1.

1
 UNIT – II
OPERATIONS MANAGEMENT

WORK STUDY
which are used in the examination of human work in all its contexts. According to British
standard (BS 3138), work study refers to the method study and work measurement, which
are used to examine human work in all its contexts by systematically investigating into all
factors affecting its efficiency and economy to bring forth the desired improvement. The
principal aim of work study is to bring efficiency and economy by making improvements in
the method of doing the job. It is used in agricultural, manufacturing, services, transport,
etc. It has 2 parts:

Work study is a means of enhancing the production efficiency (productivity) of the

firm by elimination of waste and unnecessary operations. It is a technique to identify non-
value adding operations by investigation of all the factors affecting the job. It is the only
accurate and systematic procedure oriented technique to establish time standards.

METHOD STUDY
Method study enables the industrial engineer to subject each operation to systematic
analysis. The main purpose of method study is to eliminate the unnecessary operations and to
achieve the best method of performing the operation. Method study is also called methods
engineering or work design. Method engineering is used to describe collection of analysis
techniques which focus on improving the effectiveness of men and machines.
According to British Standards Institution (BS 3138), “Method study is the systematic
recording and critical examination or existing and proposed ways or doing work as a means
or developing and applying easier and more effective methods and reducing cost.”
 Fundamentally method study involves the breakdown of an operation or procedure
into its component elements and their systematic analysis. In carrying out the method study,
the right attitude of mind is important. The method study man should have:
1. The desire and determination to produce results;
2. Ability to achieve results;
3. An understanding of the human factors involved.
Method study scope lies in improving work methods through process and operation
analysis, such as: Manufacturing operations and their sequence, Workmen, Materials, tools
and gauges, Layout of physical facilities and work station design, Movement of men and
material handling, and Work environment.

Steps Involved in Method Study:

The process of method study involves the following procedure:

Method Study

Aim: To develop better working methods

PROCEDURE
SELECT the task to be studied.
RECORD all related facts about current or proposed methods.
EXAMINE the facts critically considering the purpose, sequence,
place and resources.
DEVELOP the best possible method.
DEFINE the best possible method.
EVALUATE different alternatives to develop new method.
INSTALL the new improved method.
MAINTAIN verify the installed method.

RESULT
IncreasedEfficiency,CostEffectivenessand productivity
through
Improved workplace layout
Improved equipment design
Reduction in worker fatigue
Improved product/process design

1. Select: The task or work to which the method study principles are to be applied is to be
identified and the objectives such as saving costs, increasing productivity, eliminating
unnecessary emotions by works, etc are to be specified.
2. Record: The current process of doing job has to be recorded. While doing so, every
detail, however small it may be, has to be identified. Where the process is too long,
involving many stages of production, inspection, the present process of doing the job is
recorded sufficiently, together with all the relevant information, by using the process
chart symbols.
 Symbol Meaning
Operation (doing something):
It involves change in the condition of a product
Ex: Assembly of spare parts
Transport (Moving something from one location to
another): Ex: Assembled PC is moved to inspection
section.
Storage (Permanent):
It occurs when object is kept and protected against
unauthorized removal.
Ex: When PC is put into store after inspection.
Delay (Temporary storage):

D
It occurs to an object when conditions do not permit the
performance of next job.
Ex: Machinery breakdown, waiting for next stage, etc.
Inspection:
To check whether the Quality and quantity of the product
is good or not.
Operation cum Inspection:
Inspection is taking place during the production process.

Operation cum Transportation:

Assembling is taking place while spares are transported.

3. Examine: This is the most important phase of method study. After an activity has been
suitably recorded by means of any method, the recorded events are to be critically
examined. The analysis may be based on primary questions like purpose, place,
sequence, person etc.
4. Develop: Based on the recorded data, the alternative methods of doing the same job
more effectively are to be identified and evaluated. From these alternatives, the best one
is selected and developed to suit the requirements.
5. Evaluate: The different alternatives to developing a new improved method comparing
the cost-effectiveness of the selected new method with the current method with the
current method of performance.
6. Install: The new method so developed is to be installed in a phased manner. As part of
installation, adequate planning of schedules and deployment of resources should be
taken care of. Once the method is adopted, the workers have to be retrained, the
equipment has to be provided, and the method has to be tested in order to seek
improvement.
7. Maintain: It should be ensured that the method is used in the manner intended.
Complaints and improvements in productivity should be registered. Once the new
method starts yielding the desired result, it is necessary to maintain the new method
without any change for some time.

Objectives of Method Study:

Method study is essentially concerned with finding better ways of doing things. It
adds value and increases the efficiency by eliminating unnecessary operations, avoidable
delays and other forms of waste. The objectives of method study techniques are:
 1. Improved layout and design of workplace.
2. Improved and efficient work procedures.
3. Effective utilisation of men, machines and materials.
4. Improved design or specification of the final product.
5. Present and analyse true facts concerning the situation.
6. To examine those facts critically.
7. To develop the best answer possible under given circumstances based on critical
examination of facts.

WORK MEASUREMENT
Work measurement is also called by the name „Time Study‟. Work measurement is
absolutely essential for both the planning and control of operations. Without measurement
data, we cannot determine the capacity of facilities or it is not possible to quote delivery dates
or costs. We are not in a position to determine the rate of production and also labour
utilization and efficiency. It may not be possible to introduce incentive schemes and standard
costs for budget control.
According to British Standard Institute time study has been defined as “The
application of techniques designed to establish the time for a qualified worker to carry out a
specified job at a defined level of performance”.

Procedure Involved in Time Study:

The process of work measurement involves the following procedure:

Work Measurement

Aim: To develop Time Standard

PROCEDURE
DESCRIBE the given work for measurement.
BREAK the job into elements.
MEASURE the performance of operator.
DETERMINE the basic time.
PROVIDE time allowance for fatigue etc.
DETERMINE standard time.

RESULT
Increased Efficiency and
Higher productivity through
a) Scientific basis to develop incentive systems
b) Maintain reasonable levels of employment
c) Reliable means of planning and control

The essential pre-requisite to carry out work measurement is to describe the method
underlying the job. Stop watch time is the basic technique for determining accurate time
standards. They are economical for repetitive type of work. Steps in taking the time study are:
 1. Select the work to be studied.
2. Obtain and record all the information available about the job, the operator and the
working conditions likely to affect the time study work.
3. Breakdown the operation into elements. An element is a instinct part of a specified
activity composed of one or more fundamental motions selected for convenience of
observation and timing.
4. Measure the time by means of a stop watch taken by the operator to perform each
element of the operation. Either continuous method or snap back method of timing
could be used.
5. At the same time, assess the operator‟s effective speed of work relative to the
observer‟s concept of „normal‟ speed. This is called performance rating.
6. Adjust the observed time by rating factor to obtain normal time for each
element Normal = Observed time X Rating / 100
7. Add the suitable allowances to compensate for fatigue, personal needs, contingencies,
etc., to give standard time for each element.
8. Compute allowed time for the entire job by adding elemental standard times
considering frequency of occurrence of each element.
9. Make a detailed job description describing the method for which the standard time is
established.
10. Test and review standards wherever necessary. The basic steps in time study are
represented by a block diagram.

The objectives of work measurement are to provide a sound basis for:

1. Comparing alternative methods.
2. Assessing the correct initial manning (manpower requirement planning).
3. Planning and control.
4. Realistic costing.
5. Financial incentive schemes.
6. Delivery date of goods.
7. Cost reduction and cost control.
8. Identifying substandard workers.
9. Training new employees.

STATISTICAL QUALITY CONTROL

The process of applying statistical principles to solve the problem of controlling the
quality control of a product of service is called Statistical Quality control. W.A.Shewart in
1931 introduced, the control charts on basis of statistical principles.
Quality Control (QC) may be defined as a system that is used to maintain a desired
level of quality in a product or service. It is a systematic control of various factors that affect
the quality of the product. It depends on materials, tools, machines, type of labour, working
conditions etc. Quality control aims at prevention of defects at the source, relies on effective
feedback system and corrective action procedure. Quality control uses inspection as a
valuable tool.

Definition:
According to Juran “Quality control is the regulatory process through which we
measure actual quality performance, compare it with standards, and act on the difference”.
Quality is of two types:
a) Quality of design: It refers to product features such as performance, reliability,
durability, use, service, etc., in comparing two products.
b) Quality of conformance: It means whether the product meets the given quality
specifications or not.

TYPES OF QUALITY CONTROL

Quality Control is not a function of any single department or a person. It is the
primary responsibility of any supervisor to turn out work of acceptable quality. Quality
control can be divided into three main sub-areas, those are:
1. Off-Line Quality Control: Its procedure deal with measures to select and choose
controllable product and process parameters in such a way that the deviation between
the product or process output and the standard will be minimized. Much of this task is
accomplished through product and process design. Example: Taguchi method,
principles of experimental design etc.
2. Statistical Process Control: SPC involves comparing the output of a process or a
service with a standard and taking remedial actions in case of a discrepancy between
the two. It also involves determining whether a process can produce a product that
meets desired specification or requirements.
3. Acceptance sampling plans: A plan that determines the number of items to sample
and the acceptance criteria of the lot, based on meeting certain stipulated conditions
(such as the risk of rejecting a good lot or accepting a bad lot) is known as an
acceptance sampling plan.

STATISTICAL PROCESS CONTROL

Statistical process control (SPC) is the application of statistical techniques to
determine whether the output of a process conforms to the product or service design. It aims
at achieving good quality during manufacture or service through prevention rather than
detection. It is concerned with controlling the process that makes the product because if the
process is good then the product will automatically be good.

Confidence limit:
It indicates the range of confidence level. A confidence level refers to the probability
that the value of measurement or parameter, such as length of screw, is correct.
Ex: If a component is required with measurement of 50 mm. across, then the buyer
accepts all components measuring between 48 mm and 52 mm across, considering a five
percent confidence level.
Control limit:
Control limits are found in the control charts. There are two control limits 1) Upper
control limit (UCL) and 2) Lower control limit (LCL). These are determined based on the
principles of normal distribution.
Ex: In a pilot investigation of the length of the nails produced in the shop floor, it is
found that the mean length X is cm, the S.D 3σ, the measure of variability of the nails
produced 0.2 cm. How do you construct the control chart for this data.
CONTROL CHARTS:
It is a technique of ensuring the quality of the products during the manufacturing
process itself. It aims to control and maintain the quality of products in manufacturing
process. It is carried out through control charts. A control chart compares graphically the
process performance data to compute statistical control limits. It is of two types:

1. Variable charts:
A variable is one whose quality measurement changes from unit to unit. The
quality of these variables is measured in terms of hardness, thickness, length, etc.
These are drawn using principles of normal distribution. It is meant for variable type
of data i.e. X-Bar chart and R charts.
X – Charts:
In control charts for variables, to construct a chart, only the mean or the
average value of dimensions in the samples in plotted on it. Procedure for
construction X-Chart:
a) Compute average of averages X.
b) Calculate average of Range (R).
c) Multiply the average range by the conversion factor (A2). This gives A2R.
d) Calculate the upper control and lower control
limits Upper control limit (UCL) = X+A2R
Lower control limit (LCL) = X+A2R
Where, A2 are conversion factors from table of constants.

