Organizational Culture

• What is organizational culture? Organizational culture is the

collection of values, expectations, and practices that guide and
inform the actions of all team members.
• A great culture exemplifies positive traits  that lead to improved
performance. The positive traits are:
• 1. They treat their workers like adults
• 2. They view company culture as a product

• 3. They discourage internal competition

• 4. They hire for company culture

• 5. They recognize employee effort

• Importance of organizational culture:
Organizational culture affects all aspects of
your business, from punctuality and tone to
contract terms and employee benefits. When
workplace culture aligns with your employees,
they’re more likely to feel more comfortable,
supported, and valued. 
Factors affecting Organization Culture:
• Individual working with the organization
• The sex of the employee
• The nature of the business
• The culture of the organization is also affected
by its goals and objectives
• The clients and the external parties
• The management and its style of handling the
employees
 Organizational Climate

According to Forehand and Gilmer, “Climate consists of a set of characteristics that

describe an organisation, distinguish it from other organisations are relatively
enduring over time and influence the behaviour of people in it.”
• The organizational climate is a concept “perceived” by employees. Importantly, it
is dependent on a value judgment which can vary greatly from person to person.
• The organizational climate affects productivity, motivation and employee
behavior.
Features :
• It is a perception of the work environment.
• It is related to the quality and suitability of
the work environment.
• It gives a distinct identity to the
organization.
• It is a quick picture of the relationship
between the organization and its employees.
• Organisational climate is a multi-
dimensional concept
Factors affecting Organizational Climate

• Organisational Structure
• Individual Responsibility
• Rewards
• Risk Taking
• Warmth and Support
• Tolerance and Conflict
 Employee Morale
• Employee morale is defined as the
attitude, satisfaction and overall outlook of
employees during their association with an
organization or a business.
• An employee that is satisfied and motivated
at workplace usually tend to have a higher
morale than their counterparts.
• Employee morale is vital to organization
culture- a positive collective attitude will
create a positive working environment for
everyone.
Factors affecting Employee Morale
1. Organization Itself
2. Type of work
3. Personal attributes
4. Supervision and feedback
5. Work-Life balance
 Productivity

• Productivity is the rate at which a worker, a company or a country

produces goods, and the amount produced, compared with how
much time, work and money is needed to produce them
 Factors affecting productivity:
• Technical Factors
• Production Factors
• Organizational Factors
• Personnel Factors
• Finance Factors
• Management Factors
• Government Factors
• Locational Factors
Definitions:
Materials Management is the management of the flow of
materials into an organization to the point, where, those
materials are converted into firm’s end product(s).
-Bailey & Farmer

Materials Management is a method for planning, organizing and

controlling the activities that are related to the flow of materials
in a company. This can lead to the control of the location,
movement and time of those materials from their introduction,
production, manufacturing process and final delivery.
• The objectives of material management
are sometimes referred to as the ‘Five
Rs of Materials Management:’
1.The right material
2.At the right time
3.In the right amount
• And of the quality that is:
1.At the right price
2.From the right sources
Types of Material Management
 Levels of Stock
• Minimum Level
• Maximum Level
• Re-ordering Level
• Danger Level
 Economic Order Quantity

• Economic order quantity (EOQ) is the ideal order quantity

a company should purchase to minimize inventory costs
such as holding costs, shortage costs, and order costs. 
• The EOQ is a company's optimal order quantity that
minimizes its total costs related to ordering, receiving, and
holding inventory.
• The EOQ formula is best applied in situations where
demand, ordering, and holding costs remain constant
over time.
• One of the important limitations of the economic order
quantity is that it assumes the demand for the company’s
products is constant over time.
Stores Ledger:
A stores ledger is a manual or computer record of the
raw materials and production supplies stored in a
production facility.
Bin Card:
It is the record maintained under the perpetual
inventory system by the stores department and shows
the quantities of material received, issued and
balance in hand after each receipt and issue.
 INVENTORY SYSTEM

Periodic Inventory System: Under this method

no detailed record of stock is being maintained
during the year. An actual physical count of the
goods remaining on hand is required at the end
of each period.

Perpetual Inventory System: This system

involves the maintenance of detailed inventory
records in the accounting system. Continuous
record is maintained on a transaction-by-
transaction basis throughout the period.
Storekeeping:
• Store keeping is the task of maintaining safe custody
of all items of supplies, raw materials, finished parts,
purchased parts, and other items. These items are held
in a storeroom for which a storekeeper acts as a
trustee. As such, storekeeping can be defined as
process of receiving and distributing stores or supplies.
• In the words of Wheldon, “storekeeping is the physical
storage of materials carried into the store-room in a
scientific and systematic manner with a view
to (i) saving them from all kinds of damages and
losses, and (ii) exercising overall control over their
movement.”
• Following are the main objectives of an efficient
system of storekeeping:
• 1. To ensure uninterrupted supply of materials and stores
without delay to various production and service
departments of the organisation.
• 2. To prevent overstocking and understocking of
materials
• 3. To protect materials from pilferage, theft fire and other
risks.
• 4. To minimise the storage costs.
• 5. To ensure proper and continuous control over
materials.
• 6. To ensure most effective utilisation of available storage
space and workers engaged in the process of storekeeping
 Functions of Storekeeping:
• 1. Issuing purchase requisitions to Purchase Department as and when necessity for
materials in stores arises.

