COLLEGE OF ENGINEERING,

ARCHITECTURE, AND
TECHNOLOGY

INDUSTRIAL ENGINEERING
PROGRAM

Subject: T-IEET001 Engineering

Management

Topic: Module 3
- Managing Operations Functions
- Managing Marketing Functions
- Managing Finance Functions

By : Engr. Edilberto F. Molas PIE

Module 3 Title :
- Managing Operations
Functions
- Managing Marketing Functions
- Managing Finance Functions

TABLE OF CONTENTS

1.1.1. I. MODULE OVERVIEW

1.1.2. MODULE OVERVIEW

1.1.3. OBJECTIVES

1.1.4. SUBJECT MATTER

1.1.5. PROCEDURE

1.1.6. GENERALIZATION OF ENGINEERING MANAGEMENT

1.1.7. APPLICATIONS

1.1.8. EXERCISE/ASSESSMENT

1.1.9. REFERENCES

1- Module overview:
This modules includes : Managing operations functions,
Marketing functions and Finance functions

II- Objectives:
At the end of the topic, students will:
1. Apply engineering management on research, safety,
design of work/product, and environment
2. Analyze fundamental concepts of management and
define its importance on managing operations
3. Identify and understand functions of engineering
management
4. Identify and analyze functions of management
5. Apply management in the transformation process of
engineers and other individuals involve in company
operations and research.
6. .Foster a spirit of independence and self-direction
through self-care reflection
and meditation.

III – Subject Matter:

- Managing Operations
Functions
- Managing Marketing Functions
- Managing Finance Functions

IV- Procedures

A. Preparation

Prayer:
 GOSPEL READING

Let us put ourselves in the presence of God..

In the name of the Father, the Son, and the Holy Spirit.

Proverbs 2:6 and 10, “For the Lord gives wisdom, and from

His mouth come knowledge and understanding. For wisdom

will enter your heart, and knowledge will be pleasant to your

soul” St. John Baptist de la Salle.. pray for us.. Live Jesus in

our hearts.. Forever. VIVAT JESUS

B. Materials:
Power point

c. - Introduction and Overview

Recall on :

1. Directing, and Motivating

- Controlling, and Leadership in management
Topic # 1. Managing Operations functions:

Managing Product and Services:

Introduction :

Meaning of Productivity - The relationship of the volume of Goods and

services produced to the physical input In its production. Can be measured
in terms of the ratio of output to input Labor, capital, energy, materials, or a
combination of both.

Factors Affecting Productivity Gains

1. Tangible capital per worker – increases in productivity and the

higher income thus produced help generate
Capital formation. The process is mutually reinforcing since capital
formation help increase productivity

2. Improvement in quality of labor also form investment – Not in

tangible goods, but in human beings made
through education, on the job training, and provision of better health
facilities is a crucial factor in the equation of productivity improvement.
3. More efficient use of capital and labor – Of the factors that
improve the efficiency with which capital & labor are used, the most
prominent is technological
advancement which includes:

i. Improvement in managerial techniques as well as

modification in tools and equipment
ii. Higher efficiency may also result from a reduction in the
length of workday or week, etc.

Product Simplification and Diversification

 Product simplification - means essentially the elimination Of
extraneous or marginal lines, types, and models of products. It includes
reduction in range of materials and components used in manufacturing these
products

Product Diversification - is the direct opposite of simplification . It

involves the addition of product lines, types and models.

Product diversification approaches:

iii. Horizontal diversification – diversify horizontally into

new products without significantly affecting the existing
products, do utilize the manufacturing, marketing, or
financial know-how and facilities of the enterprise. These
are known as complementary products produce by like
processes, or equipment .,e.g. printing plants which
published books, magazines, and newspaper and do job
printing or sold in common markets, (e.g. refrigerators,
ranges, washing machines, and window air conditioner)
iv. Vertical Diversification – diversify vertically by
integration into materials, components or subsequent or
satellite products. Example metal working plant may
decide to pickle , roll, and slit its own flat , strip-steel
coils rather than buy the material from steel rolling mill.
Satellite product spin off from the principal product as in
the case of by-products.

