Process of product development, its management

Manufacturing, its organization, planning & control,

management, arrangement of whole operation in a profitable &
effective way.
Quality and its standards, TQM, quality management tools and
techniques, factors involved in shaping use of quality in
engineering organizations, cost of implementing quality system.
Engineers in project groups, as team members or managers,
project management, techniques of planning and monitoring,
project costs, case studies.
Personnel management and personal organization.
Issues discussed by Engineering Management
Engineering
Definition of engineering stated by The
Accreditation Board For Engineering &
Technology is:

A profession in which the knowledge of
mathematical & natural sciences gained by study,
experience & practice is applied with judgement to
develop ways to utilize, economically, the materials
& forces of nature for benefit of mankind.
Engineers:
Engineers are processors of information, which they gather
From a wide range of sources. If they are to be competent
And enjoy the challenge of creative engineering,
they must be good at gathering information & disseminating it.
It is not possible to be successful in any areas if one is not
Able to communicate. Therefore balance of technical &
Managerial skills is necessary to be practiced by engineers.
It is impossible to be a
professional engineer without
the knowledge of
management.
Nature of Organizations
It often seems that org. exist simply to make money, but in
reality this is rarely the case, although money plays an
important role.
The optimum activities to be undertaken by the business org.
employees are determined and derived from a clear statement
of aims and objectives of the whole org.
Once the org. has a purpose and undertakes activities to
achieve those aims, it surely require a legal identity. Because
the law regulates existence of trading organizations for
protecting the rights of all involved individuals/stakeholders.
No org. can trade legally without conforming to the
requirements of law, therefore there are few forms of business
recognized by law because few legislative and other factors
affect the business transactions.
Once the orgs. exist with an aim & legal identity they naturally try
to survive, for that they have to acquire such strategies through
which they can provide something according to customer
demand.
The qualified engineers work in engineering industry in:
Manufacturing companies
Design consultancies
Public organizations.
Many people qualify as engineers but while following their career
path they usually move away from engineering although still
using their numerical & managerial skills in the fields of finance,
computing, management & admin.
Nature of Organizations
Orgs. Vary enormously from 1, 2 or 3-person design
consultancy (where everyone is a partner) to a multinational
conglomerate where an engineer could be working in a division
with 200-300 other engineers.
It is necessary for an engineer to understand the overall
organizational aims as he has to manage a project, finance or
HR effectively. And this qualifies the requirement of
management knowledge.
The way an org. has been formed actually constrains its
operations e.g. methods of raising the capital for expansion is
greatly affected by its legal form.
Although engineers dont often involve directly in fund-raising
processes but for the sake of understanding the legal
implications, they need to have know-how while choosing one
method over the other.
The Mission Statement
Purpose of the company affects its management. The company
needs to decide once & for all, exactly what it is trying to
achieve because one cannot steer a course without knowing
the direction.
It is a statement that sets the direction & thrust of the
organization.
The statement is an objective & has the same properties.
Example: A small pump manufacturer having 30 employees.
What is the purpose of the business?
Does it exist to push back the frontiers of pump design?
Does it exist to provide wealth for the employees?
Does it exists to make money?
All these are unlikely reasons for originating the company. Because
many companies produce less profit than would be provided by
investing the assets elsewhere but still they trade.
There could be number of reasons & number of strategies for
them behind the existence of a company e.g. take the same
case:
1. If pump manufacturer exists to lead the world in pump
technology then much R & D would be appropriate.

2. If the company purpose is long-term survival then perhaps
moderate R & D coupled with establishment of alternative
business lines would be best.

3. If the aim is to meet all pump needs of a particular market
sector then forging special links with that market & excluding
competitors from it would be best.