R – Charts:
In control charts for variables, to construct a chart, only the mean or the
average value of dimensions in the samples in plotted on it. Procedure for
construction R-Chart:
a) Compute average of averages X and R for each of the samples obtained.
b) Calculate average of Range (R).
c) Multiply the average range by the conversion factor (D4 or D3).
d) Calculate the upper control and lower control
limits Upper control limit (UCL) = D4R

Lower control limit (LCL) = D4R

Where, D4 or D3 are conversion factors from table of constants.
R is average of sample ranges
 Table of constants for X and R charts
n A2 D3 D4
2 1.880 0 3.268
3 1.023 0 2.574
4 0.729 0 2.282
5 0.577 0 2.114
6 0.483 0 2.004
7 0.419 0.076 1.924
8 0.373 0.136 1.864
9 0.337 0.184 1.816
10 0.308 0.223 1.777

2. Attribute charts:
The quality of attributes can be determined on basis of yes or no. It is one in
which it is not possible to measures the quality characteristics of a product, i.e., it is
based on visual inspection only like good or bad, success or failure, accepted or
rejected. It is meant for attribute type of data i.e. C-chart and P-chart.

C – Chart:
It is used where there are a number of defects per unit. Here the sample size
should be a constant. It is used when there are several independent defects that occur
in ever unit produced. It is calculated as:
Upper control limit (UCL) = c + 3√c
Lower control limit (LCL) = c + 3√c
Where,
Total No. of defects in all samples
c=

Total No. of samples inspected

P – Chart:
It is used where there is data about the number of defectives per sample. It is
also known as fraction defective or percentage defective chart. It is classified on „go
or nogo‟ basis i.e. good or bad defective. It is calculated as:
Upper control limit (UCL) = p + 3[√ p (1 – p)] / n
Lower control limit (LCL) = p + 3[√ p (1 – p)] / n
where,
Total No. of defectives found
average defective (p) =

Total No. of pieces inspected

n = No. of pieces inspected.
ILLUSTRATIONS
1. Construct x and R charts from the following information and state whether the process
is in control for each of the following x has been computed from a sample of 5 units
drawn at an interval of half an hour from an ongoing manufacturing process.

Solution:
The mean of means =

Range is calculated as =

X Chart: X chart UCL and LCL compute at sample size 5 in A2 table value is 0.58

R Chart: R chart UCL and LCL compute at sample size 5 in D4 table value is 2.11
and D3 table value is 0
2. From the following data prepare C - chart:

Solution:

3. For each of the 14 days a number of magnets used in electric relays are inspected and
the number of defectives is recorded. The total number of magnets tested is 14,000. The
following are the particular of the number of defectives found every day.
 Solution:

ACCEPTANCE SAMPLING
Acceptance sampling is a technique of deciding whether to accept the whole lot or not
based on the number of defectives from a random drawn sample. It is widely use in buying
food products, such as rice, wheat etc. Before buying the random samples drawn from the
bags of say rice are tested. If the quality of sample drawn looks good or free from defects
then according to the requirement the entire bag or part of it can be brought. The process of
acceptance sampling through operating characteristic curve (OCC):
Operating characteristic curve (OCC):
The graphical relationship between percentage defective in the lots being submitted
for inspection and the probability acceptance is termed as “operating characteristic of a
particular sampling plan”.

It gives a clear picture about the probability of acceptance of lot for various values of
percent defectives in the lot. The probability of acceptance of a lot is high for low values of
actual percentage decrease and it is low for high values of actual percentage defectives.

Construction of OC curve:
To develop a sampling plan for acceptance sampling, an appropriate O.C curve must
be selected to construct an OC curve an agreement has to be reached between the producer
and the consumer on the following four points.
1. Acceptable quality level (AQL): This is the maximum proportion of defectives that
will make the lot definitely acceptable.
2. Lot tolerance percentage defective (LTPD): This is the maximum proportion of
defectives that will make the lot definitely unacceptable.
3. Producers risk (α): This is the risk, the producer is willing to take that lots of the
quality level AQL will be rejected, even though, they are acceptable usually α = 5%
4. Consumer risk (β): This is the risk, the consumer is willing to take that lots of the
quality level LTPD will be accepted, even though, they are actually unacceptable
usually β = 10%.
MATERIALS MANAGEMENT
Materials management is a function, which aims for integrated approach towards the
management of materials in an industrial undertaking. Its main objective is cost reduction and
efficient handling of materials at all stages and in all sections of the undertaking. Its function
includes several important aspects connected with material, such as, purchasing, storage,
inventory control, material handling, standardization etc.
Materials management plays a significant role in controlling the costs and reducing
the wastage in a manufacturing industry. Most oftenly, 70% of the price of goods are towards
cost of materials and rest on wages, salaries, overheads and profits. It means material cost
form a significant portion of total cost. For running any industry or business, we need a
number of resources. These resources are popularly known as 5 M's of any Industrial activity
i.e. Men, Machines, Materials, Money and Management.
Materials refer to inputs into the production process, most of which are embodied in
the finished goods being manufactured. It may be raw materials, work in progress, finished
goods, spare parts, etc.

Objectives of Materials Management:

The objectives of integrated materials management can be classified in two categories:
1. Primary Objectives:
i) To purchase the required materials at minimum possible prices by following the
prescribed purchase policies and encouraging healthy competition.
ii) To achieve high inventory turnover.
iii) To incur minimum possible expenditure on administrative and other activities.
iv) To ensure that continuity of supply of materials.
v) To supply materials of consistent quality.
vi) To maintain good relationship with the suppliers of materials.
vii) To ensure training and development of employees.
2. Secondary Objectives:
a) To assist technical/design department in developing new materials and products.
b) To make economic 'make or buy' decisions.
c) To ensure standardization of materials.
d) To contribute in the product improvement.
e) To contribute in the development of inter departmental harmony.
f) To follow scientific methods of forecasting prices and future consumption.

INVENTORY MANAGEMENT
An inventory is a list of items or goods. Inventory and stock control are used
interchangeably in business circle. There are various types of inventory depending upon the
context or situations. For example, inventory in a library means the list of books, journals,
periodicals, furniture, fans, etc.
A typical firm carries different kinds of inventories such as: raw materials and
purchased parts; partially completed goods called work-in-process (WIP); finished-goods or
merchandise in retail stores; replacement parts, tools, and supplies; and goods-in-transit to
warehouses or customers (called pipeline inventory).
Generally a firm has about 30 percent of its current assets and as much as 90 percent
of its working capital invested in inventory. Because inventories may represent a significant
portion of total assets, a reduction of inventories can result in a significant increase in return
on investment (ROI) - a ratio of profit after taxes to total assets.
 It is, therefore, necessary to hold inventories of various kinds to act as a buffer
between supply and demand for efficient operation of the system. Thus, an effective control
on inventory is a must for smooth and efficient running of the production cycle with least
interruptions.

INVENTORY CONTROL
Inventory control is a planned approach of determining what to order, when to order
and how much to order and how much to stock so that costs associated with buying and
storing are optimal without interrupting production and sales. Inventory control basically
deals with two problems:
(i) When should an order be placed? (Order level), and
(ii) How much should be ordered? (Order quantity).
These questions are answered by the use of inventory models. The scientific inventory
control system strikes the balance between the loss due to non-availability of an item and cost
of carrying the stock of an item. Scientific inventory control aims at maintaining optimum
level of stock of goods required by the company at minimum cost to the company.

Objectives of Inventory Control:

1. To ensure adequate supply of products to customer and avoid shortages as far as
possible.
2. To make sure that the financial investment in inventories is minimum (i.e., to see that
the working capital is blocked to the minimum possible extent).
3. Efficient purchasing, storing, consumption and accounting for materials is an
important objective.
4. To maintain timely record of inventories of all the items and to maintain the stock
within the desired limits.
5. To ensure timely action for replenishment.
6. To provide a reserve stock for variations in lead times of delivery of materials.
7. To provide a scientific base for both short-term and long-term planning of materials.

ECONOMIC ORDER QUANTITY (EOQ)

It is defined as that quantity of material, which can be ordered at one time to minimize
the cost of ordering and carrying the stocks. It refers to the size of each order that keeps the
total cost low. The framework used to determine this order quantity is also known as Wilson
EOQ Model or Wilson Formula. It is also known as quantitative technique. It depends on
two types of costs:
1. Inventory Ordering Costs: The cost refer to the cost incurred to procure the materials
particularly in large organizations, these cost are significant. This is also called as
procurement cost.
Definition: It is the cost of placing an order from a vendor. This includes all costs
incurred from calling for quotation to the point at which the item is taken into stock.
Ex: Receiving quotations, processing purchase requisition, Receiving materials and
then inspecting it, Follow up and expediting purchase order, processing sellers
invoice.

2. Inventory carrying cost: Carrying cost which are also known as holding costs are the
costs incurred in maintaining the stores in the firm. They are based on average inventory.
Ex: Storage cost includes: Rent for storage facilities, Salary of person and related storage
expenses, Cost of insurance, Cost of capital.

Determining EOQ:
(a) Graphical Method:
Total cost = ordering costs + carrying costs
EOQ = quantity at which total cost is minimum
Algebraic Method:
Step-1:
Total ordering cost per year = No. of order placed per year x ordering costs per order
=A/SxO
Step-2:
Total carrying cost per year = Average inventory level x carrying cost per year
=S/2xC
Where, A = Annual Demand
S = Size of each order (units per order)
O = ordering cost per order
C = carrying cost per unit
Step-3:
EOQ = TOC = TCC
=A/SxO
=S/2xc
2AO = S2C
S2 = 2AO / C
S = 2AO / C
EOQ = √2𝐴𝑂
𝐶
Where,
EOQ is the size of economic order quantity
A is the annual demand in units
O is the ordering costs per order
C is the carrying cost per unit

ILLUSTRATIONS
1. A biscuit manufacturing company buys lot bags of 10,000 bags wheat per annum. The
cost per bag is Rs.500 and ordering cost is Rs.400. The inventory carrying cost is
estimated at 10% of the price of the wheat. Determine EOQ and number of orders
required per year.
Solution:
Annual demand (A) = 10,000 bags
Ordering cost per order (O) = Rs.400
Carrying cost per unit (C) = 10% of Cost price
= 0.10 x 500 = Rs.50/-

EOQ = 400 bags

In the above case, the company has to place 25 orders to optimize its ordering and
carrying costs.
2. An oil engine manufacturer purchases lubricants at the rate of Rs.42 per piece from a
vendor. The requirements of these lubricants are 1800 per year. What should be the
ordering quantity per order, if the cost per placement of an order is Rs.16 and
inventory carrying charges per rupee per year is 20 paise.
Solution:
Given data are:
Number of lubricants to be purchased, A = 1800 per year
Procurement cost, O = Rs. 16 per order
Inventory carrying cost, C = Rs. 42 × Re. 0.20 = Rs. 8.40 per year
Then, optimal quantity (EOQ),
EOQ = √2𝐴𝑂
𝐶
√2 x 1800 x 16
= 8.4

= 82.8 or 83 lubricants (approx).

