGEMENT (Henri Fayol) • Henri Fayol. • On the basis of his experience as a top-level manager. the average person not only accepts responsibility but also seeks it. (3) Discipline. (4) Unity of command. (6) Subordination of individual interest to general interest. military and other organizations. (7) Remuneration. So. (8) Centralization. • From McGregor’s point of view. an effective leader should apply the appropriate theory depending upon the context. Fayol realized that it is possible to develop theories about management that could be taught to individuals with administrative responsibilities. Theory Y suggests that people are self-driven. (12) stability of personnel tenure.

There must be a clear and fair agreement for observing the rules and regulations. If there is too much responsibility. (4) UNITY OF COMMAND • An employee should receive orders from one supervisor only to avoid possible confusion and conflict. it is called centralization of authority. it may result in frustration. Authority and responsibility should be commensurate with each other. regulations. it is called decentralization. • If there is too much authority. (= A worker should not be under the control of more than one supervisor). (7) REMUNERATION • Compensation and methods of compensation should be fair to both the employee and the employer. (3) DISCIPLINE • Discipline means following of rules. The objective here is the optimum utilization of the capabilities of the personnel. Responsibility is the obligation to achieve objectives. policies and procedures by all employees of the organizations. (8) CENTRALIZATION • If all the powers are vested in the top management. it is likely to be misused. If all the powers are vested in the lower management.Unit 1 (2) AUTHORITY & RESPONSIBILITY • Authority means the right to give orders or command. A balance between centralization and decentralization must be achieved. (6) SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST • The interests of one employee or group of employees should not be given importance over the interests of the organization. Discipline is absolutely necessary for running of an organization. (5) UNITY OF DIRECTION • The activities of an organization should be organized such that there is one plan and one person in charge. 14 .

• Union is strength. horizontal communication may also be encouraged as long as managers are kept informed. • Initiative is the result of creative thinking and imagination and helps in formulating. • Everything should be in its place and there must be a place for everything. Because time is required to understand the jobs at hand and become effective in new jobs. -----------xxxxxxxxxxx------------- 15 .Unit 1 (9) SCALAR CHAIN • A scalar chain of authority extends from the highest to the lowest rank of an organization and defines the communication path. are essential in every organization. (14) ESPIRIT DE CORPS • Espirit de corps means team spirit. • Order leads to the creation of sound organization with efficient management. However. high turnover of employees should be prevented. (12) STABILITY OF TENURE OF EMPLOYEES • Stability of tenure increases the efficiency of the employees and is a symbol of sound management. the prerequisites for better performance and effective organization. (13) INITIATIVE • Managers should encourage and develop the subordinates to take initiative. (11) EQUITY • Organizations run best when managers are fair with their employees. Harmony and teamwork. planning and in execution. (10) ORDER • Order is the principle of arrangement of things and people.