Benefits derived from :

Product simplification
v. It eases problems of supervision
vi. Production planning simplification may also be extended
to individual operations to the end that a greater degree
of specialization of work task.
vii. Fewer product and less complex to manufacture
viii. Fewer type and sizes of raw materials to managed
ix. Lower manufacturing costs, etc.

Product Diversification
x. Can increase manufacturing and distribution headaches
xi. Larger and more varied inventories
 xii. Greater investments in manufacturing equipment and
tooling
xiii. Difficulties in planning production

Product Engineering

Product design – Research team carries the product to Point where it

will perform satisfactorily the function
Intended. Engineering data commonly developed by the product -
Engineering include stress calculations for highly
stressed parts together with the redesigning of such parts if necessary

Industrial Standardization:

Standards – is essentially a criterion of measurement, Quality,

performance, or practice established by Custom, consent, or authority and
used as basis for Comparison over a period of time.

Range of Industrial Standards

1. Product standards – established the ingredients, formulas, physical

characteristics, quality, and performance of a particular product or
line of products for the purpose of reproduction. Generally protect
the consumer by assuring them of articles that are interchangeable.

2. Engineering design standards – are concerned directly with the

components parts that make up the product. A company making
several similar products may standardize on certain sizes of bolts,
screws, fittings, etc. which are to be used in the design of its product
. Drawings and specifications for these parts are usually catalogued
by number so that a designer confronted with need for some such
parts has only to look in the catalogued by number.

3. Design standards – play a major role in world trade with

interchangeability, one of the principal benefits derived from their
universal application. Today some products can hardly compete
 internationally by not meeting international standards on grooved
pulleys, V- belts , cast iron pipe, & electrical fittings

4. Material Standards – those which concern with the composition,

form, size, and finish as well as type of materials used

5. Quantity standards – deals with the control of materials, production

and costs, relate to the quantity of the finished product to be
completed within a given period of time, the amount of raw
materials, in-process and supply materials required, the production
rate per person or per machine, the overhead per machine hour, and
any number of other similar standards that are in constant use in
industry today in operations of productive facilities

6. Process Standards - standardization of operating methods and

operational performance or work effort. Deals with the efficiency of
the equipment and plant operating practices and efficiency of the
employees.

7. Equipment standards – covers the rating, capabilities, installation,

and servicing requirements, etc. of processing and materials
handling equipment , tools, jigs, and fixtures. Electrical and
dimensional characteristics for machine tools

8. Safety standards – are rules and regulations, and practices which

assures the safety of employees while on company premises

9. Administrative-practice standards – are those dealing with clerical

and operating procedures, systems, and records in the realm of
administering company policies. Ex. Purchasing procedures,
inventory routine, production control records, etc.

Agencies for establishments of standards:

1. bureau of product standards (BPS)

2. Food and drug administration (FDA)
3. American national standards institute (ANSI)
4. International organization for standards (ISO)

Reliability engineering:
 Product Reliability is the time span that a product would perform its
intended function in its operating environment . Reliability of a product is
only as good as its design. Fine manufacturing workmanship and control of
quality, while important can do no more than preserve the reliability
engineered into the product. Design standards, and engineering – design
standard often assist here as proven parts, new parts have been
systematically evaluated.

Value Engineering
VE – is an organized effort to attain optimum value in a product, system, or
service by providing the necessary functions at the lowest cost.

CASE PROBLEM:

WONDERFUL WASHING MACHINE COMPANY

In 2010 the Wonderful Washing Machine Company experience a slump in

sales of its laundry appliances, contrary to sales trends in the rest of the
industry. Investigation revealed that public confidence in the company’s line
of washers and washers dryers had been shaken as the
Result of generally poor experience with the line models produced and sold
during the preceding 3 years . These machines, the investigation revealed
were causing their owners, on the average six repair calls per year compared
with two or three such call per year for competing makes of this machines.
These annoying and costly repair had won for the wonderful machine the
general reputation that they were “lemons”.