3. A manufacturing company purchase 9000 parts of a machine for its annual

requirements ordering for month usage at a time, each part costs Rs. 20. The
ordering cost per order is Rs. 15 and carrying charges are 15% of the average
inventory per year. You have been assigned to suggest a more economical purchase
policy for the company. What advice you offer and how much would it save the
company per year? Solution:
Given data are:
Number of lubricants to be purchased, A = 9000 parts per year
Cost of the part = Rs. 20
Procurement cost, O = Rs. 15 per order
Inventory carrying cost, C = 15% of cost of the part
= Rs. 20 × 0.15 = Rs. 3 per each part per year
Then, optimal quantity (EOQ),
√2𝐴𝑂
Q= 𝐶
√2 x 9000 x 56
= 3
= 300 units

And, Optimum order interval, (to) = Q/D in years

= 300 / 9000
= 1/30 years

Minimum average cost = √2.A.C.O

= √2 x 9000 x 15 x 3
= Rs.900

If the company follows the policy of ordering every month, then the annual ordering cost is
= Rs 12 × 15
= Rs. 180

Lot size of inventory each month = 9000/12

= 750
 Average inventory at any time = Q / 2
= 750/2
= 375

Therefore, storage cost at any time = 375 × C

= 375 × 3
= Rs. 1125

Total annual cost = 1125 + 180

= Rs. 1305

Hence, the company should purchase 300 parts at time interval of 1/30 year instead of
ordering 750 parts each month. The net saving of the company will be
= Rs. 1305 – Rs. 900
= Rs. 405 per year.

4. The XYZ Ltd. carries a wide assortment of items for its customers. One of its popular
items has annual demand of 8000 units. Ordering cost per order is found to be Rs.12.5.
The carrying cost of average inventory is 20% per year and the cost per unit is Re. 1.00.
Determine the optimal economic quantity and make your recommendations.

Solution:

The table and the graph indicates that an order size of 1000 units will gives the
lowest total cost among the different alternatives. It also shows that minimum total
cost occurs when carrying cost is equal to ordering cost.
ABC ANALYSIS
It is a technique of controlling inventories based on their value and quantities. It is
remembered as “Always Better Control”. In this analysis, the classification of existing
inventory is based on annual consumption and the annual value of the items. Hence we obtain
the quantity of inventory item consumed during the year and multiply it by unit cost to obtain
annual usage cost.
The items are then arranged in the descending order of such annual usage cost. The
analysis is carried out by drawing a graph based on the cumulative number of items and
cumulative usage of consumption cost.
Classification is done as follows:
Category Value (%) Volume (%) Degree of Control
A 70 10 Strict
B 20 20 Moderate
C 10 70 Low

100

90 C
Volume of Inventory (Rs.)
70

0 1030 100
Volume of inventory (units)

A – Category:
It comprises of inventory which are costly and valuable. Normally 70% of funds are
tied up in costly stocks, which would be 10% of total volume of stock and these require strict
monitoring on a day to day basis.
B – Category:
It comprises of inventory which is less costly. 20% of funds are tied up in such stocks
which are 20% of total of stocks. These require monitoring on a weekly or fortnightly basis.
C – Category:
It consists of least cost inventory. 10% of funds are tied up in such stocks which are
70% of total volume. It can be monitored on a monthly or bi-monthly basis.
For effective inventory control, combination of the techniques of ABC with VED or
ABC with HML or VED with HML analysis is practically used.

Advantages of ABC Analysis:

(1) Exercise selective control is possible.
(2) Focus high attention on high value items is possible.
(3) It helps to reduce the clerical efforts and costs.
(4) It facilitates better planning and improved inventory turnover.
(5) It facilitates goods storekeeping and effective materials handling.
ILLUSTRATION
1. A computer hardware company has organized its 10 items on an annual dollar-
volume basis. Details like item numbers, their annual demand, unit cost, annual dollar
volume, and percentage of the total represented by each item are shown in Table.
Solution:
The items are classified as A, B, and C in the Table and the same is shown
graphically in the accompanied figure.

ABC Analysis of 10 Items

Item no. % of no. Annua Unit Annual % of annual Combined Class
of items l cost ($) $ Dollar volume %
stocked volum volume
(1) e (4) = (3) ×
(Units) (4)
(3)
1 20% 1000 90.00 90,000 38.8% 72% A
2 500 154.00 77,000 33.2% A
3 30% 1550 17.00 26,350 11.3% 23% B
4 350 42.86 15,001 6.4% B
5 1000 12.50 12,500 5.4% B
6 50% 600 14.17 8,502 3.7% 5% C
7 2000 0.60 1,200 0.5 % C
8 100 8.50 850 0.4 % C
9 1200 0.42 504 0.2 % C
10 250 0.60 150 0.1 % C
8550 $232,057 100%

Note that C type items are not necessarily unimportant; incurring a stock-out of C
items such as the nuts and bolts used to assemble manufactured goods can result in a costly
shutdown of an assembly line. However, due to the low annual dollar volume of C items,
there may not be much additional cost incurred by ordering larger quantities of some items,
or ordering them a bit earlier.
OTHER TECHNIQUES
1. HML Analysis: In this analysis, the classification of existing inventory is based on
unit price of the items. It refers to:
H – High price items, unit value of > Rs.1000
M – Medium price items, unit value of Rs.100 to Rs.1000
L – Low price items, unit value of < Rs.100

2. VED Analysis: In this analysis, the classification of existing inventory is based on

criticality of the items. It is mainly used in spare parts inventory. It refers to:
 V – Vital spare part: If there is shortage in this category production would
come to a halt. So large stock should be maintained
 E – Essential spare part: Stock costs of these parts are very high. Here
production will not stop but the efficiency of production will be affected.
 D – Desirable parts: Not so essential. These are readily available.

3. FSN Analysis: In this analysis, the materials are classified based on their movement
from inventory for a specified period. Items are classified on basis of their
consumption. Higher the stay of an item in the inventory, the slower would be the
movement of the material. This analysis helps to avoid investments on non-moving
items. It refers to:
F – Fast moving materials.
S – Slow moving materials.
N – Non-moving materials.

4. SDE Analysis: This analysis is mainly used in procurement of raw materials. It states
whether the particular raw material is easy or difficult to procure. It refers to:
 S – Secure: Raw materials that are scarce in the manufacturing place and have
to import from other locations. Supply of this type of raw material is very less.
 D – Difficult: Raw materials that are available indigenously but are difficult to
procure.
 E – Easily available: Raw materials that are easily available to the nearby
markets and are easy to procure.

5. GOLF analysis: In this analysis, the classification of existing inventory is

based sources of the items. They are classified as:
 G - Government supply
 O - Ordinarily available
 L - Local availability
 F - Foreign source of supply

6. SOS analysis: In this analysis, the classification of existing inventory is based nature
of supply of items. They are classified as:
 S - Seasonal items
 OS - Off-seasonal items
IMPORTANT QUESTIONS
1. What are the objectives of plant layout? Explain the factors influencing plant layout.
2. What do you understand by product layout? Analyse the advantage & disadvantage
of product layout.
3. What do you understand by plant layout? What is it importance and explain various
principles of Plant layout.
4. What is a fixed position layout and under what conditions do you adopt it? Explain.
5. Compare and contrast Product and Process layout.
6. What are different types of plant layout?
7. What is SQC? Explain the various techniques of SQC and throw light on their
limitations?
8. What are the objectives of work measurement? Briefly point out the methods of work
measurement?
9. What are the different types of charts and diagrams used in work study
investigations?
10. What do you mean by work study/ Explain the basic procedure involved in method
study and work measurement.
11. Name the various recording techniques used in Method Study. Give the various
symbols used in recording with their meaning?
12. What are the symbols used in “process charts”. How is process charts prepared?
13. What is time study? Explain its need and procedure for conducting time study.
14. What is work study? State its objectives and state the tools of work study.
15. What is Quality Control? Explain the techniques of quality control?
16. What is meant by Acceptance Sampling? Explain with graphs?
17. Graphically represent “economic order quantity” and explain the type of costs that go
into them.
18. Discuss the procedure of classifying inventory into A,B,C categories.
19. The demand for a product is 30000 units per annum. Cost per unit is Rs 4,
procurement cost is Rs.60 per order and carrying cost is 20% of inventory value.
Determine EOQ.
20. Define Inventory control and state objectives of inventory control and what are the
steps involved in inventory control function. Explain briefly?
21. What is meant by SQC? What is the importance is identified by the company for its
usage.
22. Explain the functions of material manager. How is the activities need coordination
with other functional areas?
23. What is meant by inventory? What is the need for inventory control at different stages
of production? What are the different costs involved in maintaining inventory?
 UNIT –III
HUMAN RESOURCE MANAGEMENT

CONCEPT OF HRM
Human Resource Management (HRM) is a relatively new approach to managing
people in any organisation. People are considered the key resource in this approach. Human
Resource Management is a process, which consists of four main activities, namely,
acquisition, development, motivation, as well as maintenance of human resources. Human
Resource Management is responsible for maintaining good human relations in the
organisation. It is also concerned with development of individuals and achieving integration
of goals of the organisation and those of the individuals.

Definition:
1. Scott, Clothier and Spriegel, ―Human Resource Management as that branch of
management which is responsible on a staff basis for concentrating on those aspects
of operations which are primarily concerned with the relationship of management to
employees‘ and employees to employees and with the development of the individual
and the group.‖
2. Edwin B. Flippo, ―Human resource management is planning, organizing,
directing and controlling of the procurement, development, and resources to the end
that individual and societal objectives are accomplished.‖

Nature of Human Resource Management:

The nature of the human resource management has been highlighted in its following
features:
1. Inherent Part of Management: Human resource management is inherent in the
process of management. This function is performed by all the managers throughout
the organisation rather that by the personnel department only. If a manager is to get
the best of his people, he must undertake the basic responsibility of selecting people
who will work under him.
2. Pervasive Function: Human Resource Management is a pervasive function of
management. It is performed by all managers at various levels in the organisation. It is
not a responsibility that a manager can leave completely to someone else. However,
he may secure advice and help in managing people from experts who have special
competence in personnel management and industrial relations.
3. Basic to all Functional Areas: Human Resource Management permeates all the
functional area of management such as production management, financial
management, and marketing management. That is every manager from top to bottom,
working in any department has to perform the personnel functions.
4. People Centered: Human Resource Management is people centered and is relevant in
all types of organizations. It is concerned with all categories of personnel from top to
the bottom of the organisation. The broad classification of personnel in an industrial
enterprise may be as
 Blue-collar workers (i.e. those working on machines and engaged in loading,
unloading etc.) and white-collar workers (i.e. clerical employees),
 Managerial and non-managerial personnel,
 Professionals (such as Chartered Accountant, Company Secretary, Lawyer,
etc.) and non-professional personnel.
 5. Personnel Activities or Functions: Human Resource Management involves several
functions concerned with the management of people at work. It includes manpower
planning, employment, placement, training, appraisal and compensation of
employees. For the performance of these activities efficiently, a separate department
known as Personnel Department is created in most of the organizations.
6. Continuous Process: Human Resource Management is not a one shot function. It
must be performed continuously if the organisational objectives are to be achieved
smoothly.
7. Based on Human Relations: Human Resource Management is concerned with the
motivation of human resources in the organisation. Human relations skills are also
required in training performance appraisal, transfer and promotion of subordinates.

HUMAN RESOURCE DEVELOPMENT (HRD)

Human Resource Development is a continuous and planned process. It is viewed as a
process to help employees:
(a) To acquire and sharpen their capabilities to perform better.
(b) To enable them to discover their own potential and utilize them for organizational
development.
(c) To develop an organizational culture that reflects strong superior – subordinate
relationships, team work, motivation, etc.
According to HRD, the employees must continuously acquire capabilities and sharpen
and use them. Organizations should develop enabling culture, wherein the employees take
initiative and risks in the process of achieving their goals, experiment, and make things
happen.

