NAME OF THE SUBJECT: INDUSTRIAL MANAGEMENT & SMART

TECHNOLOGIES

SUBJECT CODE: EE-501

SCHEME: C-20

YEAR: FIFTH SEMESTER (2023-2024)

PREPARED BY:

SIVAKUMAR K
(Lecturer in EEE)

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 1. BASICS OF INDUSTRIAL MANAGEMENT
 Objectives:
 Define industry, commerce (Trade) and business
 Know the need for management
 Understand the evolution of management
 Differentiate between supervisory, middle and Top-level management
 Understand the functions of management
 Explain the principles of management
 Explain the principles of scientific management
 Understand the nature of management as a profession
 Explain the importance of managerial skills (Technical, Human, Conceptual)

 Introduction:
 Industry is essentially an economic activity and is carried on by the people
(employees) for the people (consumers and society at large).
 An industrial enterprise may therefore be viewed as an economic institution
functioning in social, political and cultural environment.
 Indian economy has been mainly agrarian (relating to agricultural lands).
 India is the second most populous country in the world with agriculture as
the basic importance, but industry also occupies an important position.
 An efficient agricultural system in fact is one, which is carried out with the
help of machines and mechanical devices.
 This can be achieved only when industry whether large scale, small scale or
cottage is given an honoured place in the national economy.
 In the present age of science and technology and industrially backward
country has no significant role to play.
 India having vast factors like raw material, power, labour, transport, market
and finance is ideally suitable for large scale industrialisation.
 The small scale industries are the blessings for the urban people while the
cottage industries are extremely beneficial for the rural people.
 Because of growing unemployment problem industrialisation provides a
solution.
 Rapid and widespread development of small scale industries can help in
providing jobs to the unemployed.
 India till lately was regarded as supplier of human labour, within the last few
decades India‘s technological advancement has been seen, which was
watched incredibly by western nations and in fact many have been our
customers.

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  So the industry plays an important role in the development of Indian
economy.
 India being over populated, developing nation, role of industry should be
towards accelerating the industrial growth and economic prosperity.

 Objectives of Industry towards Economic Development:

 Surviving the industry of an entrepreneur and getting profits by him.
 Providing employment to large number of people and creates job satisfaction
to them and improves standard of living.
 Supplying quality goods and services with competitive price to satisfy
consumers.
 Utilising natural resources for production of goods.
 Providing opportunities for other firms depending on it for their business.
 Providing higher monetary benefits to shareholders for their investments.
 Utilising the revenue from the taxes on industry to welfare measures for the
development of the country.
 Achieving self-sufficiency of the country.
 Promoting exports and earning foreign exchange.
 Getting higher national per capita income.
 To stand among other industrially developed countries.

 Business and Division of Business:

Business is an economic activity. It literally means ―being busy‖. Business
activities may be classified into two broad categories namely- a) Industry and b)
Commerce.
a) Industry: The term industry refers to that part of business activity which
concerns itself with the raising production, processing or fabrication of
products.
Types of Industries: The broad sphere of industry may be divided into four
types namely-
(i) Extractive industry
(ii) Generic industry
(iii) Construction industry and
(iv) Manufacturing industry
b) Commerce: While the industry in concerned with the production of goods
for the satisfaction of human wants, commerce is an activity whereby goods
are transferred to those who need them.
So, commerce is an organised system for the exchange of goods between the
members of the industrial world.
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 In simple words, industry involves the production of goods and materials
while commerce mainly concerned with their distribution.
Trade: Trade is an important part of commerce. It refers to the sales, transfer
or exchange of goods. It doesn‘t include supportive functions like
transportation, insurance, banking etc.
Types of Trades: Trade may be classified broadly into
i) Internal trade: a) Whole sale trade b) Retail trade
ii) International trade or foreign trade: a) Import trade b) Export trade.

 Management:
Different authors on management have defined the term ―Management‖ in
different ways. Some of the important definitions of management are:
To manage is to forecast and plan, to organise, to command, to coordinate and
to control.
(Or)
Management is an art of getting things done through and with the people in
formally organised groups.
(Or)
Management is an art of getting things done through the efforts of other people.
(Or)
Management is an art of directing and inspiring people.
(Or)
Management is an art and science of decision making and leadership.
(Or)
Management is the co-ordination of human and material resources towards the
achievement of organisational objectives.