Example of American Railways Companies
Their Mission Statement was:
To provide a quarter of all the railway miles sold in USA over the
next decade.
It seems a perfectly sensible goal because org is engaged in making
money from sale of rail journeys. It cant be told from the statement
whether it is realistic target for any particular company but it does
certainly sounds a worthy objective.
In fact, many companies at time used exactly such mission statement
& ultimately went out of business because none of these ever thought
any invention of the type invented by Wright brothers which replaced
them. Now How is the invention of airplane related to these MS?
None except that the rail companies turned blind eye towards this new
development. As almost after 30 yrs people replaced
their use by airplanes for all kinds of uses and cargo
freights to any corner of the world.
Error of American Railways Companies
They chose simply a wrong mission statement. Their futures
could have been different if they had chosen a statement
like following.
To provide a quarter of all the transport miles sold in
USA over the next decade.
By simply changing only one word & they would have kept a
keen eye towards developing new transport technologies
& ultimately would have been the 1
st
to add air transport to
its portfolio of products.
A rail company have success in achievement of this goal
would have ended up owning the airlines instead of
running out of business due to them & all because just one
word was incorrectly chosen.


MBOMgmt By Objectives
Once a MS has been selected & agreed upon, the mgmt of organization
must communicate it to all members within the organization.
To arrive at task for all members of the organization that contribute to
this central task clearly involves a great deal of subdivision & is far
more than one person, or even a small team, is likely to be able to
do. Subordinate tasks can be identified from an examination of the
MS implications. And then each of these tasks may have component
tasks, further can be subdivided also.
Example from pump manufacturer:
MS:- To return a profit of 14% of turnover by supplying centrifugal
water pumps to European customers over the calendar year.
Now the senior mgmt can produce supporting tasks by utilizing their
technical knowledge and skills. By considering sales price & profit
margin for all different models of pumps, target numbers for each
model to be sold can be prepared.



MBOMgmt By Objectives
The org will have to manufacture the pumps & they have to be sold & shipped.
The directors can now start making objectives for each department by using
their knowledge of business & company.
Even the very presence of a department is governed by the MS because simply
the production dept of pump manufacture exists to meet only the
manufacturing needs of the MS, not the other way round.
Objectives (examples):
Sales dept: logging fifty orders a month.
Manufacturing: meeting every order within 22 days with an average
manufacturing cost of less than 65% of sales price, etc etc.
So all these deptl obj. are chosen to support the MS. If the MS had been
different, the deptl obj. would also have been different. Once first level of obj.
have been agreed, individuals are made responsible for achieving them.
Normally in a company the directors take on objectives at this level.
Divisional objectives
Mission statement
Individual's
objectives
Managers objectives
Managers objectives Managers objectives
Individual's
objectives
Individual's
objectives
MBOMgmt By Objectives
In case discussed above manufacturing manager might know that the current
material & labor cost is too high to meet the departmental objective & thus
set up the group of engineers to solve the problem.
Similarly the manufacturing department may feel that the amount of sub-
contract labor is too high or that commonality of parts between models
should be increased. The deptl obj. are used to decide which tasks are
actually important & only those which support the dept & then MS are
selected.
The size of org helps to decide about the number of times the objectives are
subdivided. The progressive subdivision of main task directs the whole
organization for achievement of overall goal so that no effort is wasted on
undesirable directions & no contradictory programs of activity occur.
APPRAISAL is the tool to find management by objectives extending to every
single member of staff in the organization. Because objectives are used to
manage the activities of everybody in an org.
People tend to believe that obj dont change both at corporate & personal level.
But such is not the case because Time Do Change & business activities
change with them.

MBOMgmt By Objectives
For this dynamic reason the senior managers of org meet regularly, review
progress towards each of their obj & reassess the value & sensibility of
mission statement & consequent obj to it.

Corporate objective are not immovable/static & they need maintenance for
appropriation. Sticking doggedly to outdated objectives is not advantageous
to the org as it can lead to missing the opportunities.

Conversely there is no benefit in constantly changing objectives in response to
every external factor.

The most testing assessment of a management team is how well they
maintain their corporate objective to steer their organization between
two pitfalls.

Legal Establishment of Organizations
There are six ways to establish businesses in private sector:
1. Sole traders.
2. cooperatives.
3. Public companies.
4. Private companies.
5. Franchising
6. Partnerships
The legal form & legislation affects them in accordance with the country they
exist in.
1) Sole Traders are the establishment of a business with a single owner. It is
the simplest & very common form of business particularly in all streets &
easy to dissolve. They are newsagents, run small shops, work as
electricians, plumbers, builders & consultants.
Business has no separate legal identity from owner i.e. all debts, liabilities &
profit belongs to owner.
One has to be careful for not using another companys trade name.
Working alone is not necessary, can employ other people as well.