Nature of the HRD:

1. System Perspective: HRD is said to be core of a larger system known as Human
Resource System. It is concerned with providing learning experience for the
organizational members to develop their competencies. HRD is only a sub-system of
the organization which is integrated with all other sub-systems such as production,
finance, marketing etc.
HRD is viewed as a system consisting of several interdependent and
interrelated sub-systems. These include performance appraisal, potential appraisal,
role analysis, training, job enrichment, communication etc. In designing a human
resources development system enough attention should be paid to building linkages
can be established in number of ways depending upon the companies of the system.

2. Behavioural Science Knowledge: Human Resources Development makes the use of

the principles and concepts of behavioural science for the development of the people.
It uses knowledge drawn from the psychology, sociology and anthropology for
planning and implementing various programs for the development of individuals,
groups and organization.

3. Quality of life: In general, HRD has its relevance to the ―quality of human
life improvement‖. At the organizational level, it is concerned with improving the
quality of work life so as to achieve greater satisfaction of employees and higher level
of productivity.
 4. Continuous Process: As a dynamic and proactive process, HRD believes in and
emphasize the need for ―continuous development‖ of personnel to face
the innumerable challenges in the functioning of an organization. However, HRD
mechanisms, process, policies, etc. differ from organization to organization to suit the
need of the situation. HRD sub-systems are deeply interlinked with social, cultural,
economic and political factors.

PERSONNEL MANAGEMENT AND INDUSTRIAL RELATIONS (PMIR)

It is the process of acquiring, developing, employing, appraising, remunerating and
retaining people, so that right type of people available at right position and at right time in the
organization. A personal manager is primarily concerned with taking care of human
relationships in the organization.

Definition:
According to Edwin B. Flippo, ―Personal Management is defined as the
planning, organizing, directing and controlling of procurement, development, compensation,
integration and maintenance of people for the purpose of contributing to the organizational
goals.‖

Features of PMIR:
1. It is concerned with managing people at all levels in the organization.
2. It is concerned with employees both at individual and group.
3. It is a method of helping the employees to identify and develop their potential.
4. It is a method to solve, intelligently and equitably, the problems of organizations
pertaining to management of HR.
5. It is required in every organization in the form of services of the personnel manager.

Functions of PMIR:
1. Recruitment and maintenance of labour force: This function includes attracting,
screening, testing, hiring and inducting men on the job.
2. Training: Training is a must to prepare the worker to meet the challenges of the new
jobs or techniques and to maintain and to improve the quality of work so that the
employees may earn more for them and contribute more to the unit.
3. Job analysis and Job description: It involves the studies of job requirements of the
enterprise and assignment of well defined functions to jobs so that qualified
employees may be hired. It forms the basis of wage determination
4. Compensation: It includes, determining wage rates, incentive systems, rating of
employees and performance standards.
5. Keeping personnel records: It includes collection of bio-data of all employees
pertaining to their work, i.e., training, job performance, aptitude, payment records etc.
6. Welfare: It includes health and safety program, sanitary facilities, recreational
facilities, educational activities etc.

HRM vs. PMIR

Personnel Management refers to the activities of a specialist responsible for devising
and executing the personnel policies and strategies in the organization. Recently it is being
referred as HRM. According to ‗Storey‘, there are 27 differences between HRM and PMIR
under 4 heads:
 1. Beliefs and Assumptions:
In PMIR, the terms and conditions are clearly defined with each of the
employee. It is defined as to what the employee has to do and also what the employees
have to do. The rules, norms and customs set precedence for human behaviour.
In HRM, the aim is to go beyond the contract. The people do not like to be
controlled by rules. The actions of management are justified by business needs. People
tend to do all that is required to achieve the mission.

2. Strategic Aspects:
In PMIR, the key issue is the labour management relation i.e., look for further
instructions at every critical stage.
In HRM, the focus is on customer, the initiatives are integrated. It makes the
decision making process faster.

3. Line Management:
In PMIR, the management role is restricted to each transaction. The initiatives
of line managers make a lot of difference and degree of standardization of any issue is
high.
In HRM, the role of leadership is more chain oriented. The communication is
direct and standardization is low. The differences between line and staff managers are
reducing.

4. Key Levels:
It offers a solution to the given problem, such as deployment of human resources,
evaluation and rewarding of performance, etc. these are the most critical and central
issues of difference between HRM and PMIR.

Difference between HRM and PMIR:

Dimension PMIR HRM
1. Contract Careful of written contracts Aim to go beyond contract
2. Rules Importance of devising ‗Can do‘ outlook, impatience
clear rules with rules
3. Guide to Procedures Business needs
management action
4. Behaviour referent Norms or customs and Values or mission
practice
5. Managerial task monitoring Nurturing
6. Nature of relations Pluralist Unitarist
7. Conflict Institutionalized De-emphasized
8. Key Relations Labour management Customer
9. Initiatives Piecemeal Interpreted
10. Corporate plan Marginal Central
11. Speed of Decision Slow Fast
12. Management Role Transactional Transformational leadership
13. Key managers Personal or IR specialists General or line managers
14. Communication Indirect Direct
15. Standardization High Low
16. Prized management Negotiation Facilitation
skills
 17. Selection Separate, managerial task Integrated, key task
18. Pay Job evaluation, fixed grades Performance related
19. Conditions Separately negotiated Harmonization
20. Labour management Collective bargaining Towards individual contract
contracts
21. Thrust of relations Regularized through Marginalized with
with stewards facilities and training bargaining
22. Job categories and Many Few
grades
23. Communication Restricted flow Increased flow
flow
24. Job Design Division of labour Team work
25. Conflict Handling Temporary truce Manage climate and culture
26. Training and Controlled access to courses Learning companies
Development
27. Foci of attention for Personnel procedures Wide ranging cultural,
interventions structural and personnel
strategy

FUNCTIONS OF HR MANAGER
The various functions of a HR Manager are as follows:
1. Manpower Planning: Manpower planning is also known as human resource planning
(HRP). It may be defined as a rational method of accessing the requirements of
human resources at different level in an organization. It ends with proposals of
recruitment, retention or dismissal. Through planning a management strives to have
the right number and the right kinds of people at the right places, at the right time, to
do things which result in both the organisation and the individual receiving the
maximum long-range benefit.
Importance of Manpower planning:
1. It directly contributes to achieve the corporate objectives.
2. It enables to secure the right kind of quantity of human resources at different
levels.
3. It helps decision makers in search for optimum strategy.
4. It helps the line managers to highlight the existing problems in managing the
HR under their control.
5. It provides an adequate basis to take meaningful decisions.

2. Recruitment: Recruitment means search of the prospective employee to suit the job
requirements as represented by job specification–a technique of job analysis. When the
manpower plan reveals the need for additional people in organization, the manager
has to initiate the search for employees and see that they apply for jobs in the
organization. Recruitment is often called Positive function. At this stage the
applications are invited for further scrutiny and short-listing.
The sources of recruitment includes internet, executive search agencies,
employment exchanges, university and college campus, Ads in TV and Radio,
recommendation of existing employees, etc.
3. Selection: The process of identifying the most suitable persons for the organization is
called selection. It is also called Negative function because here applications are
screened and shortlisted on the basis of selection criteria. The main purpose is to
choose right person for right job. The selection procedure, depending upon the cadre,
involves different stages. The organizations are free to formulate their own selection
procedures, as there is no standard practice.
Normally a selection process involves: Initial screening or short listing,
Comprehensive application or bio-data screening, Aptitude or written tests, Group
discussions, Personal interview, Medical examination, Employment offer.

4. Training and Development skills: Training is an organized activity for increasing

the knowledge and skills of people for a definite purpose. It involves systematic
procedures for transferring technical know-how to the employees so as to increase
their knowledge and skills for doing specific jobs with proficiency. In other words,
the trainees acquire technical knowledge, skills and problem solving ability by
undergoing the training programme.
The training methods are differed into two categories:
 On-the-job training methods: It is designed to make employees immediately
productive. It is learning by physically doing the work. These methods
include: Job instruction training, Experimental learning, Demonstration,
Apprentice learning.
 Off-the-job training Methods: It is meant for developing an understanding of
general principles, providing background knowledge, generating an awareness
of comparative ideas and practice. It includes: Lectures or talks and class room
instructions, Conferences, Seminars, Team discussions, Case study, Role
planning, Programmed instructions.

5. Placement: After training the employee is placed in his position under the charge of a
manager. The new recruit is allowed to exercise full authority and is held responsible
for the results. Placement involves assigning a specific job to each one of the selected
candidates. However, placement is not simple as it looks. It involves striking a fit
between the requirements of a job and the qualifications of a candidate. The
importance of placement is that it reduces employee‘s turnover, absenteeism,
accidents and dissatisfactions.

6. Salary and Wage Administration: Compensation is the Human Resources

Management function that deals with the every type of reward individuals receives in
the exchange for performing organizational tasks. It is the major cost of doing the
business for many organizations. It is the chief reason why some individuals seek
employment. The objective of the compensation is to create the system of rewards that is
equitable to the employers and employees alike. The desired outcome of the
employees is to attract the employees towards the tasks.
The salary constitutes of the Basic Salary, Dearness Allowance (DA), House
Rent Allowance (HRA) and other allowances. Some other benefits include profit
sharing, bonus, leave travel concessions, medical reimbursement, provident fund,
gratuity, group insurance schemes, pension, accident compensation, leave with pay,
educational allowance, etc.
 7. Promotion: It refers to the advancement of an employee to a job with a higher
authority and responsibility. It may also carry better compensation package. It is
viewed as a means of filling up vacancies in the organization from time to time. The
basis of promotion could be merit or seniority depending upon the nature and level of
job. As and when the vacancies arise, the qualified staff may get promotion.

8. Transfer: It is a lateral shift that moves an individual employee from one position to
another i.e. it may be in same department or to a different department or location. To
optimize the human resources at different locations or departments, employees are
transferred from one location to another. It is also viewed as a tool for punishing the
employee in case of misconduct or misbehavior. It does not involve any change in
salary, duties and responsibilities.

9. Separation: It refers to termination of employment i.e. the employee is separated

from his job. It is also called as dismissal. In case of misconduct or misbehavior or
where the employee is not in a position to improve his performance, he is terminated.