So, in its broad sense, management can be finally regarded as:

(i) Formulation of plans, policies and objectives.
(ii) Securing men, material, machinery, money and methods (5M‘s).
(iii) Putting all of them into operation.
(iv) Directing and motivating men at work.
(v) Supervising and controlling their performance.
(vi) Providing maximum satisfaction and services to employer, employees and
public at large.

 Need for Management:

 Business is an on-going activity that doesn‘t run itself.
 All organizations exist for certain purposes or goals.
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  Management in all business and organizational activities is the act of getting
people together to accomplish desired goals and objectives using available
resources efficiently and effectively.
 To achieve those organizational goals, it is essential to have proper planning,
staffing, co-ordination and control of men, materials, machinery, money and
methods.
 Management or managers are responsible for combining and using
organizational resources to ensure that their organizations achieve their
goals.

 Evolution of Management:
The theories and principles of management make it easier for us to decide what
we must do to function effectively as managers. The three approaches to the
evolution of management are:

1. The Classical Approach: The classical school represented the first major
systematic approach to management thought. It is primarily based upon the
economic rationality of all employees. This evolved that people are
motivated by economic incentives and that they will rationally consider
opportunities that provide for them greatest economic gain. The classical
school can be broken down into three historical philosophies of
management.
a) Scientific management,
b) Administrative management, and
c) Bureaucratic model.

2. The Behavioural Approach: The behavioural approach is based upon the

premise of increase in production and managerial efficiency through an
understanding of the people. The human relations approach of management
involves with the human behaviour and focused attention on the human
beings in the organisation.

3. The Quantitative Approach: This approach involves the application of

modern quantitative or mathematical techniques for solving managerial
problems. This approach is also known as decision theory approach,
mathematical approach, quantitative approach, operational approach etc.
These quantitative tools and methodologies are designed to add in decision-
making relating to operations and production.

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 Levels of Management:
An organisation may have various levels of management. The term ―level‖
involves persons arranged in a series, thus levels of management suggest the
arranged managerial position in the organisation depends upon its size,
technology and the range of production.
The main significance of levels is that they determine authority relationships in
an organisation. On the basis of authority and responsibility, the management
can be divided into three levels, namely:
(i) Top Level Management: This management consists of owners, board of
directors, managing director, general manager, chief executive, financiers,
shareholders, secretaries, etc.
(ii) Middle Level Management: This consists of functional heads such as
production manager, marketing manager, financial manager, etc. and divisional
and sectional officers working under financial heads.
(iii)Lower Level Management: This consists of superintendents, supervisors,
and foreman. This is the link between workers and top management. The
efficiency of the whole organisation depends upon the efficiency of lower
management.

 Functions of Management:
Functions of management can be described with an acronym ―PODSCORB‖
which includes Planning, Organising, Directing, Staffing, Co-ordinating,
Reporting and Budgeting.

The following are the comprehensive classification of managerial functions

even though different authors are given different functions of management.

(i) Planning: Planning is thinking and deciding in advance for future action.
Planning aims at elimination of wastage of materials, idleness of men,
machinery and money. Planning decides in advance, what to do, when to do,
how to do and how much is to be produced by whom. The primary object of
planning is to achieve better results.

(ii) Organising: It is another function of management. It establishes the frame

work. It is the arrangement of men, materials, machines and money in a
systematic way for the actual execution of manufacture of a product to achieve
the objectives of the organisation.

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(iii) Staffing: It is the most important function of management since everything
is to be carried out by the people and it cannot exist without people. Staffing is
a process of selecting right people, their training and their placement in
organisation structure with suitable remuneration.

(iv) Directing: Directing is called ―management in action‖. It consists of a)

giving proper instructions b) explaining various methods of work c) giving
proper training d) guiding the subordinates and e) interacting the interests and
objectives of various personnel to achieve the aims of organisation.
This function is carried out by proper leadership, motivation, effective
communication and supervision.

(v) Co-ordination: Co-ordination means working or acting together for a

common purpose with an understanding. It is the achievement of harmony and
integration among different types of workers who are engaged with common
object of producing particular product.