A survey of service centers and spare-part depots showed that the largest
number of failures centered about clutches,
Filters, and transmission. The problems with these items is varied but were
found to include materials, workmanship, and design.

The company decided to offer each owner of one model of washing

machine a brand new , and hopefully more trouble free, model machine at a
cost to the customer of P1000. It furthered offered to exchange a
combination model washer dryer on which severe problems had been
encountered with new, individual washer and dryer units delivered ,
installed, and initially serviced free of charge. On other models the company
offered to replaced the transmission free of charge. The total cost of these
replacement program was estimated to exceed P 7,500,000.00. Yet this
expenditure was deemed essential if the company ever wished to regain
public confidence in its line of laundry appliances.

Question:

Detail comprehensive measures that might be taken as a reliability program

to prevent difficulties of the sort encountered by Wonderful Washing
Machine Company.

Topic # 2. Managing Marketing Functions

Functions of the Marketing Division:

Market Research – to find out from potential users the Extent of the
demand for a product. This is done Through the preliminary survey. As
plans materialize, An intensive Market Study is conducted to discover The
location of the market and the steps required to Sell the product in the face
of competition. Many new products and enterprise fail because they Are
launched on a “guesstimate” of the potential
Market which is never realized. The cost in time and Money of a careful
market study is relatively cheap Insurance for the larger failures it helps to
avoid.

In many instances, it maybe desirable to Have an outside Agency

do the work. Many professional organizations- Marketing specialist,
advertising agencies, business –
Engineering firms – perform this service. Newspapers, Magazines, radio and
TV network, and other advertising media make surveys of markets tapped
by their circulation coverage. Such surveys maybe of great help if adapted to
the needs of manufacturers.

Sales Forecast –The market research conducted by a firm

Plus the analyses of current sales experience an Trends form the basis for the
construction of a sales
Forecast. This forecast estimates sales volume for Each product line by sales
territory and for specific
Periods. This forecast will be the basis for planning By the company.

Advertising

Maybe divided into two principal types : 1. Advertising intended to

promote the sale of a particular product and advertising intended for the
promotion of an idea.

1. The first type is the one most commonly used over a period of years.
It conveys information regarding quality, price, and general
desirability of a named product. It is a direct approach to the buyer in
an attempt to induce him to buy.

2. The second type of advertising which proposes to promote an idea is

a more indirect approach to the customer. In many instances it may be
intended as a means of keeping the name of the company before the
public. Some have termed it as institutional advertising, or
“Goodwill” , while more severe critic called it propaganda, others
termed it “publicity”, but publicity now is considered as one of the
marketing strategy.

Sales Promotion

SP - is a specialized function and can be established as a separate

department or it may become a part of the advertising department .The scope
of the function itself may vary greatly between companies.

Publicity
 Publicity – is a form of advertising indirectly by way of Engaging in
programs or projects which will publicly Promote the company or product.
Typical example is Sponsoring a sport activity, or project tulong for the
Community during calamity, scholarship programs etc.,
Which normally catches attention of broadcast or Print media.

In general, the function of advertising department may be

Classified as follows:

1. Preparation and control of advertising budget

2. Liaisons with the agency
3. Supervising advertising and marketing research
4. Keeping in touch with representatives of important media
5. Cooperation with the sales dept. and with other depts..
6. Distribution of advertising material
7. Production and supervision of sales-promotion materials.
8. Supervision of copy
9. Merchandising the advertising
10 Administration

Servicing:

Service is an essential part of the sale itself. A Manufacturer of

production machinery finds it essential
To see that his products are properly installed.