Features of sole trader business:
1. Accounts do not have to be disclosed publicly and are not available to competitors.
2. The owner makes all the decisions and has total control of the business.
Advantage: Speedy decisions can be made and implemented.
Disadvantage: Owners competence as a manager and business person can restrict
the business. He can not discuss his ideas with any one as no-ones interest is
vested in the business.
3. A sole trader can offer a personal service which may be valued more highly by
some customers.
4. All debts belong to owner. This can result in hardships if business does badly
because many sole traders use homes as security for the business. If debts are
excessive it can lead to the forced sale of personal possession; liability for debt is
unlimited.
5. Extra capital for development or expansion of business not available.
6. The owner of the business has to work himself, all administration and book
keeping will be done by him. Taking holidays will be a problem.
7. Sole traders rarely benefit from economies of scale therefore it will be a high cost
enterprise. But some retail trade businesses overcome this problem by forming
some sort of collective & purchase large quantities from wholesalers &
manufactures , thus getting better price.

2) Partnership
2) Partnerships exist when there are a number of people involved as
partners of business. This type of business can be set without any formality.
But drawing up of the partnership deed is advised covering matter like
percentage or ratio of profit split-up.

A maximum of 20 partners is allowed according to English law. But tow
cases are exempted from this limit.
1. Banks, where maximum allowed is 10.
2. Certain professional partnerships like Solicitors & accountants where law
does not permit to form companies, so there could be more than 20.

In partnership every partner is jointly liable for any contract made by any
other partner, irrespective of prior knowledge. If one partner agrees to supply
a piece of equipment in a stipulated time, then it will have a binding on all
the partners.
If a partner leaves the business then all contracts have to be informed that
the person concerned will not be liable for future contracts, his name will be
removed from business stationary


Features of Partnership business:
1. Liabilities and decision making are shared. To reach a decisions difficult because it
requires consultation and agreement among all partners. So clear lines of
demarcation for various aspects of management & operations of business can
alleviate this problem.
Advantage: Skills and experience of partners complement each other.
Disadvantage: Liability as a partner exist, if the partner did not know or agree to a
particular contract.
2. Less formality and expenses are required in comparison to form a company
3. Accounts do not have to be disclosed to competitors or to public.
4. Initially it would be possible to raise large amounts of capital because of large
number of people having resources will be involved in it. But extra capital if
required will be difficult to obtain due to limited additional security because many
people use their homes as security for loan.
5. Partnership can be suddenly dissolved if one partner dies or goes bankrupt, unless
this event is covered in the deed of partnership.
6. Holidays & illness can be covered by other partners.

3) Cooperatives & their principles:
Cooperatives involve a voluntary association of people, known as members and
operate an enterprise collectively. Their aim may not be to make profit.
1. Cooperatives are run on the basis of one member, one vote irrespective of how
much each member has invested. The managers are also democratically elected on
same basis.
2. Main advantage: cooperative operations give support to the members of the
cooperatives. There is little asset stripping (asset stripping means assets are sold off
to provide profits).
3. Membership allows good industrial relationships.
4. There is open & voluntary membership for all who work in the organization.
5. Interest paid on capital is limited.
6. Business is conducted for the mutual benefit of the members & all profits are
shared. Particularly people are paid on the basis of what they need rather than on
the basis of market rate for the job.
7. Business must be socially aware & act responsibly towards other businesses,
customers, suppliers & local community
8. They dont necessarily make profits. Liability of members is achieved by
registering with Register of Friendly Societies.