MANPOWER PLANNING
Manpower planning is also known as Human Resource Planning (HRP). Human
Resource Planning is concerned with the planning the future manpower requirements are the
organisation. Human Resource planning is the process by which a management determines
how an organisation should move from its current manpower position to its desired
manpower position. Through planning a management strives to have the right number and the
right kinds of people at the right places, at the right time, to do things which result in both the
organisation and the individual receiving the maximum long-range benefit.
Definition:
1. Coleman – ―Human Resource Planning as the process of determining manpower
requirements and the means for meeting those requirements in order to carry out the
integrated plan of the organisation.
2. Leap and Crino – ―HRP includes the estimation of how many qualified people
are necessary to carry out the assigned activities, how many people will be available,
and what, if anything, must be done to ensure that personnel supply equals personnel
demand at the appropriate point in the future‖.
Objectives of HR Planning:
The objectives of human resource planning may be summarized as below:
1. Forecasting Human Resources Requirements: HRP is essential to determine the
future needs of HR in an organization. In the absence of this plan it is very difficult to
provide the right kind of people at the right time.
2. Effective Management of Change: Proper planning is required to cope with changes
in the different aspects which affect the organization. These change needs
continuation of allocation/reallocation and effective utilization of HR in organization.
3. Realizing the Organizational Goals: In order to meet the expansion and other
organizational activities the organizational HR planning is essential.
4. Promoting Employees: HRP gives the feedback in the form of employee data which
can be used in decision-making in promotional opportunities to be made available for
the organization.
5. Effective Utilization of HR: The data base will provide the useful information in
identifying surplus and deficiency in human resources.
Manpower Planning Process (HRP Process):
Human resource planning refers to a process by which companies ensure that they
have the right number and kinds of people at the right place, at the right time; capable of
performing different jobs efficiently. Planning the use of human resources is an important
function in every organisation. A rational estimate to various categories of personnel in the
organisation is an important aspect of human resource planning.
HRP involves the following process:

Corporate Goals and Resources

Departmental targets and resources

Department
Identify and Analyze workload
Level

Access manpower requirements

Succession plan Employee Turnover Employee Development

Shortage or Surplus of Staff

Formulate strategies for

Succession, Recruitment, Redundancy, Employee Development

Top Management Review

Company
Level Financial Clearance

Management Approval

Action Plans

Evaluation and Control

Steps in Human Resource Planning:

1. The manpower planning starts with identifying the corporate goals and resources.
2. Each department has to identify their targets and resources allocated.
3. Analyze their work load and access manpower requirements.
4. They have to formulate succession plan, training programs for employee
development and employee turnover.
5. In case of additional staff required, plan for recruitment and in case of surplus,
discharge them.
6. Accordingly the proposals are made to top management. They review the
proposal.
7. After getting clearance, the departments evaluate the financial terms.
8. After approval, they formulate action plans to implement the decisions.
9. Action plans are evaluated and controlled in terms of department requirements
and financial constraints.
RECRUITMENT
Recruitment means search of the prospective employee to suit the job requirements as
represented by job specification–a technique of job analysis. It is the first stage in selection
which makes the vacancies known to a large number of people and the opportunities that the
organisation offers. In response to this knowledge, potential applicants would write to the
organisation. The process of attracting people to apply in called recruitment.
Definition:
1. Dale S. Beach - Recruitment as the development and maintenance of adequate
manpower resources. It involves the creation of a pool of available labour upon whom
the organisation can depend when it needs additional employees.
2. Edwin B. Flippo - Recruitment is the process of searching for prospective employees
and stimulating them to apply for jobs in the organisation.

Sources of Recruitment
The various sources of recruitment are generally classified as:
1. Internal Sources:
This refers to the recruitment from within the company. The various internal
sources are promotion, transfer, past employees and internal advertisements.

2. External Sources:
External sources refer to the practice of getting suitable persons from outside. The
various external sources are advertisement, employment exchange, past employees,
private placement agencies and consultants, walks-ins, campus recruitment, trade unions,
etc. The following external sources of recruitment are commonly used by the big
enterprises:
1. Direct Recruitment: An important source of recruitment is direct recruitment by
placing a notice on the notice board of the enterprise specifying the details of the jobs
available. It is also known as recruitment at factory gate. It is generally followed for
filling casual vacancies requiring unskilled workers. This method of recruitment is
very cheap as it does not involve any cost of advertising vacancies.

2. Casual Callers: The organisations which are regarded as good employers draw a
steady stream of unsolicited applications in their offices. This serves as a valuable
source of manpower. If adequate attention is paid to maintain pending application
folders for various jobs, the personnel department may find the unsolicited
applications useful in filling the vacancies whenever they arise.

3. Media Advertisement: Advertisement in newspapers or trade and professional

journals is generally used when qualified and experienced personnel are not available
from other sources. Advertisement gives the management a wider range of candidates
from which to choose. Its disadvantage is that it may bring in a flood of response, and
many times, from quite unsuitable candidates.

4. Employment Agencies: Employment exchanges run by the Government are regarded

as a good source of recruitment for unskilled, semi-skilled and skilled operative jobs.
In some cases, compulsory notification of vacancies to the employment exchange is
required by law. Thus, the employment exchanges bring the jobs givers in contact
with the job seekers.
 5. Management Consultants: Management consultancy firms help the organisations to
recruit technical, professional and managerial personnel. They specialize middle level
and top level executive placements. They maintain data bank of persons with different
qualifications and skills and even advertise the jobs on behalf their clients to recruit
right type of personnel.

6. Campus Recruitment: Jobs in industry have become increasing technical and

complex to the point where college degrees are widely required. Consequently big
organisations maintain a close liaison with the universities, vocational institutes and
management institutes for recruitment to various jobs. It is also known as campus
recruitment.

7. Recommendation: Applicants introduced by friends and relatives may prove to be a

good source of recruitment. In fact, many employers prefer to take such persons
because something about their background is known. When a present-employee or a
business friend recommends someone for a job, a type of preliminary screening is
done and the person is placed on a job.

8. Labour Contractors: Labour contractors are an important source of recruitment in

some industries in India. Workers are recruited through labour contractors who are
themselves employees of the organisation. The disadvantage of this system is that if
the contractor leaves the organisation, all the workers, employed through him will
also leave. That is why this source of labour is not preferred by many business
organizations.

9. Telecasting: The practice of telecasting of vacant posts over T.V. is gaining

importance these days. Special programmes like ‗Employment News‘, etc, over the
T.V have become quite popular in recruitment for various types of jobs. The detailed
requirements of the job and the qualities required to do it are publicized along with
the profile of the organisation where vacancy exists.

10. Raiding: Raiding is a technical term used when employees working elsewhere are
attracted to join organisations. The organisations are always on the lookout for
qualified professionals, and are willing to offer them a better deal if they make the
switch. There are always some employees who are professionally very competent, but
dissatisfied with something or the other in the organisation.

SELECTION
.

The process of identifying the most suitable persons for the organization is called
selection. It is also called Negative function because here applications are screened and
shortlisted on the basis of selection criteria. The main purpose is to choose right person for
right job. The selection procedure, depending upon the cadre, involves different stages. The
organizations are free to formulate their own selection procedures, as there is no standard
practice. Selection is the process of picking up individuals (out of the pool of job applicants)
with requisite qualifications and competence to fill jobs in the organization.
Definition:
Selection is the process of differentiating between applicants in order to identify and
hire those with a greater likelihood of success in a job.
Essentials of a Good Selection Practice:
1. Detailed job descriptions and job specifications prepared in advance and endorsed by
personnel and line management.
2. Trained the selectors.
3. Determine aids to be used for selection process.
4. Check competence of recruitment consultants before retention.
5. Involve line managers at all stages.
6. Attempt to validate the procedure.
7. Help the appointed candidate to succeed by training and management development.

Steps in Selection:
1. Preliminary Interview: The purpose of preliminary interviews is basically to
eliminate unqualified applications based on information supplied in application forms.
The basic objective is to reject misfits. On the other hands preliminary interviews is
often called a courtesy interview and is a good public relations exercise.
2. Selection Tests: Jobseekers who past the preliminary interviews are called for tests.
There are various types of tests conducted depending upon the jobs and the company.
These tests can be Aptitude Tests, Personality Tests, and Ability Tests and are
conducted to judge how well an individual can perform tasks related to the job.
Besides this there are some other tests also like Interest Tests (activity preferences),
Graphology Test (Handwriting), Medical Tests, Psychometric Tests etc.
3. Employment Interview: The next step in selection is employment interview. Here
interview is a formal and in-depth conversation between applicant‘s acceptability. It is
considered to be an excellent selection device. Interviews can be One-to-One, Panel
Interview, or Sequential Interviews. Besides there can be Structured and Unstructured
interviews, Behavioral Interviews, Stress Interviews.
4. Reference & Background Checks: Reference checks and background checks are
conducted to verify the information provided by the candidates. Reference checks can
be through formal letters, telephone conversations. However it is merely a formality
and selections decisions are seldom affected by it.
5. Selection Decision: After obtaining all the information, the most critical step is the
selection decision is to be made. The final decision has to be made out of applicants
who have passed preliminary interviews, tests, final interviews and reference checks.
The views of line managers are considered generally because it is the line manager
who is responsible for the performance of the new employee.
6. Physical Examination: After the selection decision is made, the candidate is required
to undergo a physical fitness test. A job offer is often contingent upon the candidate
passing the physical examination.
7. Job Offer: The next step in selection process is job offer to those applicants who
have crossed all the previous hurdles. It is made by way of letter of appointment.
8. Contract of Employment: After the job offer is made and candidates accept the
offer, certain documents need to be executed by the employer and the candidate. Here
is a need to prepare a formal contract of employment, containing written contractual
terms of employment etc.
TRAINING AND DEVELOPMENT
Training is an organized activity for increasing the knowledge and skills of people for
a definite purpose. It involves systematic procedures for transferring technical know-how to
the employees, so as to increase their knowledge and skills for doing specific jobs with
proficiency. In other words, the trainees acquire technical knowledge, skills and problem
solving ability by undergoing the training programme.
Training makes newly appointed workers fully productive in the minimum of time.
Training is equally necessary for the old employees whenever new machines and equipment
are introduced and/or there is a change in the techniques of doing the things. In fact, training
is a continuous process. It does not stop anywhere. The managers are continuously engaged
in training their subordinates. The purpose of training is to bring about improvement in the
performance of work. They should ensure that any training programme should attempt to
bring about positive Changes in the Knowledge, Skills, and Attitudes of the workers.

Definition:
According to Edwin B. Flippo, ―Training is the act of increasing the knowledge and
skills of an employee for doing a particular job‖.

Need and Importance of Training:

1. Increasing Productivity: Instruction can help employees increase their level of
performance on their present job assignment. Increased human performance often
directly leads to increased operational productivity and increased company profit.
2. Improving Quality: Better informed workers are less likely to make operational
mistakes. Quality increases may be in relationship to a company product or service, or
in reference to the intangible organizational employment atmosphere.
3. Helping Company fulfills its Future Personnel Needs: Organizations that have a
good internal educational programme will have to make less drastic manpower
changes and adjustments in the event of sudden personnel alternations. When the need
arises, organizational vacancies can more easily be staffed from internal sources if a
company initiates and maintains and adequate instructional programme for both its
non-supervisory and managerial employees.
4. Improving Organizational Climate: An endless chain of positive reactions results
from a well-planned training programme. Production and product quality may
improve; financial incentives may then be increased, internal promotions become
stressed, less supervisory pressures ensue and base pay rate increases result.
5. Improving Health and Safety: Proper training can help prevent industrial accidents.
A safer work environment leads, to more stable mental attitudes on the part of
employees. Managerial mental state would also improve if supervisors now that they
can better themselves through company-designed development programmes.
6. Obsolescence Prevention: Training and development programmes foster the
initiative and creativity of employees and help to prevent manpower obsolescence,
which may be due to age, temperament or motivation, or the inability of a person to
adapt himself to technological changes.
7. Personal Growth: Employees on a personal basis gain individually from their
exposure to educational experiences. Again, Management development programmes
seem to give participants a wider awareness, an enlarged skin, an enlightened
altruistic philosophy, and make enhanced personal growth possible.
METHODS OF TRAINING:
The following methods are generally used to provide training i.e. On-the-Job Training
and Off-the-Job Training:

On-the-Job Training Methods:

This type of training is imparted on the job and at the work place where the employee
is expected to perform his duties. It enables the worker to get training under the same
working conditions and environment and with the same materials, machines and equipments
that he will be using ultimately after completing the training.
1. On Specific Job: On the job training methods is used to provide training for a specific
job such electrician, motor mechanic, pluming etc.
a) Experience: This is the oldest method of on-the-job training. Learning by
experience cannot and should not be eliminated as a method of development, though
as a sole approach, it is a wasteful, time consuming and inefficient.
b) Coaching: On-the-Job coaching by the superior is an important and potentially
effective approach is superior. The technique involves direct personnel instruction
and guidance, usually with extensive demonstration.