• 2. Receiving purchased materials from the purchase department and to confirm their
quality and quantity with the purchase order.

• 3. Storing and preserving materials at proper and convenient places so that items could
be easily located.

• 4. Storing the materials in such a manner so as to minimise the occurrence of risks and to
prevent losses due to defective storage handling.

• 5. Issuing materials to various departments against material requisition slips duly

authorized by the respective departmental heads.

• 6. Undertaking a proper system of inventory control, taking up physical inventory of all

stores at periodical intervals and also to maintain proper records of inventory.

• 7. Providing full information about the availability of materials and goods etc., whenever
so necessary by maintaining proper stores records with the help of bin cards and stores
ledger etc.
 Stores: Centralized and Decentralized

• Meaning of centralized stores

A centralized store is that store which receives
materials for and issues them to all departments,
divisions and production floors of the company.
Such a store is only one in the company which
receives materials for and issues to all who need
them. The materials required for all the
departments and branches are stored and issued
by only one store.
• Advantages Of Centralized Stores

• The followings are the main advantages of centralized stores.

• 1. A better supervision of store is possible because the store is located under a

single supervision.

• 2. A better layout of store and its control are possible.

• 3. Less space is occupied.

• 4. Investment in stock is minimized.

• 5. It is economical for storing materials.

• 6. Safety of materials is possible according to the nature of materials.

• 7. Trained and specialized persons can be appointed.

• 8. Wastage of materials can be minimized.

• Disadvantages Of Centralized Store

• The followings are the main disadvantages of centralized stores.

• 1. Delay in sending materials to the departments and branches.

• 2. Increase in material handling cost.

• 3. Greater risk of loss by fire.

• 4. Not suitable for a large company.

Meaning Of Decentralized Stores
A decentralized store is that type of store which
receives materials for and issues them to only one
department and not to the whole company. The
decentralized store may be in many numbers in the
company, as each department has its own such
store. Purchasing and handling of materials are
undertaken by each and every department
separately. If the volume of material activities is
large, this type of store is suitable because each and
every branch has their own store for facilitating
smooth operations of their production activities.
Advantages Of Decentralized Stores

1. Controlling a and storing function can be accomplished

easily.

2. Delay in material handling will be eliminated.

3. Minimizes the chances of loss by fire.

4. No need of internal transportation costs.

5. Specific needs of individual departments can be easily

fulfilled.

6. Saving in material handling cost.

• Disadvantages Of Decentralized Stores

1.Higher cost of supervision.

2. More space is required for individual departments.

3. Higher amount of investment is required.

4. More time for stock taking and taking.

5. Higher cost of staff and stationary.

6. Improved technique is less possible for controlling of

materials.
 Types of Storage Equipment:

• Storage cabinet: storage cabinets are high-density steel storage

containers that offer quick access to the inventory and are an easy and
convenient way of storing goods. These storage cabinets are typically used
to accommodate bulkier items.
• Selective Pallet Racks: the most popular type of warehouse storage
and pallet rack system on the market. They offer an inexpensive design and
the largest selection of sizes and accessories to be custom configured for
your warehouse storage application. Designed to get pallets off the
warehouse floor and into a racking system, they provide immediate
accessibility to store or unload pallets
• Push back pallet racks: Push-back racking for pallets has a single
loading and unloading area, at the front of the structure, and the unit
loads are stored by pushing the previous ones towards the back of the
rack.
• Multi-tier Shelves: Multi-tier shelving is the construction of shelves or
racks on more than one level. Multi-tier shelving provides storage space at
multiple levels, thus maximizing the utilization of vertical space available
in a warehouse, making it easier for businesses to store more of their
inventory, thereby increasing the warehouse’s capacity as a whole. 
• Mezzanine Flooring: A warehouse mezzanine floor can yield a massive
amount of extra storage space. Effectively, a second floor is being
constructed above existing floor, which provides extra shelving space,
working areas for staff to pick and pack or check and move stock on.
Mezzanines don’t always need to be restricted to a single level; they can
provide two or even three extra levels.
 ABC Analysis

