Que1: What are the differences between value engineering and value

analysis?

Ans: Value analysis is "A Systematic and objective evaluation of the value of a goods
or service, focusing on analysis of function relative to the cost of manufacturing or
providing the items or service".

Value analysis provides insight into the inherent worth of final goods or service,
possibly altering specifications and quality requirements that could reduce costs
without impairing functional suitability.

Value engineering is "Value analysis conducted at the design engineering stage of

the product development process."

Value Engineering (VE, or Value Analysis) is a management technique that seeks the
best functional balance between cost, reliability and performance of a product,
project, process or service

In summary value analysis refers to the analysis of an existing product, service or

administrative process while Value engineering refers to the same analysis applied to
the product, services or administrative processes that are under design and have not
been finalised.

Que2: In an organization we pay for jobs and wouldn’t pay for man.
Do you agree with this? How does job evaluation affect human
relations with company?
Ans: No, we are not agreeing with this statement.

A job evaluation is a systematic way of determining the value/worth of a job in

relation to other jobs in an organization or company. It tries to make a systematic
comparison between jobs to assess their relative worth for the purpose of
establishing a rational pay structure.

The aim of job evaluation is to provide a systematic and consistent approach to

defining the relative worth of jobs within a workplace, single plant or multiple site
organisation. It is a process whereby jobs are placed in a rank order according to
overall demands placed upon the job holder. It therefore provides a basis for a fair
and orderly grading structure. Job evaluation does not determine actual pay. That is
a separate operation, normally the subject of negotiation between management and
employees or their trade union representatives. Only the job is evaluated, not the
person doing it. It is a technique of job analysis, assessment and comparison and it is
concerned with the demands of the job, such as the experience and the
responsibility required to carry out the job. It is not concerned with the total volume
of work, the number of people required to do it, the scheduling of work, or the
ability of the job holder. Several techniques of job evaluation have developed,
varying in approach. Some involve an examination of jobs according to criteria such
as skill, responsibility and working conditions. Others are less complex.

Introduction of job evaluation:-

 It can be beneficial when the existing grading structure is in need of review.

 It can help establish or maintain the credibility and acceptability of a grading

system.

 Job evaluation facilitates the accommodation of new or revised jobs into the
grading structure.

 It can be used by organisations as a basis for job matching and external pay
comparisons.

Factors in job evaluation:-

Job evaluators often assess jobs based on these factors:

Training level or qualifications requirements

Interaction with various levels of the organization

Problem-solving and independent judgment

Accountability and responsibility

Decision-making authority

Degree of supervision required

Cross-training requirements

Working conditions

Degree of difficulty in filling job

The Process of Job Evaluation: - The process of job evaluation involves the
following steps:
 Gaining acceptance: Before undertaking job evaluation, top management
must explain the aims) and uses of the programme to the employees and unions.
To elaborate the programme further, oral presentations could be made. Letters,
booklets could be used to classify all relevant aspects of the job evaluation
programme.
 Creating job evaluation committee: It is not possible for a single person to
evaluate all the key jobs in an organisation. Usually a job evaluation committee
consisting of experienced employees, union representatives and HR experts is
created to set the ball rolling.
 Finding the jobs to be evaluated: Every job need not be evaluated. This may
be too taxing and costly. Certain key jobs in each department may be identified.
While picking up the jobs, care must be taken to ensure that they represent the
type of work performed in that department.
 Analysing and preparing job description: This requires the preparation of a
job description and also an analysis of job needs for successful performance .
 Selecting the method of evaluation: The most important method of
evaluating the jobs must be identified now, keeping the job factors as well as
organisational demands in mind.
 Classifying jobs: The relative worth of various jobs in an organisation may be
found out after arranging jobs in order of importance using criteria such as skill
requirements, experience needed, under which conditions job is performed,
type of responsibilities to be shouldered, degree of supervision needed, the
amount of stress caused by the job, etc. Weights can be assigned to each such
factor. When we finally add all the weights, the worth of a job is determined. The
points may then be converted into monetary values.

The value of job evaluation: - Job evaluation is a powerful tool in the

compensation and benefits specialist's repertoire. Effective job evaluation helps you
gather information to develop job descriptions that meet the changing needs of your
organization. By implementing a successful job evaluation, you can develop an
equitable compensation plan and attract and retain high-performing and talented
employees.
 Limitations of Job Evaluation:-

 Job evaluation is not exactly scientific.

 The modus operandi of most of the techniques is difficult to understand,
even for the supervisors.
 The factors taken by the programme are not exhaustive.
 There may be wide fluctuations in compensable factors in view of changes in
technology, values and aspirations of employers, etc.
 Employees, trade union leaders, management and the programme operators
may assign different weight to different factors, thus creating grounds for
dispute.