Channels of Distribution

The problem of selecting routes or paths by which the

Product goes from manufacturer to the actual user vary in
Terms of the nature of the product. The manufacturer may choose a direct
channel with the consumer. He may go through
Intermediary trade known as middlemen, who in general are
Specialists in the resale of products to consumer

Organization for Marketing

The organization in its simplest form is a line sales organization. The

manager works in a liaison relationship with
Other divisions, carries the responsibility for sales promotion, advertising,
market investigations and contact with selected customers, and through his
assistant coordinates the work of sales personnel . Below are three types of
organization:

The Line Organization

Marketing Manager

Sales Manager

Salesmen

Divided by Regions

Sales Manager

Assistant Sales Manager

Branch Mgr. A Branch mgr. B Branch Mgr. C

Salesmen Salesmen Salesmen

Divided by products
 General Manager

Sales Manager Sales Manager Sales Manager

Product A Product B Product C

Salesmen Salesmen Salesmen

Assignment/seatwork:

Prepare a sales forecast by trend equation:

A linear Trend equation has the form Y = a + bt

Where t = specified number of time periods from t = 0
Yt = forecast for period t
A = value of Yt at t = 0
B = slope of the line

Given:

WEEK Unit Sales

1 700
2 724
3 720
4 728
5 740
6 742
7 758
8 750
9 770
10 775
11
12
13
Required:
 a. Plot the sales on the Y – axis to create a trend
Line equation.
b. Find the trend line equation.
c. Compute forecast for week 11, 12, & 13

Values of ∑t, and ∑t2

T ∑t ∑t2

1 1 1
2 3 5
3 6 14
4 10 30
5 15 55
6 21 91
7 28 140
8 36 204
9 45 285
10 55 385

Formula:

B = (n∑ty - ∑t∑y)/n∑t2 – (∑t)2

A = (∑y - b∑t)/n

Where:
N = number of periods
Y = value of the time series

Seatwork : Write 2 samples of each of the following:

1. Advertising
2. Promotion
3. Publicity
4. a jingle of one of your advertising
sample in number 1.
Topic # 3. Managing Finance Functions
Managing the Finance Functions

Planning the financial structure

Enterprises can still be started on a shoestring and may be developed

into large-scale companies. The problem of
Starting a new enterprise is always much more difficult than
That of expansion for existing firm but modern condition make
Financial planning a necessities.

Financing the non-corporate Enterprise

In case of single proprietorship and partnership, the initial

Capital comes from the individuals directly interested and possibly through
loans and investments that their friends are
willing to make in the business. In addition to cash these individuals may
contribute the actual lands, buildings, machinery, and materials needed to
make up the productive capital of the business.

Corporate Capitalization –

Capitalization for corporation may come from the incorporators

themselves in terms of cash or fixed assets. The corporation may sell stock
(common or preferred) , bond Issues, and for working capital may opt for
trade credits. If the corporation has assets, it can be used as collateral for
bank short or long term loans.

Kinds of Capital
Capital – is a single term used to cover the land, buildings,
Machineries , tools, and materials of a productive enterprise.
 1. Fixed Capital – are money needed to finance or buy Land, buildings,
machineries, tools and other installation to be used over and over
again for a long period of time. If acquired they now become fixed
assets of the company.
2. Working Capital – are money or funds needed to cover its operation-
to maintain plant, to purchase materials and supplies, to pay salaries
and wages, to cover storage,, transportation, and shipping services,
for advertising, and to tide over the enterprise during the time lag
between the sale of its products and payment for them. This are
current operations and the funds to cover them is called working
capital.

Sources of capital funds:

1. The money market
b. Banking houses for short and long term loans
c. Industrial financing corporations
d. Government owned and controlled corp. like DBP,
DOST, Land Bank, ect.
e. Trade Credits - acquisition of machineries, tools,Supplies, and
raw materials on credit terms
f. Credit instruments

The Budget
It is a long term responsibility of management to use investment that
will yield the largest possible profit or return, and it is the function of
budgeting to plan that profit picture.
Types of budgets:

1. The static budget – This type of budget serve a valua-

ble purpose in the planning and control of certain fixed types of
expenditures, and suited for government type of operation. This
is used solely in manufacturing budgeting for projects like
automation program, expansion program, etc.
 2. The Variable Budget – The variable budget is constructed in
anticipation of variations in sales. It provides in advance for
orderly change in the volume of production and expenditures.

