Professional Documents
Culture Documents
Engineering Economy
By: Mehari B.(PhD)
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Industrial Revolution
1st Industrial Revolution
The use of steam power and mechanization of production.
The use of steam power for industrial purposes was the greatest
breakthrough for increasing human productivity.
e.g. steam engine, spinning wheel, water wheel, were introduced for better
and more productivity
2nd Industrial Revolution
The discovery of electricity and assembly line production
The idea of mass production by Henry Ford (1863-1947)
Characterized by significantly faster production at lower cost.
3rd Industrial Revolution
The partial automation using memory-programmable
controls and computers, followed by full automation of the entire
production
E.g. Robotics, NC, CNC, DNC classes of automated production machinery.
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4th Industrial Revolution
The application of ICT to industry and is also known as "Industry 4.0“
Production systems use a network connection and have a digital
twin on the Internet so to speak
The networking of all systems leads to "cyber-physical production
systems"
E.g Internet of things (IoT),
industrial Internet of things (IIoT),
Cobot (collaborative robot),
Big data,
Cloud computing,
Virtual manufacturing,
3D printing
Smart factories
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Course Outline
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Chapter One
Basic Management Concepts and
Industrial Organization
Introduction:
Management Is…
Efficiency
Getting work done
through others
Effectiveness
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Efficiency and Effectiveness
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Functions of management
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Planning and Decision Making
Defining goals, establishing strategy
and developing sub plans to choose
alternatives and coordinate activities
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In short planning is:
Determining organizational goals
and means to reach them
Managers plan for three reasons
1. Establish an overall direction for the
organization’s future
2. Identify and commit resources to achieving
goals
3. Decide which tasks must be done to reach those
goals
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Organizing
Is a process of deciding:
Where decisions will be
made
Who will do what jobs and
tasks
Who will work for whom
Includes creating departments and job descriptions
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Leading/Directing
Inspiring
Leading
Motivating
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Controlling
Monitoring progress towards goal achievement
and taking corrective action when needed
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….Controlling
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LEADERSHIP AND MANAGEMENT
LEADERSHIP:- defined as speaking,
listening and acting in a way that
mobilizes self and others to make
effective action to realize visions,
possibilities and dreams.
is the ability to influence others, with or without
authority.
the ability to influence others is a source of
Interpersonal Communications
Conflict Management
Problem solving
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Differences between Leadership and
Management
There is a continuing controversy about the
difference between leadership and
management
It is obvious that a person can be a leader
without being a manager
ex. an informal leader
A person can be a manager without leading
ex. some people with the job title “manager” do
not have any subordinate
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The most extreme distinction involves the
assumption that management and leadership
cannot occur in the same person
In other words, some people are managers and
other people are leaders
The definitions of leaders and managers
assume they have incompatible values and
different personalities
Managers value stability, order, and efficiency,
whereas leaders value flexibility, innovation,
and adaptation
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Managers are concerned about how things get
done, and they try to get people perform better
Leaders are concerned with what things mean
to people, and they try to get people to agree
about the most important things to be done
According to some writers, managers are
people who do things right and leaders are
people who do the right thing
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The Differing Perspectives of Managers and
Leaders
Managers are concerned with Leaders are concerned with
Plans Vision
Feedback Inspiration
Objectives Outcomes
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Activities Undertaken by Managers and Leaders
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…con’d
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…con’d
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SIMILARITIES B/N LEADERSHIP AND MANGT
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Basic Levels of Management
Top
Managers
Middle Managers
First-Line Managers
Non-managers
Levels of Management
First-line Managers: have direct responsibility for
producing goods or services Foreman, supervisors,
clerical supervisors
Middle Managers:
Coordinate employee activities
Determine which goods or services to provide
Decide how to market goods or services to customers
Assistant Manager, Manager (Section Head)
Top Managers: provide the overall direction of an
organization Chief Executive Officer, President, Vice
President
Management Level and Skills
Organizational structure
Opportunity for change in organizational
structure is limited due to diversification or
amalgamation or merger.
Stages in setting up effective organizational
structure:
Establish activities which achieve business
objective's
Group related activities together E.g
production, marketing
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……Con’d
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Types of organizational structure
there are four types of Organizations
1. Line Organization:
Simplest & efficient in small and medium-size
enterprises
Also called military organization
Because there is a clear ‘line’ of responsibility and
authority
Chain of command is direct and decisions made
quickly and implemented rapidly
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President
n
it o
z a
Vice President ni
a
rg
e O
i n
Plant Manager
L
Staff Staff
Staff
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2. Functional Organization:
The function/type of activity determine area of authority
and responsibility.
An expert or specialist placed in charge of each function
and will have direct control of each function
Eg.—personnel managers responsible for employees
in any dept.