4) Companies:
A company has a separate legal identity from its owners & continues to operate
even if the owners & managers change.
It is owned by shareholders who each have a liability which is limited to the
nominal value of their shares. This nominal value is originally promised in return
for the allotment of shares & is usually different from the price of shares being
traded on the stock market.
The trading price reflects the value placed on the company by investors
In UK both public & private companies are registered with Registrar of
Companies, whereas in Pakistan they are registered with SSECP.
Creating a Company: process of company creation is called incorporation &
during it two documents are drawn up:
1) Memorandum of Association
2) Article of Association.
Memorandum relates to the external affairs of the company giving information like
Company name
Registered office
Company purpose
Its share capital


Companies:
The Articles relate to internal operation of the company & include things as:
The rights of the shareholders &
The powers of its directors
The above documents along with others defining the amount of capital &
number of directors are submitted to the Registrar of Companies in UK &
to SSECP in Pakistan with a fee. Then they are issued a certificate of
incorporation.
After incorporation, the company details are made available for public
inspection & then private company can start to trade immediately.
But a public company may not trade until the registration authority is
satisfied. & unless the necessary share capital has been allotted.
The regulation of the companies is achieved through Companies Act which
states that the company has to regularly prepare & publish information
about its activities. Further the companies are allowed to carry out only the
activities defined in the OBJECTS CLAUSE of its Memorandum of
Association. But this clause can be amended in accordance with the Act.
Closing A Companies:
Annual Report: ownership of limited liability companies belongs to the
shareholders & they delegate the operation of the company to directors who
ultimately become responsible for producing annual reports & accounts in correct
form as required by law.
Annual reports must contain both the balance sheet & the profit & loss accounts. Some
large companies also have to include other items of financial & general information
such as Chairmans Review & auditors report.
A statement of funds source & the way of their usage is also included besides giving a
full record of financial transactions undertaken during accounting period.
A company is closed by court order if it cannot pay its debts after experiencing
financial difficulties. This winding up process of a company is called Liquidation
& it could be done either on compulsory or voluntary basis.
Voluntary Liquidation occurs when company agrees to sell its assets & pay off
debts. Whereas Compulsory Liquidation is there when the company is given no
choice, an official receiver is appointed by the court who sell off assets & pay off
debts. Sometime in some cases the receiver sell the company as going concern
indicating the continuation of trade.


Main Features of Operating Company:
1. Shareholders have limited liability & that also only to the nominal
value of their shares.
2. Company has legal identity separate from its owners & managers.
3. Extra capital can be raised in public companies by issuing more
shares. Shares in public companies can be freely transferred without
consulting other shareholders.
4. After formation the company has perpetual succession since
company management is separate from its ownership.
5. Accounts are must to be disclosed to public thus facilitating the close
monitoring of company performance of the competitors.
6. Company objects are limited by the Objects Clause.
7. The company is more closely controlled & regulated by outsiders
than sole traders or partnerships because of the Companies Act.


Public Companies
Tend to be larger than public companies.
Can be distinguished from private as their
names end in plc (public limited
company)
To become public the company must
have a minimum defined amt of capital.
Must have at least one-quarter of each
share actually paid for.
Can offer shares to public & transfer them
freely subject to the rulings of the
Monopolies Commission.
Share dealing is done through Stock
Exchange.
Min. membership is two & max is defined
by number of shares.
Must have at least two directors &
disclose the accounts publicly.
Private Companies

Can be distinguished as their names must
contain the word Limited, abbreviated to
Ltd.
Owned by shareholders but unlike the
public company they cant offer them to
public unless done under the agreement
made with Inland Rev. i.e. SECP.
In above discussed case the shares can
only be offered to company employees.

They dont have to disclose as much
information in accounts as public
companies.

They require only one director but a
company secretary is must besides that.
5) Franchising:
It is an increasingly popular way of setting up a business.
The individual willing to start a business has to pay a sum of money
to another organization for becoming its franchise.
Franchise is a license to sell the franchisors product or service & this
form of business is very common in service industry.

In exchange for the franchise fee & other on-going payments the
business receives support of franchisor like:
1) Brand name or label under which they are licensed to trade
2) Full support for marketing & training.
In return for this support the franchisee is exclusively bound to the
franchisor for the period of franchise.
The franchisee also has to find premises & equipment in house style.


Main Features of Franchising:
1. Sole traders, partners and companies can operate as franchises.

2. There is limited outlay & risk due to the support of the franchisor.
However problem may arise due to insufficient support.

3. The product produced & sold by them is already tested, marketed &
has a well know image. Additionally the franchisor may provide
large-scale advertising.

4. The franchisee may not be able to manage the product in the best
way for their own business as it is not in the best interest of the
franchisor.


QUESTIONS
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