(vi) Reporting: Communication is the transmission of message from one person

to another. This helps smooth running of the enterprise in making quick
decisions and planning. The communication is essential to all the concern
parties namely employees, customers, suppliers, shareholders and to general
public.

(vii) Budgeting: It is the process of creating a plan to spend money. This

spending plan is called a budget. Creating this spending plan allows us to
determine in advance whether we will have enough money to do the things we
need to do or would like to do. Budgeting is simply balancing our expenses
with our income.

(viii) Control: It means guiding or watching activities of a concern. It is

necessary in order to ensure that everything is carried out according to plan. If
there is any deviation from expected performance, the necessary remedial
measures should be taken. So control is a process which enables management to
get its policies implemented and take corrective actions if performance is not
according to the predetermined standards. If the planning is the beginning of the
management process, controlling is said to be the final stage.

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 Principles of Management:
Henry Fayol (1841-1925), a French Engineer who was considered as the father
of modern management theory has formulated 14 principles of management.
His work is concentrated with the higher levels of organisation.
According to him, the principles of management should be flexible, but not
absolute.
In his book ―General and Industrial Administration‖ he formulates 14 principles
of management which are still regarded as monumental contribution of the
subject. They are:

(i) Division of Work: It means dividing the work among various departments
which leads to specialisation at all levels and gives higher productivity and
increases the skill of the workers.

(ii) Authority and Responsibility: These two are interrelated. Authority is the
power of the manager to delegate and control the subordinates. Responsibility is
the duty of the manager to implement the policies of the management.
Both of these must go together. Authority without responsibility leads to
irresponsible behaviour while responsibility without authority makes a person
ineffective.

(iii) Discipline: Discipline is obeying and working according to instructions and

orders of superiors. Rules of discipline are intended to facilitate the work, but
not to embrace the worker. This is essential for effective management and
smooth running of business.

(iv)Unity of Command: An employee should receive orders from only superior

which mean that the worker should not be under the control of more than one
superior.

(v) Unity of Direction: This means that each group of activities having same
objective must have one head and one plan. Unity of command cannot function
without unity of direction. Unity of command is connected with functioning of
people while unity of direction is related to the activities.

(vi) Subordination of individual interest to general interest: The interest of the

firm as a whole is more important than the interest of an individual or group of
persons.

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(vii) Remuneration of Personnel: The salaries and wages paid to the
employees for their services should be fair and should give maximum
satisfaction both to the employee and the employer.

(viii) Centralisation of Authority: Centralisation means concentration of

authority in the hands of a single person or few persons; i.e. with top
management. They have the power to control over the work. The degree of
concentration of authority should vary according to the needs of the situation.

(ix) Scalar Chain: It shows the line of authority from top executive to the
lowest one to facilitate communication. Sometimes this line may be short
circuited for avoidance of delay.

(x) Order: This principle is concerned with materials and persons. Material
order means ―a proper place for everything and everything in its place‖.
Similarly social order implies as ―place for every one and everyone is his
place‖. It means that ―right man in the right job and right material is in right
place‖ which ensure effective utilisation of available resources.

(xi) Equity: Equal treatment should be given to all the subordinates with
kindness and justice by the manager. This makes the employees more loyal
towards the management and devoted to the work.

(xii) Stability of tenure of personnel: Stable and secure work force is necessary
to reduce unnecessary turnover for achieving efficiency which is necessary for
successful organisation.

(xiii) Initiative: Initiative is freedom to think out plan. Encouragement will be

given to the workers who come forward voluntarily to propose new method,
idea or change.

(xiv) Expirit de corps: This is a French word which means ―Union is strength‖.
This principle implies that there should be co-operation and team work among
the members of the organisation. This creates harmony and understanding
among workers. The policy of management should not be ―divide and rule‖.