2. Job Rotation: The major objective of job rotation training is the broadening of the
background of trainee in the organisation. If trainee is rotated periodically from one job
to another job, he acquires a general background.

3. Special Projects: This is a very flexible training device. The trainee may be asked to
perform special assignment, thereby he learns the work procedure. Sometime a task-
force is created consisting of a number of trainees representing different functions in the
organisation.
4. Apprenticeship: Under this method, the trainee is placed under a qualified supervisor
or instructor for a long period of time depending upon the job and skill required. Wages
paid to the trainee are much less than those paid to qualified workers. This type of
training is suitable in profession, trades, crafts and technical areas like fitter, turner,
electrician, welders, carpenters etc.

5. Vestibule Training: Under this method, actual work conditions are created in a class
room or a workshop. The machines, materials and tools under this method is same as
those used in actual performance in the factory. This method gives more importance to
learning process rather than production.

6. Multiple Management: Multiple management emphasizes the use of committees to

increase the flow of ideas from less experience managers and to train them for positions
of greater responsibility.

Off-the-job Training Methods:

The following are the off the job training techniques:
1. Special Courses and Lectures: Lecturing is the most traditional form of formal
training method. Special courses and lectures can be established by business
organizations in numerous ways as a part of their development programmes.
a) First, there are courses, which the organizations themselves establish to be taught by
members of the organizations.
 b) Second approach to special courses and lectures is for organizations to work with
universities or institutes in establishing a course or series of course to be taught by
instructors by these institutes.
c) Third approach is for the organizations to send personnel to programmes established
by the universities, institutes and other bodies.

2. Conferences: This is also an old method, but still a favorite training method. In this
method, the participants pools, their ideas and experience in attempting to arrive at
improved methods of dealing with the problems, which are common subject of
discussion; Conferences may include buzz sessions that divide conferences into small
groups of four or five intensive discussion. These small groups then report back to the
whole conference with their conclusions or questions.

3. Case Studies: This technique, which has been developed, popularized by the Harvard
Business School, U.S.A is one of the most common form of training. A case is a written
account of a trained reporter of analyst seeking to describe an actual situation. Some
causes are merely illustrative; others are detailed and comprehensive demanding
extensive and intensive analytical ability. Cases are widely used in variety of
programmes. This method increases the trainee‗s power of observation, helping him to
ask better questions and to look for broader range of problems.

4. Brainstorming : This is the method of stimulating trainees to creative thinking This

approach developed by Alex Osborn seeks to reduce inhibiting forces by providing for a
maximum of group participation and a minimum of criticism. A problem is posed and
ideas are invited. Quantity rather quality is the primary objective. Ideas are encouraged
and criticism of any idea is discouraged.

5. Laboratory Training: Laboratory training adds to conventional training by providing

situations in which the trains themselves experience through their own interaction some
of the conditions they are talking about. Laboratory training is more concerned about
changing individual behaviour and attitude. There are two methods of laboratory
training: simulation and sensitivity training.
a) Simulation: An increasing popular technique of management development is
simulation of performance. In this method, instead of taking participants into the
field, the field can be simulated in the training session itself Simulation is the
presentation of real situation of organisation in the training session. There are two
common simulation methods of training: role-playing is one and business game.
b) Sensitivity Training: Sensitivity training is the most controversial laboratory
training method. Many of its advocates have an almost religious zeal in their
enhancement with the training group experience. Some of its critics match this
favour in their attacks on the technique.

PLACEMENT
Placement involves assigning a specific job to each one of the selected candidates.
However, placement is not simple as it looks. It involves striking a fit between the
requirements of a job and the qualifications of a candidate. The importance of placement is
that it reduces employee‘s turnover, absenteeism, accidents and dissatisfactions.
Definition:
Pigors and Myers defined placement as, ―the determination of the job to
which an accepted candidate is to be assigned, and his assignment to that job. It is a
matching of what the supervisor has reason to think he can do with the job demands and what
he offers in the form of pay rolls, companionship‖ with others, promotional possibilities etc.

Principles of Placement:
A few basic principles should be followed at the time of placement of a worker on the
job. This is elaborated below:
1. Man should be placed on the job according to the requirements of the job. The job
should not be adjusted according to the qualifications or requirements of the man. Job
first, man next, should be the principle of the placement.
2. The job should be offered to the person according to his qualification. This should
neither the higher nor the lower than the qualification.
3. The employee should be made conversant with the working conditions prevailing in
the organization and all things relating to the job. He should also be made aware of
the penalties if he commits the wrong.
4. While introducing the job to the new employees, an effort should be made to develop
a sense of loyalty and cooperation in him so that he may realize his responsibility
better towards the job and the organization.
5. The placement should be ready before the joining date of the newly selected person.
6. The placement in the initial period may be temporary as changes are likely after the
completion of training. The employee may be later transferred to the job where he can
do better.
Proper placement helps to improve the employees‘ morale. The capacity of the
employees can be utilized fully. The right placement also reduces labour turnover,
absenteeism and also the accident rate.

WAGE AND SALARY ADMINISTRATION

Compensation is the Human Resources Management function that deals with the
every type of reward individuals receives in the exchange for performing organizational
tasks. It is the major cost of doing the business for many organizations. It is the chief reason
why some individuals seek employment.
Financial compensation is either direct or indirect. The direct financial compensation
consist of the person receives in the form of wages, salaries, bonuses or commissions etc.
Indirect compensation consists of the like praise, self-esteem, recognitions, motivation,
productivity, (Benefits and Welfare). In the present economic situation the major cash flow of
the organization is more than 50% in financial and non-financial compensations. Pay is
influenced by series of external and internal factors.
While the basic wage or pay is the main component of compensation, fringe benefits
and cash and non-cash benefits influence the level of wages or pay because the employer is
concerned more about labour costs than wage rates per se. The tendency now is towards an
increasing mix of fringe benefits, which therefore have an important impact on pay levels. In
industrialized countries, and sometimes in countries with high personal tax rates, the non-pay
element of executive compensation has substantially increased in recent years.
The compensation policy depends on certain criteria below:
1. Adequate: Minimal Governmental, union and managerial levels should be met.
2. Equitable: Each person should be paid fairly, in the line with his or her effort,
abilities and training.
3. Balanced: Pay, benefits and other rewards should provide a reasonable total rewards
package.
4. Cost-effective: The pay should not be excessive, considering what the organization
can afford to pay.
5. Secure: Pay should be enough to help employees feel secure and aid him or her in
satisfying basic needs.
6. Incentive providing: Pay should motivate effective and productive work.
7. Acceptable to the employee: The employee should understand the pay system and
feel it is a reasonable system for the enterprise and him or herself.

Determinants of Compensation:
Fair and adequate compensation is critical to motivating employees attracting high-
potential employees, and retaining competent employees. Compensation has to be fair and
equitable among all workers in the same company (internal equity). Internal equity can be
achieved when pay is proportionate to the individual employee‘s qualifications and
contributions to a company.
On the other hand, compensation also has to be fair and equitable in comparison to the
external market (external equity). If a company pays its employees below the market rate, it
may lose competent employees. In determining adequate pay for employees, a manager must
consider the three major factors: the labour market, the nature and scope of the job, and
characteristics of the individual employee. Potential employees are recruited from a certain
geographic area—the labour market.
The actual boundary of a labour market varies depending on the type of job, company,
and industry. Pay for a job even within the same labour market may vary widely because of
many factors, such as the industry, type of job, cost of living, and location of the job.
Compensation managers must be aware of these differences. To help compensation managers
understand the market rate of labour, a compensation survey is conducted.
Several factors are generally considered in evaluating the market rate of a job. They
include the cost of living of the area, union contracts, and broader economic conditions.
Urban or metropolitan areas generally have a higher cost of living than rural areas. Usually,
in calculating the real pay, a cost-of-living allowance (COLA) is added to the base wage or
salary. Cost-of-living indexes are published periodically in major business journals. The
characteristics of an individual employee are also important in determining compensation. An
individual‘s job qualifications, abilities and skills, prior experiences, and even willingness to
work in hardship conditions are determining factors. Within the reasonable range of a market
rate, companies offer additional compensation to attract and retain competent employees.
In principle, compensation must be designed around the job, not the person. Person-
based pay frequently results in discriminatory practices, which violates the legal
preconditions. For job-based compensation, management must conduct a systematic job
analysis, identifying and describing what is happening on the job. Each job must be carefully
examined to list the necessary tasks and actions, identify skills and abilities required, and
establish desirable behaviours for successful completion of the job.
As the market becomes more dynamic and competitive, companies are trying harder
to improve performance. Since companies cannot afford to continually increase wages by a
certain percentage, they are introducing many innovative compensation plans tied to
performance. Several of these plans are:
 1. Incentive Compensation Plan: Incentive compensation pays proportionately to
employee performance. Incentives are typically given in addition to the base wage;
they can be paid on the basis of individual, group, or plant-wide performance. While
individual incentive plans encourage competition among employees, group or plant-
wide incentive plans encourage cooperation and direct the efforts of all employees
toward achieving overall company performance.

2. Skill-Based or Knowledge-Based Compensation: Skill-based pay is a system that

pays employees based on the skills they possess or master, not for the job they hold.
Some managers believe that mastery of certain sets of skills leads to higher
productivity and therefore want their employees to master a series of skill sets. As
employees gain one skill and then another, their wage rate goes up until they have
mastered all the skills. Similar to skill-based pay is knowledge-based pay.

Team-Based Compensation: As many companies introduce team-based management

practices such as self-managed work teams, they begin to offer team- based pay.
Recognizing the importance of close cooperation and mutual development in a work
group, companies want to encourage employees to work as a team by offering pay
based on the overall effectiveness of the team.

Performance-Based Compensation: In the traditional sense, pay is considered

entitlement that employees deserve in exchange for showing up at work and doing well
enough to avoid being fired. While base pay is given to employees regardless of
performance, incentives and bonuses are extra rewards given in appreciation of their
extra efforts. Other incentives and bonuses are calculated based on this new merit pay,
resulting in substantially more total dollars for highly ranked employee performance.
Frequently, employees also receive an end-of-year lump sum bonus that does not build
into base pay.