Implementing the job evaluation scheme:-

 The validation of the factor plan against benchmark jobs is essential before
evaluating all other jobs.
 An appeals procedure based on the agreed factor plan and or job description
should be established.
 The scheme should be fully documented and a manual produced to facilitate
proper maintenance.
 There should be a mechanism for evaluating new jobs or changes in jobs.

How can the Equitable Job Evaluation System help?:

 Equitable Job Evaluation is designed to capture all the relevant information

about jobs and to minimise gender bias. This includes identifying, assessing
and ‘measuring’ (putting a value on) skills, knowledge, responsibility and
working conditions that may have been previously overlooked. Equitable Job
Evaluation can reduce reliance on assumptions and make values transparent. 
Equitable Job Evaluation can:
 identify appropriate training and career development
 improve performance
 improve service delivery
  help staff feel more valued and better supported
 help attract and retain competent staff, and
 help ensure staff are paid appropriately.

Que3: Recommend a system of wage payment which may simulate a

industrial productivity at the present juncture. Compare and contrast
the time wage, peace wage and profit sharing method for wage
payment?

Ans: Time rate system and Piece wage system may be compared in following lines:
(1) In time wages, time is the basis of payment whereas in piece wages quantity of
work is the basis of payment.
(2) Time rate system does not make a distinction between efficient and inefficient
workers whereas piece rate system gives a premium on efficiency.
(3) Time rate system provides security of wages to workers while piece rate docs not.
(4) Time rate system may be used where quality is more important than quantity
whereas piece rate system is used where quantity is more important than quality.
(5) Labour unions generally prefer time rate system and oppose piece rate system.

METHOD OF WAGE PAYMENT:

Basically there are two methods of paying labor remuneration and other methods
are combinations or modifications of these two. One is the time wage system and
another is the piece wage system.

1. Time Wage System:

Under this system, wages are paid on the basis of time spent on the job irrespective
of the amount of work done. The unit of time may be a day. A week, a fortnight or a
month. In the past, daily wages have been the most common basis and, therefore, it
came to be known as the ‘Day Wage System’.

Time wage system has the following advantages:

1. It is the simplest and the oldest method. It is easy to understand and workers
can easily compute their own remuneration.
2. Earnings of workers are regular and fixed and they do not suffer from
temporary loss of efficiency.
3. As there is no pressure to speed up production, the quality of work can be
kept high. A worker can show his skill.
4. Learners can concentrate on learning the best methods of work as their
earning s are not dependent on the amount of work.
5. It is an objective method.
The time wage system suffers from the following disadvantages:
1. The method provides no incentive for better performance as reward is not
proportionate to effort.
2. Guaranteed remuneration makes workers indifferent and complacent.
3. Calculation of labor cost per unit is difficult as the total wage bill does not
change with the volume of production.
4. In the absence of an incentive to hard work, productivity of labor becomes
low unless close supervision is used. Thus, costs of supervision are high.
5. Control over labour cost becomes difficult and more payment may be made
for the lesser amount of work.
Time wage system is suitable under following conditions:

1. Where units of output are non-measurable an in case of office work and

mental work is involved as in policy working.
2. When quality of work is especially important, e.g., artistic furniture, fine
jewelry, etc.
3. When supervision is good and supervisors know what constitutes a “fair day’s
work”.
4. When workers are new and learning the job.
5. When collective efforts of a group of persons are essential for completing the
job.
2. Piece Wage System:
Under this system, remuneration is based on the amount of work done or output of
a worker. One unit of output is considered as one piece and a specific rate of wage is
paid per piece. Greater id the number of pieces produced by a worker, higher is his
remuneration. Thus, a workman is paid in direct proportion to his output. It is called
payment by results.

Piece wage system has the following advantages:

1. There is a direct relation between effort and reward; workers who work hard
and produce more get more wages. This provides an incentive to increase
productivity.
2. Ambitious and efficient workers are provided ample opportunity to utilize
their talent and increase their earnings and thereby improve their standard of
living and morale.
3. The method is just and fair to all. Efficient workers get ample reward, while
shirkers are penalized. It prevents soldiering on the job.
4. Management can distinguish between efficient and inefficient workers for
the purpose of promotion, etc.
5. Increase in productivity results in higher output and lower costs of
production per unit.
6. The cost of labor per unit of output can be easily calculated as the wage bill
varies in direct proportion to the output.
7. As workers themselves have a stake in maximization of efficiency, cost of
supervision is low.
Piece wage system is, however, subject to the following drawbacks:

1. It is very difficult to fix piece wage rates. Employers often cut the piece rate
when they find workers are producing large quantities.
2. The earnings of workers are not stable and they may suffer due to temporary
delays or difficulties. They feel insecure and dissatisfied.
3. Employees may not stress quality so that rigid quality control becomes
necessary.
4. This system may create jealousy between efficient and inefficient workers.
Trade unions do not like it as it affects their solidarity.
5. Detailed records of production have to be kept so that the clerical work is
increased. The method is not practicable when contribution of individual workers
cannot be calculated, i.e., construction work.
Piece wage system is suitable under the following conditions:

1. When work done by an individual worker can be measured accurately, e.g.,

production of standardized goods in the factory.
2. When the quantity of output depends directly upon the skill and efforts of
the worker.
3. Where the flow of work is regular and interruptions are minimum i.e.,
repetitive jobs.
4. Where quality and workmanship are not very important.
5. In large scale production involving heavy overheads and heads and broad
supervision.
6. When competitive conditions and cost control require that labor cost per unit
fixed in order.
7. When methods of production are standardized and the job is of a repetitive
nature.