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 Principles of Scientific Management:
The term scientific management contains two words namely – scientific and
management. The term ―Management‖ means getting the things done through
others and ―Scientific‖ means systematic, analytical and objective approach.
Hence scientific management is the art of knowing exactly what is to be done
and the best way of doing it.
It also means as the application of scientific principles and methods to the
management of business units.
From the above definitions it is clear that scientific management is concerned
with the replacement of old and out modelled techniques with scientific
methods of production.
The scientific management is summarised as follows:
“Science, not a rule of thumb. Harmony, not discord. Co-operation, not
individualism. Maximum output in place of restricted output. The development
of each man to his greatest efficiency and prosperity.”
The principles of scientific management may be summarised as:
 To achieve higher production.
 To lower the cost of production and raise purchasing power of
consumer.
 To find the waste and its cause and to eliminate the wastage after
ascertaining the reasons for it.
 To provide trained and efficient work force.
 To standardise the methods, material and equipment and working
conditions.
 To select, train, teach and appoint workmen scientifically.
 To ensure division of work and responsibility.
 To specialise the activities, not generalisation.
 To develop the best way of doing job by conducting work study.
 To promote co-operation between employer and employee.
 To equalise the work and responsibility between labour and
management.
 To replace old thumb rule and develop science for each of element of
man‘s work.

 Understand the Nature of Management as Profession:

 Over a few decades, factors such as growing size of business unit,
separation of ownership from management, growing competition etc., have
led to an increased demand for professionally qualified managers.
 The task of manager has been quite specialized.
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 As a result of these developments the management has reached a stage
where everything is to be managed professionally.
 A profession may be defined as an occupation that requires specialized
knowledge and intensive academic preparations to which entry is regulated
by a representative body.
 The essentials of a profession are:
1. Specialized Knowledge:
 A profession must have systematic body of knowledge that can be
used to development of professionals.
 Every professional must make deliberate efforts to acquire expertise
in the principles and techniques.
 Similarly, a manager must have devotion and involvement to acquire
expertise in the science of management.
2. Formal Education and Training:
 There are number of institutes and universities to impart education
and training for a profession.
 No one can practice a profession without going through a prescribed
course.
 Many institutes of management have been set up for imparting
education and training.
 For example, a CA cannot audit the A/C‘s unless he has acquired a
degree or diploma for the same but no minimum qualifications and a
course of study has been prescribed for managers by law.
 For example, MBA may be preferred but not necessary.
3. Social Obligations:
 Profession is a source of livelihood but professionals are primarily
motivated by the desire to serve the society.
 Their actions are influenced by social norms and the society.
 Similarly, a manager is responsible not only to its owners but also to
the society and therefore he is expected to provide quality goods at
reasonable prices to the society.
4. Code of Conduct:
 Members of a profession have to abide by a code of conduct which
contains certain rules and regulations, norms of honesty, integrity and
special ethics.
 A code of conduct is enforced by a representative association to
ensure self-discipline among its members.
 Any member violating the code of conduct can be punished and his
membership can be withdrawn.
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  The AIMA has prescribed a code of conduct for managers but it has
no right to take legal action against any manager who violates it.
5. Representative Association:
 For the regulation of profession, existence of a representative body is
a must.
 For example, an institute of Charted Accountants of India establishes
and administers standards of competence for the auditors but the
AIMA however does not have any statuary powers to regulate the
activities of managers.
 From above discussion, it is quite clear that management fulfils several
essentials of a profession, even then it is not a full-fledged profession
because:
 It does not restrict the entry in managerial jobs for account of one
standard or other.
 No minimum qualifications have been prescribed for managers.
 No management association has the authority to grant a
certificate of practice to various managers.
 All managers are supposed to abide by the code formulated by
AIMA
 Competent education and training facilities do not exist.
 Managers are responsible to many groups such as shareholders,
employees and society. A regulatory code may curtail their
freedom.
 Managers are known by their performance and not mere degrees.
 The ultimate goal of business is to maximize profit and not social
welfare. That is why Haymes has rightly remarks, ―The slogan
for management is becoming – He who serves best, also profits
most‖.