-- office managers have authority over clerical &
secretarial staff in any dept.
Give specialist freedom to concentrate on their particular
functions
Limitation: difficult to control
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on
Functional Managers
ati
niz
rga
F G H
al O
ion
nct
Fu
A B C D E
Operators
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3. Line and Staff Organization:
A combination of line & functional organization
Specialist act as advisers and have no executive authority
outside their dept.
Ensures clear line of authority
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i za tion
n
Managing Director ff Orga
nd Sta
a
Director Line
Employment Training
L= line r/n, S= staff r/n officer officer
Responsibility & authority: _________
Staff advisory r/n: ………………………….
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4. Matrix Organization (Project Organization):
Temporary organizational structure for specific project
within specific time period.
When the project completed specialist go back to their
respective duties.
Specialist selected based on task-related skills & expertise
E.g. the renaissance dam
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n
it o on)
i za ati General
gan niz Manager
r ga
x O r
ri O
at ject
M ro
(P Technical
Labor Research Finance Personnel
service
Project A
Manager
Project B
Manager
Project C
Manager
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Span of control
Is the number of people reporting directly to one
supervisor.
Also called span of management
The main concern is to determine how many individuals
a manager effectively supervise
It depends on:
Similarity of function
Geographic contiguity
Complexity of functions
Coordination
planning
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Chain of command
A formal channel which determines authority,
responsibility and communication.
Top
Managers
Middle Managers
Authority
First-Line Managers
Non-managers
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Basics of productivity
The word "productivity" has become such a
buzz word these days that it is almost rare not
to find it mentioned in some context or other-
in trade magazines, newspapers, management
briefs, shareholders' reports, political
speeches, TV news, consultants'
advertisements, conference proceeding's etc..
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Definition's:
in 1883, Littre defined productivity as the "faculty to
produce," that is, the desire to produce.
In 1950, the Organization for European Economic
Cooperation (OEEC)
Productivity is the quotient obtained by dividing
output by one of the factors of production.
In this way it is possible to speak of the
productivity of capital, investment or raw
materials according to whether output is being
considered in relation to capital, investment or
raw materials, etc
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Common misuse of the term
"productivity" is often confused with the term
"production.“
greater the production, is not necessarily the greater
the productivity.
Example: Suppose that a company manufacturing
electronic calculators produced 10,000 calculators
by employing 50 people at 8 hours/ day for 25
days.
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Then:
Production = 10,000 calculators
Productivity (of labor) = (10,000 calculators)/(50 X
8 X 25 man-hour) = 1 calculator/man-hour
• If the company increased its production to 12,000
calculators by hiring 10 additional workers at 8
hours/day for 25 days.
Production= 12,000 calculators
Productivity (of labor) = (12,000
calculators )/ (60 X 8 X 25 man-hour) = 1
calculator/man-hour
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Production: concerned with the activity of producing
goods and/or services.
Productivity: is concerned with the efficient
utilization of resources (inputs) in producing goods
and / or services (output)
In quantitative terms:
Production: quantity of output produced
Productivity: Ratio of the output produced to
the input(s) used.
The terms productivity, efficiency, and effectiveness
are confused with each other
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Efficiency: ratio of actual output attained to standard
output expected.
Effectiveness: degree of accomplishment of objectives.
In other words:
how well a set of results accomplished reflects
effectiveness,
how well the resources are utilized to accomplish the
results refers to the efficiency.
Productivity is a combination of both effectiveness
and efficiency,
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Mali [1978] brings together the terms productivity,
effectiveness, and efficiency in the following manner:
𝑜𝑢𝑡𝑝𝑢𝑡 𝑜𝑏𝑡𝑎𝑖𝑛𝑒𝑑 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒 𝑎𝑐h𝑖𝑒𝑣𝑒𝑑 𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒𝑛𝑒𝑠𝑠
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥= = =
𝑖𝑛𝑝𝑢𝑡 𝑒𝑥𝑝𝑒𝑛𝑑𝑒𝑑 𝑟𝑒𝑠𝑜𝑢𝑟𝑠𝑒𝑐𝑜𝑛𝑠𝑢𝑚𝑒𝑑 𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦
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Total Productivity
is the ratio of total output to the sum of all
input factors.
Thus, a total productivity measure reflects the
joint impact of all the inputs in producing the
output.
In all of the above definitions, both the output
and input(s) are expressed in "real" or
"physical" terms by being reduced to constant
dollars (or any other monetary currency) of a
reference period (often referred to as "base
period").
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the effect of reducing the output and input(s) to a
base period is to eliminate the effects of price
variations, so that only the "physical" changes in
output and input(s) are considered in any of the
productivity ratios.
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E.g. Consider the ABC Company. The data for output
produced and inputs consumed for a particular time
period are given below:
Output=
$1000
Human input= 300
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