• ABC analysis is an inventory management

technique that determines the value of
inventory items based on their importance to
the business.
• ABC ranks items on demand, cost and risk
data, and inventory mangers group items into
classes based on those criteria.
• This helps business leaders understand which
products or services are most critical to the
financial success of their organization.
• ABC classification is based on the premise that not all inventory
is of equal value. Instead it follows the Pareto Principle, where
20% of stock accounts for 80% of the value to the business.
Using ABC classification you can therefore split inventory into
three categories:
• Category A: this is the smallest category and consists of the
most important stock items
• Category B: will generally be slightly larger in terms of volumes
of Category A and will usually be made up of products of less
value compared to Category A
• Category C: this will typically be the largest category where
products will contribute the least to your business’s bottom line
• The inventory’s ‘value’ can be based on a number of criteria,
such as annual sales revenue, profitability or annual
consumption value.
The graph below illustrates how 80% of a
company’s sales revenue comes from 20%
of their stock items:
 Calculation of ABC Analysis

Formula to calculate the annual consumption value of each item:

Annual number of units sold (per item) x cost per unit
• List the products in descending order
based on their annual consumption value.
• Total up the number of units sold and the
annual consumption value.
• Calculate the cumulative percentage of
items sold and cumulative percentage of
the annual consumption values using the
totals.
• Determine the thresholds for splitting the data into A, B
and C categories. The threshold for determining the ABC
split will be unique to your company and your product
mix, but typically it’s close to 80% / 15% / 5%.
After calculating ABC classification, the final
data is used to review how the inventory
system is being managed in each category.
Treating all items the same (in terms of the
stock holding and the purchases regardless
of their category) then that will mean the
management probably have inefficient and
needlessly expensive inventory policies. This
means that the firm is probably over- and
under-ordering on many product lines.
 Value Analysis
• Value analysis is a set of techniques, knowledge, and skills used to improve
the value of a product by eliminating unnecessary costs or improving its
functions without compromising its quality, reliability, and performance. It
involves understanding the components of a product and related costs.
 Benefits of Value Analysis

The benefits are:

• reduce costs
• maintain high quality
• provide an opportunity to use new technologies
• eliminate waste
• encourage new ideas
• improve brand image
• improve design
• Example: The production process of a lead pencil was
analyzed using the value analysis technique to reduce
cost. Wood and paint were found to be the two most
expensive elements in producing the pencil, which
shared 37.5% of the pencil’s total cost.
• A round-shaped design for the pencil was suggested
instead of the hexagonal-shaped design to reduce the
manufacturing time and manufacturing cost. Normal
paints were suggested instead of glitter paints, which
were expensive and additional care was required to be
taken while applying them on wood.
• With the suggested design changes, the production cost
of each pencil was reduced by 25%.
Value Analysis Flow diagram
DARSIRI Method of Value Analysis
• In Sanskrit, Darsiri method means “to consider”
and also follows similar steps. Here, DARSIRI
method stands for
• D- data collection,
• A- analysis,
• R- record ideas,
• S- speculate,
• I- investigate,
• R- recommend and
• I- implement
Cost Control Methods
1. Value Engineering Analysis: Value engineering refers to the
systematic method of improving the value of a product that a
project produces. It is used to analyze a service, system, or
product to determine the best way to manage the important
functions while reducing the cost.

2. Target Costing: Target costing is a structural approach to

determine the cost at which a proposed product with specified
function and quality must be produced, to generate a desired
level of profitability at its anticipated selling price.
• The price of the product is determined by market conditions.
The company is a price taker rather than a price maker.
• The difference between the current cost and the target cost is
the “cost reduction,” which management wants to achieve
3. Cost Accumulation: Cost Accumulation is the process of
collecting all costs information about the business with the help
of the cost accounting system. It is a process of collection of all
relevant data regarding the various costs incurred by the
company at various stages of production. This calculation is the
result or outcome of the cost accounting system prevalent or
practices in the company.
4. Banana Curve: A Banana curve is a graph that plots a relevant
cumulative data field — such as man hours or cost — against
time. It’s useful in project management because, by comparing
the expected shape of the curve against its current shape, it can
help project managers track project progress, evaluate
performance, and serve as a consideration for making cash flow
estimates. Where, in a business climate that emphasizes the
value of speed, project work must run and be completed
according to a predetermined schedule and budget.
5. Earned Value Analysis: Earned Value Analysis (EVA) is a method that allows the
project manager to measure the amount of work actually performed on a project
beyond the basic review of cost and schedule reports. EVA provides a method that
permits the project to be measured by progress achieved. It is a project
management technique that allows to measure performance and progress.
• This method allows the project manager to measure the amount of work
actually performed on a project
• it is possible to measure the project according to the progress achieved.
• Using the measured progress, the project manager is therefore able to predict
the total cost of a project and its completion date.
• Often the term “earned value” refers to the Budgeted Cost of Worked
Performed or BCWP.
• This value allows the project manager to calculate the efficiency indices of the
project.
• Moreover, it provides information on how the project is progressing in relation
to its original planning.
• These indices, if applied to future activities, allow to predict how the
development of the project in the future will be, provided that
the performance indices do not fluctuate.