 Managerial Skills:
 Skill may broadly be defined as the ability to transform experience and
knowledge into action.
 A manager is said to be successful when he is able to make a smooth
functioning team of people with different skills required for the running of
the organization.
 Hence it is obvious that skills needed by a manager are of three types
namely:
(i) Technical Skills (ii) Human Skills (iii) Conceptual Skills

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1. Technical Skills:
 Technical skill is responsible for the great advances of modern Industry.
 The need for technical skill is more for the managers or executives at the
lower or lower-middle level.
 It refers to an understanding of and proficiency in handling methods,
process of a particular kind of activity.
 Of the three skills Technical Skill is the most concrete and is required of
the greatest number of people.
 As the managers move up in the hierarchy, the need for technical skill
becomes less important provided he has skilled sub-ordinates and can
help them to solve their problems.
2. Human Skill:
 Human skill means a manager‘s ability to work effectively as a group
member and to build co-operative effort within the team he leads.
 This skill is demonstrated in the way he behaves with his superiors and
subordinates. It seems to be most important at lower levels of
management.
 Where the number of direct contact between the manager and the
subordinates is the greatest.
 Top level and middle level managers require the human skill exactly to
deal with the outsiders, trade union leaders and the executives who have
direct contact with the operative personnel.
3. Conceptual Skills:
 Company‘s overall success is dependent upon its manager conceptual
skill in taking and carrying out policy decision.
 This skill is unifying and coordinating ingredient of the administrative
process.
 The conceptual skill embodies both the technical and human aspects of
the organization.
 Conceptual skill is also referred to as creative ability.
 Conceptual skill becomes more important with the need for policy
decisions and board scale actions.
 The degree of conceptual skill increases as we go up in hierarchy of
management.

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 THE ONE BEST WAY

 In a small tent on the outskirts of that famous world fair, he recreated a fragment
of the steel factory he operated 3,600 miles away in Bethlehem, Pennsylvania: a
handful of lathes and a few workers, tirelessly churning out metal chips.
 To the fin de siècle (relating to or characteristic of the end of a century,
especially 19th century) exposition audience, the rate at which his system did this
was nothing short of miraculous: the norm was nine feet of steel per minute;
Taylor‘s system could cut fifty.
 Industrial manufacturing was the most interesting technology of the day, and
Taylor‘s display was akin to Steve Job‘s introducing the first iPhone.
 People travelled across Europe and spent hours winding their way through the
line outside Taylor‘s tent before being granted a few minutes to gaze at his
system.
 The French metallurgist Henri-Louis Le Chatelier wrote, ―Nobody quite believed
at first in the prodigious result…but we had to accept the evidence of our eyes.‖
 A British engineer compared Taylor‘s breakthrough to the creation of the electric
light.
 A prominent design engineer determined that the demonstration was nothing less
than ―a landmark in the history of mankind.‖
 So what had he created? A new steel cutting machine? A new way of heating or
cooling the metal? The brilliance of Taylor‘s creation was not technological - his
machines were very similar to those used by other companies.
 His genius lay in the regularity of his procedures.
 Through a series of experiments, Taylor had determined the optimal temperature
at which to cut steel chips, the optimal distance between the machinist and his
tools, the optimal way for water to cool the lathe, and the optimal speed for
internal conveyor belts.
 When it all came together, there was not a second of lost time, not an ounce of
misplaced material, not a moment of unproductive human effort.
 Taylor made more, faster, with less.
 A childhood friend noted that as a young boy walking around town Taylor would
―endeavour to discover the step which would cover the greatest distance with the
least expenditure of energy; or the easiest method of vaulting a fence; the right
length and proportions of a walking staff.‖
 This mind-set, applied to questions of human organization, precipitated the most
influential doctrine in the history of management.
 At the age of 17, Taylor turned down Harvard to work in a factory.