PROMOTION
The employees are given the promotions to higher posts and positions as and when
vacancies are available or when new posts are created at the higher levels. It is quite common
in all types of organizations. It is the product of internal mobility of the employees due to
change in organizational processes, structure etc. It is better than direct recruitment which
satisfies many human resources problems of the organization and helps in achieving
organizational objectives.
Promotion means higher position to an employee who carries higher status, more
responsibilities and higher salary. The higher status and salary is the two most important
ingredient of any promotion. It is an advancement of employee to a higher post with greater
responsibilities and higher salary, better service conditions and thus higher status.
Policy varies with organization. So the promotion is very sensitive to employees, it is
very essential. The promotion policy should clearly stated, widely circulated, and fully
explained to their employees. The promotion policy which influences the number of factor of
the organization such as, morale, motivation, turnover of the personnel in the organization.
The personnel department of the organization must develop an effective promotion policy.
The promotion policy should consider merit, potential and seniority of the employees. The
merit factor requires a good procedure for evaluating the performance of the employee.
Purpose of Promotion:
1. To motivate employees to higher productivity.
2. To attract and retain the services of qualified and competent people to recognize and
reward the efficiency of an employee.
3. To increase the effectiveness of the employee and the organization.
4. To fill up higher vacancies from the within the organization.
5. To built loyalty, morale and the sense of belongingness in the employee.
6. To impress upon others that opportunities are available to them too in the
organization, if they perform well.

TRANSFER
One of the internal mobility of the employee is transfer. It is lateral movement of
employee in an organization by the employee. Transfers of employees can possible from one
department to another from one plant to another. Transfer may be initiated by the
organization or by the employees with the approval of the organization. It can be also due to
changes in organizational structure or change in volume of work, it is also necessary due to
variety of reasons. But broadly can be done either to suit the conveniences of organization
and to suit the convenience of employees.

Definition:
Dale Yoder has defined transfer as ―A transfer involves the shifting of an employee
from one job to another without changing the responsibilities or compensation‖.

Types of Transfers:
Most of the transfers generally carried out four types of transfers which are discussed below:
1. Production Transfer: Such transfers are resorted to when there is a need of
manpower in one department and surplus manpower in other department. Such
transfers are made to meet the company requirements. The surplus employees in one
department/section might be observed in other place where there is a requirement.

2. Replacement Transfers: This takes place to replace a new employee who has been
in the organization for a long time and thereby giving some relief to an old employee
from the heavy pressure of work.

3. Remedial Transfers: As the name suggest, these transfers are made to rectify the
situation caused by faulty selection and placement procedures. Such transfers are
made to rectify mistakes in placement and recruitments. If the initial placement of an
individual is faulty or has not adjusted to work/job, his transfer to a more appropriate
job is desirable.

4. Versatility Transfer: Such transfers are made to increase versatility of the employees
from one job to another and one department to another department. Transfer (Job
Rotation) is the tool to train the employees. Each employee should provide a varied
and broader job experiences by moving from one department to another. This is for
preparing the employee for promotion; this will definitely help the employee to have
job enrichment.
Purposes of Transfer:
The transfer are generally affected to build up a more satisfactory work team and to
achieve the following purposes:
1. To increase the effectiveness of the organization.
2. To increase the versatility and competency of key positions.
3. To deal with fluctuations in work requirements.
4. To correct incompatibilities in employee relations.
5. To correct, erroneous placement.
6. To relieve monotony.
7. To adjust workforce.
8. To punish employees.

SEPARATION
Employees separate from the campus in a variety of ways. Some separations are
voluntary and initiated by the employee, such as resignation or retirement. Others are
involuntary and initiated by management, such as lay off or medical separation. The death of
an employee or dismissal for cause creates unique challenges. Each type of separation
requires specific, different actions by you, though some processes are common to all.
Whatever the circumstances, every employee leaving the campus, whether voluntarily
or involuntarily, should feel they were treated with respect. These are:
1. Death of an Employee: When an employee dies, the surviving family members or
named beneficiaries may be eligible for certain benefits. You should report the death
immediately so notifications can be made and paperwork started. It‘s also important
to maintain contact with the family and offer assistance. Retirement benefits may be
due to the family and if the employee retired with a disability, additional insurance
may be due. The beneficiaries will be contacted by the offices involved.
2. Dismissal: Dismissal is the ultimate disciplinary action, normally used when other
methods employed to correct performance or behavioural problems have not been
successful. Under circumstances of extreme misconduct, dismissal without prior
warning may be warranted. Dismissal or discharge involves separating an employee
from the payroll for violation of company rules or for inadequate performances.
Which include indiscipline, insubordination and dishonesty and so constitutes the
major cause of dismissal.
3. Job Abandonment: An employee who does not report to work when expected or call
into report their absence for five consecutive days or more may be considered to have
abandoned their position, and may be subject to dismissal without prior discipline, as
noted in the dismissal.

4. Exit Interviews: Employees terminating from the campus are valuable resources.
Through hearing their feelings, concerns, and impressions, you collect data relevant to
your department and the campus. Exit interviews are used primarily for voluntary
separations. During this meeting, talk about the employee‘s reasons for leaving, and
how the employee feels about the job and supervision. Ask for specific suggestions
the employee may have for you and the department.
5. Lay off: The purpose of the layoff is to reduce the financial burden on the
organization in the event that human resources cannot be utilized profitably. Lay off
involves temporary removal from the payroll of the people with surplus skills.
According to the Industrial Act, 1947, lay off means the failure, refusal or inability of
employer on account of shortage of power, raw material or accumulation of stocks,
breakdown of machinery or by any reason to give employment to a workmen whose
names appear to be in master roll.

6. Medical Separation: When an employee becomes unable to perform essential,

assigned duties of a position as a result of a disability or medical condition, the
campus is committed to providing services to assist the employee, including efforts at
reasonable accommodation. If accommodation efforts are unsuccessful, the employee
may be medically separated.

Resignation: When the separation is initiated by the employee himself, it is termed as

resignation. Although some resignation to rectify the mistakes in the procurement of
personnel or to bring new blood into the affected unit, but excessive turnover may prove
costly to the organization. It is a fact that, the investment in the recruitment, selection
and training of the employees is lost due to resignation.

Retirement: Majority of the separations are from retirements. Employees who have
rendered services to the organization for a number of years expect the organization to
provide for their future, when they have retired. Retirement of an employee is an
important event in his life also has an important impact on the organization, where the
employee worked for a major portion of his life. Therefore at the time of parting or
separation there must be an exit interview to know the improvements he wanted to be
introduced in the organization.
JOB EVALUATION
It is a technique of assessing systematically the relative worth of each job. The
fundamental pre-requisite to the establishment of a compensation policy is the determination
of the comparative values of jobs throughout the hierarchy. These values form the basis to
build the pay and the benefits package.

Objectives:
1. To establish correct wage correct wage differentials for all jobs within the factory.
2. To bring new jobs into their proper relatively with jobs previously established.
3. To help clarify lines of authority, responsibility and promotion.
4. To accomplish the foregoing by means of the facts and principles, this can be readily
explained to and accepted by all concerned.
5. To establish a general wage level for a given factory which will have parity with those
of neighboring factories.
Advantages:
1. It is simple, inexpensive and expeditions.
2. It is easily understood and easily administered.
3. It helps setting better rates based purely a judgment and experience.
4. Same unions prefer it, because it leases more room for bargaining.

Disadvantages:
1. Job may be ranked on the basis of incomplete inform action and without the benefits
of well defined standards.
2. The rank position of different jobs is likely to be influenced by prevailing wage ranks.
3. No one committee number is likely to be familiar with all the jobs.

JOB EVALUATION METHODS

It is broadly be classified as: Qualitative Method and Quantitative Method
Qualitative Method:
It can broadly be classified as ranking or classifying the job from lowest to highest.
1. Ranking technique: In this method, the jobs in the organization are arranged in either
in the ascending or descending order and numbered serially. The basis of such
arrangement could be the job description in terms of duties, responsibilities,
qualifications needed, relative difficulty involved in don the job, or value to the
company.
 Amount of work involved
 Supervision needed
 Extent of responsibility required
 Difficulties involved in the work conditions

2. Classification Method: This is also called job-grading method. Here, the number of
grades and the salary particulars for each grade are worked out first. The grades are
clearly described in terms of knowledge, skill and so on. Major steps for job
evaluation:
 Deciding the number of grades
 Writing grade descriptions
 Identifying/listing of the jobs to be evaluated
 Preparing job descriptions
Quantitative Method:
Where point values are assigned to the various demands of a job and relative value is
obtained by summing all such point values.
1. Factor comparison method: Every job requires certain capabilities on the part of the
person who does the job. These capabilities are considered as critical factors, which
can be grouped as follows:
 Mean effort
 Skill
 Physical
 Responsibility
 Working conditions
Step involved in the factor comparison method:
i) Identify the key jobs
ii) Rank the key job, factor by factor
iii) Apportion the salary among each factor and rank the key jobs
iv) Compare factor ranking of each job with its monetary ranking
v) Develop a monetary comparison scale
vi) Evaluate non-key jobs based on the monetary comparison scale

2. Point-rating method: There are four widely accepted factors used in the point rating
method, skill, effort, responsibility and job conditions each of these factors is divided
into sub-factors.
 Skills: It includes the rating factors such as Education and training,
Experience, Judgment and initiative.
 Efforts: This factor includes Physical and Mental abilities of an individual.
 Responsibility: It includes the factors like Materials or product, Equipment or
process, Safety of others, and Work of others.
 Job conditions: It includes the working environment of the organisation.

MERIT RATING
Merit rating in a technique to evaluate the merits of duals according to job request
merit. The personal abilities that an individual brings to his job, measured by the extent to
which his output or quality of his work exceeds the minimum that can reasonably to expected
for his basic rate of pay.

Definition:
1. Edward Flippo, ―Merit rating is a systematic, periodic and, so far as humanly
possible, an impartial rating of an employee‗s excellence in matters pertaining to his
present job to his potentialities for a job.‖
2. Scot, Clothier and Spriegal, ―Merit rating of an employee is the process of evaluating
the employee‗s performance on the job in terms of the requirements of the job.‖

Objectives of Merit Rating:

The objects of Merit Rating are as follows:
1. To make a comparative study of the abilities of different employees.
2. To provide higher reward to the more efficient employees.
3. To prove the justification of different wages to employees according to their abilities.
4. To establish harmonious relation between employees and employers.
 5. To motivate the employees to do better and more work.
6. To determine a policy for promotions and transfer.
7. To evaluate the success of training programmes.

Methods of Merit Rating:

1. Rating Procedure: In this method, the abilities of an employee are compared with
that of other employees. Under this method, the employees are divided into efficient
and inefficient employee. This method adopts the technique of paired comparison.
Therefore, the pairs of two employees each are made according to the formula of
N(N-1)Z and the more efficient employee in every pair is underlined. The employee
having maximum underline is treated as the most efficient employee whereas the
employee having no underline to his credit is treated least efficient employee.
2. Grading Method: Here different grades are divided for evaluating the ability of
different employees and then the employees are placed in these grades. The grades
are, Excellent, Very Good, Good, Average, Bad, and Worst. Every grade may again
be sub-divided into three grades: (i) Highly Satisfactory (ii) Satisfactory (iii) Non-
satisfactory. Employees can be placed in any of these groups according to their
abilities.
3. Man to Man Comparison Method: This is the method where, a master scale is used
to evaluate the qualities of different employees. The five scales of performance are
determined for every job in the master scale. For example, to measure the efficiency
of employees, first of all the most efficient employee is selected and after that the
most inefficient employees are selected who are respectively more efficient than
average efficiency and less efficient than average efficiency.
4. Graphic Rating Method: In this method, the abilities of employees are evaluated
through graph. The abilities of all the employees are represented on a graph paper
with the help of scale. Following qualities are included to evaluate the ability of
employees such as Quantity of Job, Quality of job, Regularity, ability to learn, ability
to initiate, dependence upon other employees and officers, safety aspects, ability to
direct, ability to supervise, behaviour with other employees and officers.
5. Checking List Method: A list of necessary qualities for the performance of a job is
prepared under this method. The qualities of the employees are measured on the basis
of the abilities of such lists. If an employee possesses that quality the sign (+) is
marked in the list. If that quality is not possessed by an employee the sign (-) is
marked in the list. If there is a doubt regarding it, the sign of (?) is marked in the list.
On the basis these sign, the abilities of an employee are evaluated.
6. Descriptive Method: In this method supervisor prepares a detailed report of the
abilities, efficiency and potentialities of the employees under his supervision. All the
employees are evaluated on the basis of these reports.
7. Forced Choice Descriptive Method:
In this method some details are collected regarding the performance of an
employee on the given job. After this, some standards are fixed with the consent of
evaluations. The performance of an employee is evaluated on the basis of these
standards and the ability and efficiency of all the employees are evaluated on this
basis.
Comparison of Job Evaluation and Merit Rating:
Job Evaluation Merit Rating
Meaning It is a technique by which different Merit Rating is the process by
jobs of an enterprise are evaluated. which the ability, efficiency and
potentiality of an employee are
evaluated.