Que4: Derive an equation for optimal level of stocking when the

demand is under risk?

Ans: Determination of optimal stocking levels:

The key component in the design of multi-echelon inventory systems for recoverable
items is the determination of the base-stock levels at each echelon. There is a two
phase method to determine these optimal base-stock levels at the bases in each
pooling group i and the depot (Lee [1]). The first phase is to find the value of Si at

C
each pooling group i to minimize the cost total in Equation (2.4) for each given
S0 . The second phase is to optimize the value of S0 at the depot. For a given S0 ,

the optimal base-stock level Si at each pooling group i ,is the one that minimizes
Equation (2.5).
Ci (S i | S 0 )  hmi S i  vE (Bi ) αi Ni (2.5)

 hm S  vE (Q − m S )  ( vT  a )m λα .
i i i i i i i i i i

The optimal cost Ci for pooling group i is denoted as C i * (S0 ) for a given value

of S0 , where
 Ci * (S 0 )  min Si Ci (S i | S0 ) . (2.6)

By solving Equation (2.6), we always find the best value of Si which result in the
Optimal cost.

The second phase in the method is to look for the optimal value of S0 at the depot,
With the following proposition as stopping criterion (from Lee [1]):
Suppose S0 is such that

N n
* *
h ≥ ∑ Ci (S 0 ) −∑Ci (S0 → ∞) . (2.7)
i1 i1

Then all S 0  S0 Cannot be optimal.

Que5: International trade should be regarded as a special case of

regional trade or perhaps inter-local trade. Justify this statement?

Ans: Bertil Ohlin believed that there is a little difference between Inter-Regional
Trade and International Trade. International values are therefore determined in the
same way as they are determined in internal trade according to him “International
trade is but a special case of interlocal or inter-regional trade”. Therefore he does
not find any justification for separate theory of international trade. He has a number
of arguments in support of his statement.

Ohlin does not accept the classical argument that labour and capital are freely
mobile within a country but immobile internationally. He argues that labour and
capital are also immobile inter regionally within a country. This is apparent from the
fact that wage rates differ not only in different trades but also in the same trades in
different regions within the same country. Similarly interest rates vary for different
purposes in different regions.

Further labour and capital are not immobile between countries. Rather labour and
capital have moved from one country to the other. The rapid development of U.S.A.,
Australia, Newzealand, Canada and the Latin American countries in the 19th and
early 20th centuries has been due to the movement of labour and capital from
England and Europe.

According to Ohlin the basis of international trade is not much different from inter-
regional trade. In both space factor is important and goods move from places of
abundant supplies to places where they are scare. Transport costs are involved in
both. Trade is carried on by firms for the purpose of maximising profits both in
international and inter regional trade. So far as currency differences in international
trade are concerned they do not necessitate. Separate theory the rate of exchange
between two countries is connected together on the basis of the purchasing power
of the two currencies. Since currency of one country is convertible into the currency
of another country there is no basic difference between international trades and
inter regional trade.

Last but not the least Ohlin argues that the theory of comparative costs is not
applicable to international trade alone but to all trade within a country. It is inherent
in the principle of specialization that an individual will devote his abilities to those
pursuits for which he is best suited. For example the manner of a firm may be able to
repair his motor can more cheaply and efficiently than a mechanical at a garage but
he does not do so because his time and energy more profitably employed in
attending to his business.

As put by Ohlin “Regions and nations specialize and trade with each other for the
same reasons that individuals specialize and trade. Some are better fitted by
temperament for one work rather than another, one is a better gardener, and the
other a better teacher, while third proves an excellent doctor. The gardener would
prove a poor teacher and teacher a poor doctor and so on. Thus the gain from
specialization is clear. Even if every individual were equally alike in ability it would
pay to specialise”. This fundamental principle of specialization which permits all
walks of like applies in exactly the same way and with same force to international
trade. Thus the application of the principle of comparative costs to international
trade is unnecessary because it is the basic of all trade. Ohlin emphasis in this
connection “As nations are certainly the most significant of all regions, so that theory
of international trade represents the chief of application of the general theory of
international trade”.

He therefore believes that there is no need for a separate theory of international

trade and regards international trade as “a special case of inter local or inter regional
trade”.