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 An intellectually gifted child of privilege, he had attended boarding school at
Phillips Exeter Academy, where he devoted himself rigorously to his studies and
consistently ranked as the top student in his class.
 A lucrative career in law, following in footsteps of his father, seemed all but
inevitable, especially after gaining university admission at the start of his senior
year.
 But around that time, a spate of headaches and deteriorating eyesight convinced
his doting parents that he suffered from ―over studying.‖
 So, in late 1874, he boarded a carriage and returned to his quiet Pennsylvania
home.
 After a few months of dawdling, Taylor yearned for something – anything – to
keep him occupied.
 He signed up for an apprenticeship at Enterprise Hydraulic Works, a small
company in downtown Philadelphia that made steam pumps and hydraulic
machinery.
 At Enterprise, Taylor fell in love with the gritty hustle and bustle of industry.
 For the first time, he got to know people who worked with their hands for a
living.
 He learned how the contraptions that filled his home were made, learned what
life on the factory floor was like.
 He wrote later that his six months on the factory floor represented ―the most
valuable part of my education.‖
 Taylor became fascinated by the contrast between the scientific precision of the
machines in the shop and the remarkably unscientific processes that connected
the humans to these beautiful contraptions.
 On Taylor‘s first day at work, a foreman thrust an unmarked ruler under his nose,
placed his finger randomly along its length, and demanded that Taylor tell him
the exact measurement. A useful trick, Taylor thought, but why not just have
numbers on the ruler?
 When fashioning a tool bit, Taylor was taught to heat the metal and beat it into a
diamond shaped point. But why that shape?
 There was no explanation.
 ―It was a tradition,‖ he wrote. ―It had no scientific basis.‖
 Each worker had developed his own system of hammering, melting, and
hardening, of work and breaks etc., which each believed to be superior to that of
his colleagues.
 Because there was no forum for comparing their outputs, everyone could
continue to operate under the belief that his own system was best.
 They could not all be right, Taylor thought – there must be one best way.
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 Although Taylor claimed that he ―learned appreciation, respect and admiration
for the everyday working mechanic,‖ he also developed an intellectual disdain
for the casual intuitive nature of common laborers‘ work.
 He came to believe that their protectionism over trade knowledge prevented
industry from achieving its potential for scaled efficiency.
 Technology had leapt forward and now management was the limiting factor.
 At his next position, with Midvale Steel Works, he was put in charge of the
factory floor.
 Everywhere he looked, he saw slack that could be tightened, fat that could be
trimmed, seconds that could be shaved off flawed processes.
 Confident that the men could do more, he raised minimum output rates.
 In response, workers, who saw him as an arrogant upstart, sabotaged machines
and went on strike.
 Taylor made them pay for repairs, cut their pay and fired them.
 After two years of struggle, which Taylor later recalled as the most miserable of
his life, he had an epiphany: he would not make them work harder – he would
show them that it could be done.
 He would rigorously study practices that had, for centuries, been left to rules of
thumb; he would find ―the one best way‖ to cut steel, prove that method‘s
supremacy, and then have everyone do exactly that.
 Thus, began a set of experiments that would change the working world for
generations.
 CLOCKWORK: Armed with a pen, a ledger, and a stopwatch, Taylor hovered
over workers on the shop floor, timing every procedure, adjust their actions, and
timing again.
 He hired an assistant to catalogue the duration of every variant of every
procedure.
 Determined to be as ―scientific‖ das possible in his optimizing, he followed the
reductionist impulses of classical mechanics, breaking every job down to its most
granular elements, analysing factory labour with similar intellectual tools to
those used by Issac Newton to deconstruct and make sense of the forces of the
physical world.
 In the case of workers at Midvale, this was a series of discrete motions, which he
measured, compared, and then reconstructed, calculating the fastest possible way
to execute each step.
 The small gains made by optimizing each tiny element came together to make a
substantial difference in efficiency.
 Though the notion of a ―best practice‖ is now commonplace, at that time a
workman‘s methods were part of his art: variable, personalized, and a matter of
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 pride. For people who perceived themselves as skilled workers, was degraded:
they went on strike and quit.
 In a petition against Taylor‘s ―humiliating‖ system, the workers agree that ―any
man on whom the stop watch was pulled should refuse to continue to work.‖
 Taylor‘s system meant that – once researched, evaluated, and formalized – their
skilled jobs became simple steps executable by anyone.
 He could find new, cooperative workers, and with the massive increases in
production gained by his efficient system, he could pay them more.
 Taylor wasn‘t afraid of worker‘s quitting; he fired anyone unable to keep pace
with what he had calculated to be a hard day‘s work.
 Taylor methods were cruel, but, for business owners, his results were undeniable.
 The cost of overhauling boilers dropped from $62 (around $2000 today) to $11;
machining a tire could now be done in one fifth of the previous time; making a
cannon projectile now took just ninety minutes instead of ten hours; 1200 could
now do work that would have taken 2000 people at any other company.
 The date vindicated Taylor‘s belief in the mismatch between the capabilities of
technology and the way organizations were run and confirmed the tremendous
potential for improved performance through rigorous, reductionist optimization
and standardization.
 He measured more and more, revealing bottlenecks in the flow of materials and
inefficiencies within machines.
 The physical layout of the room, the nuances of sweeping the floor, the methods
of issuing orders, and the protocols for returning materials all fell under the
authoritarian choreography of his instruction cards.
 In a small shop, such savings might have been insignificant, which is why rule of
thumb worked fine and intrusive management would have been
counterproductive.
 But at the scale of industrial production, where these gains were multiplied
across hundreds of identical machines and thousands of workers, small savings
added up to significant differences in productivity and profits.
 By 1890, Midvale had become an industry leader and Taylor departed to pursue
the broader potential of ―a workplace ruled by science.‖
 Science at the time was dominated by the notion of determinism – the idea that
any initial conditions has only one, inevitable outcome: a ball thrown at a certain
speed will have a predictable trajectory, as will a planet in orbit.
 Throughout the nineteenth century, phenomena that had once been written off as
the work of God fell under human mastery.
 The vision was of a ―clockwork universe‖ in which all laws were coherent and
all causes and effects predictable.
17
 If you knew the rules and the inputs, you could foresee and sometimes
manipulate the outputs.
 Taylor created a clockwork factory, systematically eliminating variation,
studying all labour until he understood it inside and out, honing it to peak
efficiency, and ensuring that those precise procedures were followed at scale.
 At a paper mill in Wisconsin, he was told that the art of pulping and drying could
not be reduced to a science.
 He instituted his system and material costs dropped from $75 to $35 per ton,
while labour costs dropped from $30 a ton to $8.
 At a ball baring factory, he experimented with everything from lighting levels to
rest break durations and oversaw an increase in quantity and quality of
production while reducing the number of employees from 120 to 35; at a pig iron
plant, he raised worker output from 12.5 to 47 tons of steel per day and
decreased the number of workers from 600 to 140.
 By the time Taylor‘s Parisian tent showed the world how Bethlehem Steel could
produce fifty feet of metal a minute, the doctrine he had developed to resolve a
factory – floor fight at Midvale was the gospel of forward – looking
industrialists.
 Because he could STUDY and PREDICT, he could CONTROL.
 He dubbed his doctrine “scientific management”.
 Taylor became the world’s first management guru.