Beginning This process is started before the This process of Merit Rating is
appointment of an employee. started after the appointment of
employees.

Procedure of In the process of job evaluation, In the process of Merit Rating, the
Evaluation the ability, efficiency and the performance of an employee is
potentiality of an employee are evaluated by comparing it with the
evaluated. performance of another
employee‘s of equal rank and
status.

Relation It is related with the relative study It is related with relative study of
of different jobs. different employees.

Basis of In the process of job evaluation, In the process of Merit Rating, the
Determining the remuneration of an employee remuneration of an employee is
Wages and is determined. determined on the basis of his
Salaries efficiency, ability and potentiality.

MARKETING MANAGEMENT
The term “market” originates from the Latin word “Marcatus” which means “a place
where business is conducted.” A layman regards market as a place where buyers and sellers
personally interact and finalize deals. Marketing is an essential function of a modern
organization whether it deals in products or services. Marketing is a process of identifying the
customer‟s requirements and satisfying them efficiently and effectively. It constitutes the
eyes and ears of the business.
Marketing is the basic reason for the existence of a business organization. In the age
of fast changes, marketing is springboard of all business activities. It works as the guide for
all business/non-business organization. It is a powerful mechanism which alone can satisfy
the needs and wants of consumers at the place and price they desire. Marketing is said to be
the eyes and ears of a business organization because it keeps the business in close contact
with its economic, political, social and technological environment, and informs it of events
that can influence its activities as per requirements of the market.

Definition:
1. Philip Kotler defines, “Marketing is a societal process by which individuals and
groups obtain what they need and want through creating, offering and freely exchange
products and services of value with others.”
2. E.F.L. Brech defines, “Marketing is the process of determining consumer demand for
a product or service, motivating its sales and distributing it into ultimate consumption
at a profit.”
 For a managerial definition, marketing has often been described as “the art of selling
products.” Marketing management takes place when at least one party to a potential exchange
thinks about the means of achieving desired responses from other parties. Marketing
management as the art and science of choosing target markets and getting, keeping, and
growing customers through creating, delivering, and communicating superior customer value.

FUNCTIONS OF MARKETING MANAGEMENT

The marketing functions direct and facilitate the flow of goods and services from the
producer to the end user. Firms must spend money to create time, place and ownership
utilities as discussed earlier. Several studies have been made to measure marketing costs in
relation to overall product costs and service costs and most estimates have ranged between
40-60 percent. These costs are not associated with raw materials or any of the other
production functions necessary for creating form utility. What then does the consumer
receive in return for this proportion of marketing cost? This question is answered by
understanding the functions performed by marketing.
The marketing process starts and ends with these functions. Marketing is responsible
for the performance of 8 universal functions: buying, selling, transporting, storing,
standardizing and grading, financing, risk taking and securing marketing information. Some
functions are performed by manufacturers, others by marketing intermediaries like
wholesalers and retailers.The marketing functions can be broadly categorized into three
categories. Buying and selling, the first two functions represent exchange functions.
Transporting and storing are physical distribution functions. The final four marketing
functions – standardizing and grading, financing, risk taking and securing market information
– are often called facilitating functions because they assist the marketer in performing the
exchange and physical distribution functions.

A. Exchange functions:
1. Buying: Ensuring that product offerings are available in sufficient quantities to
meet customer demands.
2. Selling: Using advertising, personal selling and sales promotion to match goods
and services to customer needs.
B. Physical distribution functions:
Transporting: Moving products from their points of production to locations convenient for
purchasers.
Storing: Warehousing products until needed for sale.
C. Facilitating functions:
Standardizing and grading: Ensuring that product offerings meet established quality and
quantity control standards of size, weight and so on.
Financing: Providing credit for channel members or consumers.
Risk taking: Dealing with uncertainty about consumer purchases resulting from creation and
marketing of goods and services that consumers may purchase in the future.
Securing marketing information: Collecting information about consumers, competitors and
channel members for use in marketing decision making.
MARKETING STRATEGIES BASED ON PRODUCT LIFE CYCLE
A product is a physical good or service or combination of both. It is capable of
satisfying the buyer‟s needs. It attempts to recognize distinct stages in sales history of the
product. The success or failure of a product life depends on how well it makes adjustments to
ever changing, saturation and decline stages. The length of each stage or product life cycle
varies on product nature and environment conditions.
A product has a life cycle is to assert four things:
1. Products have a limited life.
2. Product sales pass through distinct stages, each posing different challenges,
opportunities, and problems to the seller.
3. Profits rise and fall at different stages of the product life cycle.
4. Products require different marketing, financial, manufacturing, purchasing, and
human resource strategies in each stage of their life cycle.

Stages in Product Life Cycle (PLC):

There are six stages a product passes through from time of its introduction to decline
over a period of time:

Sales

Introduction Early growth Rapid Maturity Saturation Decline

growth

Time
1. Introduction: This stage follows just after the launch of the product. The sales are likely
to be very slow. Most of the buyers do not come forward as the product is new and
untested.
2. Early Growth: This is the critical stage. When the usage of product starts flowing into
the market and the results are encouraging more and more buyers come forward to buy
and the unit cost relatively is high, with increased expenses, etc.
3. Rapid Growth: A new product enters the stage of rapid growth when it satisfies the need
of the customers. The sales will increase with repeat purchases and also by mouth
publicity and promotion by manufacturer.
4. Maturity: When the sales growth slows down, it is called maturity stage. At this stage,
the firms tend to attract the customers away from their competitors through cheaper prices
and larger promotional efforts and outlay.
5. Saturation: When the sales slows down to zero. The size of market does not increase
beyond this stage i.e. a new customer is replaced by the old customer who has stopped
buying the product.
6. Decline: When the sales of the product tend to fall. When they do not satisfy the
customer, it is no more preferred. As a result its competing products offering superior
benefits take over the market.
CHANNELS OF DISTRIBUTION
Channels of distribution refer to the ways and means of reaching the customer
through the intermediaries such as wholesalers, retailers and other agencies, if any. The
channel intermediaries involve the transfer of goods from seller at a given place to the buyer
in a different place. Thus, they provide place utility to the marketing process. They bring the
goods to the consumer in a convenient shape, unit, size, style and package when he wants
them. The wholesaler buys the goods from the manufacturer, stores them, if necessary, and
sells to the retailers for onward sale to the ultimate customer. Thus, they add time utility also.

Definition:
According to Stanton, “A distribution channel consists of the set of people and firms
involved in the transfer of title to a product as the product moves from producer to ultimate
consumer or business user”.

Functions of channel of distribution:

Primarily a channel of distribution performs the following functions:
1. It helps in establishing a regular contact with the customers and provides them the
necessary information relating to the goods.
2. It provides the facility for inspection of goods by the consumers at convenient points
to make their choice.
3. It facilitates the transfer of ownership as well as the delivery of goods.
4. It helps in financing by giving credit facility.
5. It assists the provision of after sales services, if necessary.
6. It assumes all risks connected with the carrying out the distribution function.

Factors affecting channels of distribution:

1. Type, size and nature of consumers demand: If the customer wants small
quantities, long channels are preferred and vice versa.
2. The nature of company’s business: Choose the channel according to the nature of
business activity such as agricultural products, industrial products, services, etc.
3. The type of product sold: The goods may be consumer goods, durable goods or
producer or industrial goods or other goods.
4. The price of the unit of sale: If the price of one unit is as high as that of an
aeroplane, the producer can contact the consumer directly.
5. The profit margins and mark-ups: These, together with the extent of the seller‟s
product line play a role in attracting distributors to handle the goods.
6. Degree of competition: If the completion is intense, the manufacture has to arrange
for even door-to-door selling or retail outlets.

Types of Channels of Distribution:

The producers/manufacturers usually use services of one or more middlemen to
supply their goods to the consumers. But sometimes, they do have direct contact with the
customers with no middlemen in between them. This is true more for industrial goods where
the customers are highly knowledgeable and their individual purchases are large. The various
channels used for distribution of consumer goods can be described as follows:
1. Zero stage channel of distribution
2. One stage channel of distribution
3. Two stage channel of distribution
4. Three stage channel of distribution
1. Zero stage channel of distribution:
(Manufacturer – consumer) Zero stage distribution channels exists where there is
direct sale of goods by the producer to the consumer. This direct contact with the
consumer can be made through door-to-door salesmen, own retail outlets or even
through direct mail. Also in case of perishable Products and certain technical
household products, door-to-door sale is an easier way of convincing consumer to
make a purchase. For example, Eureka Forbes sells its water purifiers directly through
their own sales staff.
Examples: Industrial goods such as Aeroplanes, Turbo-engines, Ships, Teleshopping,
E-Business, Internet and E-Commerce.

2. One stage channel of distribution:

(Manufacturer – Retailer – consumer) In this case, there is one middleman i.e., the
retailer. The manufacturers sell their goods to retailers who in turn sell it to the
consumers. This type of distribution channel is preferred by manufacturers of
consumer durables like refrigerator, air conditioner, washing machine, etc. where
individual purchase involves large amount. As the retailers enjoy large discounts in
this process, they share this benefit with their customers by keeping their products
competitively priced. The consumers patronage this channel because they can buy in
small quantities from a wide variety at lower prices.
Examples: Supermarkets, departmental stores (Big Bazaar, Spensors), etc.

3. Two stage channel of distribution:

(Manufacturer-wholesaler-retailer-consumer) This is the most commonly used
channel of distribution for the sale of consumer goods. In this case, there are two
middlemen used, namely, wholesaler and retailer. This is applicable to products where
markets are spread over a large area, value of individual purchase is small and the
frequency of purchase is high. Manufacturers would find it prohibitively expensive to
set up their own outlets in such circumstances. For manufacturers of consumer goods
such as hosiery, food items, confectionery, clothes, and readymade garments,
cosmetics, and so on, intermediaries are indispensable in the distribution chain.
Example: Food items, clothes, cosmetics, readymade garments, etc.
 4. Three stage channel of distribution:
(Manufacturer-Agent-wholesaler-retailer-consumer) When the number of
wholesalers used is large and they are scattered throughout the country, the
manufacturers often use the services of mercantile agents who act as a link between
the producer and the wholesaler. They are also known as distributors or agents.
Example: Food items, clothes, movies, etc.

Management Science