Preparing the budget

The annual budget is normally done in the latest part of the year
October to December in preparation for the budgetary requirement for next
year operations. The Finance department is the coordinating unit and given
the task of consolidating the entire budget by cost centers. Projected
financial statements are then prepared to determine possible outcome. Unit
cost per product is then provided so that operating units would be informed
as their target.

The budget process start with guidelines from top management which will
be used as basis for all units in preparing their required expenditures. The
bulk of activity is
Centered on the line organization, and the planning group of operation
which is normally spearheaded by the industrial engineering department.
Sales forecast then is the key element for the budgeting process and
normally there is the so called first pass of the budget, second pass, or third
pass depending on each outcome, or what if sales forecast.

Basic accounting terminology

1. Income Statement – shows the annual sales /revenue and expenses

and taxable income or loss and gross income subject to tax and net
profit after tax.
Example of Income Statement XYZ Enterprises for the year ended
2013.

1. Gross revenue/sales Php.1,500,000.00

Less: cost of goods sold 500,000.00
2. Gross Income from sales 1,000,000.00
Less Operating Expenses:
2.1 Salaries & wages Php. 200,000
 2.2 Interest from loan 100,000
2.3 Amortization 100,000
2.4 Depreciation 150,000
2.5 Rent 50,000
2.6 Admin. Expense 150,000
2.7 Energy, fuel,& water 50,000
2.8 Maintenance exp. 30,000
2.9 Insurance 20,000
2.10 Others 20,000 (870,000.0)
3.0 Taxable Income +/(-) -------- Php.130,000.0
Less: 30% tax -------- 39,000.0

4.0 Net Income Php. 91,000.00

2. Balance Sheet (XYZ Enterprises) – Shows the assets and

liabilities of an enterprise, or the value / worth of the enterprise

1. Assets:
Current Assets
Cash on bank Php. 1,000,000.0
Accounts receivable 200,000.0
Inventories 300,000.0
Total Php. 1,500,000.00

Fixed Assets:
Land 1,500,000.00
Buildings 4,000,000.00
Machineries & Equipt. 2,500,000.00
Total 8,000,000.00

Total Assets Php.9,500,000.00

2.0 Liabilities & Owners Equity

Accounts Payable 150,000.00
Bank Notes 250,000.00
Mr. XYZ Equity 9,100,000.00
Total Liabilities Php. 9,500,000.00
 3. Cash Flow – Shows the operating revenue on a given particular
time and cash ending balance on the same period after allocation of
required cash for operations

Operating Revenue Php. 1,500,000.00

Less : Labor 200,000.0
RM/CGS 500,000.0
Amort. Exp. 100,000.0
Rent 50,000.0
Adm. Exp. 150,000.0
Energy/etc. 50,000.0
Maint. 30,000.0
Insurance 20,000.0
Others 20,000.0 1,120,000.00
Cash Flow Ending Balance Php. 380,000.00

V - Generalization:
 Management in general is present in all kinds
of human endeavor, in all kinds of activity that we people do and
professionals do adhere to specific standards. In the practice of
engineering, Engineers do exercise management
of operations, Marketing and Financing.
VI – Applications:
Specific to topics in this module, the applications are quite vague
because men do exercise management in corporate
Business and anywhere in the industry as well as services

VII– Assessments:
Answer the following:
1. What is vertical integration and horizontal integration ?
2. Explain further publicity and cite example
3. What is forecasting?
4. Is an engineer fitted to manage marketing department?

IX – Assignment:

Reaction Paper on these topic

X – References:
Call Reference Material
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Youtube Medina, Roberto, Engineering Management, Pdf. file
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You Tube Pineda, M.B.[Ma. Estrella Natalie B. Pineda] (2020, Nov 18) PERT CPM. Youtube.
Channel https://www.youtube.com/watch?v=plfh9v-B51w