18
2. ORGANISATION STRUCTURE & ORGANISATIONAL BEHAVIOUR
 Objectives:
 Understand the philosophy and need of organisation structure of an industry
 Understand the line, staff and Functional organisations
 Understand the differences between Delegation and Decentralization
 Explain the factors of effective organisation
 State motivation theories
 State Maslow’s Hierarchy of needs
 List out different leadership models
 Explain the trait theory of leadership
 Explain behavioural theory of leadership
 Know the concept of Job analysis, Job description and specifications
 Assessing human resource requirements
 Understand the process of recruitment, selection, training and development
 Understand types of business ownerships

 Philosophy:
 Organisation structure is the systematic arrangement of people working for
the organisation in order to achieve the common objective.
 Industrial system is a place where man, material and machines are brought
together and produce required product in an economic way.
 For achieving this common goal, a good organisational system is necessary.
 The success or failure of an industry depends upon its ability to co-ordinate
various factors of production and implementing the policies.
 Sound organisation is highly important to the success of the business.
 In one sense, the term organisation is used as a dynamic process.
 Some authors regarded the organisation as an input – output system.
 Some others regarded, organisation as a group of persons working together
for the attainment of common goal.
 Actually, is a frame work of management.
 According to Haimann organisation is a process of defining and grouping
the activities of enterprise and establishing the authority relationships among
them.

 Need (or) Importance of Organisation:

 It facilitates administration.
 It facilitates growth and diversification.
 It facilitates use of human power.
 It provides optimum use of technological improvements.
19
  It stimulates independent creative thinking and initiative.
 It leads to specialisation.
 It reduces wastage and expenditure.
 It minimises ineffectiveness.
 It provides adequate communication.
 It coordinates or integrates and controls the activities of individuals or
groups.

 Objectives of Organisation:
 To help management.
 To increase production.
 To have co-operation among employees.

 Types of Organisation Structures:

 The organisational structure mainly concerned with allocation of duties
and responsibilities and delegation of authority and responsibility in an
enterprise.
 It represents hierarchal arrangement of various positions in the
organisation.
 Depending on different methods of allocation and delegation, different
organisational structures have been evolved.
 The type of organisational structure depends upon the size of organisation,
nature of product to be manufactured and its complexity of the problems
being faced.
 The various types of organisation structures are:

(i) Line (or) Military (or) Scalar Organisation.

(a) Pure Line Organisation.
(b) Department Line Organisation.
(ii) Functional (or) Staff Organisation.
(iii) Line and Staff Organisation.
(iv) Committee Organisation.

 Line (or) Military (or) Scalar Organisation:

 Line organisation is the basic frame work for the whole organisation.
 It is the simplest and oldest form of organisation.
 This is called as military organisation since authority and responsibility flows
from top boss to the bottom worker in a straight line.
 Here each person is responsible for one boss only.
20
  Everybody is responsible for his work and is accountable to his boss.
 The success of this type of organisation depends upon the ability of a single
man (department head) who is ultimately responsible for the result.
 There are two types of line organisations namely a) Pure line organisation
and b) Departmental line organisation.
a) Pure Line Organisation: In pure line organisation, all persons at a given
level perform the same type of work.
The divisions are solely for the purpose of control and direction. It is
represented as follows:

b) Departmental Line Organisation: In this system, the business concerned is

divided into number of departments on the basis of products produced or on
the basis of process of manufacture. This can be represented as follows:

 Advantages:
 The structure is simple to form and understand.
 There is a clear-cut authority and responsibility.
 It is flexible and easy to expand or contract.
 Communication is easy.
 Co-ordination is possible.
 It is stable since unity of command is followed.
 Quick and prompt decisions can be taken.
 Discipline is maintained because of unity of direction.
 It is economical.
 It has effective control and supervision.

21
  Disadvantages:
 It is limited to small concerns.
 It lacks expert advice and so specialisation is not practiced.
 Top man is over loaded with too many duties.
 There is scope for favouritism or partiality.
 Communication is inadequate.
 Due to lack of experitism, the top man has to depend on supervisors and
workers.
 It encourages dictorial way of working.
 It becomes rigid and inflexible.
 It lacks initiative.
 Loss one or two capable men may cripple the entire organisation and so
unstable.

 Applications: It can successfully employ

 In small scale business.
 In factories having continuous process such as cement, sugar, paper, etc.
 In factories where automatic machines are used.
 In concerns where the number of subordinates and workmen is small.
 In concerns where work is simple and of routine nature.

 Functional or Staff Organisation:

 Functional organisation is
also a line type of
organisation with the
difference that instead of one
foreman, there are eight
functional foremen; four of
them are located at shop floor
and remaining four in the
office.
 Each functional foreman who
is a specialist in an activity is in charge of one function.
 He will supervise a particular process in several departments which are all
inter-related.

 Advantages:
 It will have specialists in each area.
 It increases the overall efficiency of the organisation.
22
  It provides division of labour.
 It provides wide scope for growth and mass production by
standardisation and specialisation.
 It increases quality of work due to specialisation.
 It eliminates one-man control and facilitates democratic control.
 It provides better supervision as they are well acquainted with the work.
 It provides relief to top executives.
 It separates manual and mental functions.
 It is possible for wider expansion.

 Disadvantages:
 All round executives cannot be developed.
 It lost unity of command.
 It creates problems of co-ordination among various specialists.
 Fixing of responsibility is difficult.
 Taking decisions will be delayed.
 It is too complicated in operation.
 Division of authority creates problem of discipline.
 It is expensive due to appointment of number of experts.
 Workers are always confused about the authority and creativity of each
foreman.

 Application: This system has been quite successfully followed in big

concerns for division of work at the top.

 Line and Staff Organisation:

 The draw backs in the line organisation and staff organisation are eliminated
by introducing line and staff organisation.
 When the industry grows and the number of personnel is increased, it is
necessary to go for line and staff organisation.
 This is basically a line organisation where some functional experts known as
―staff‖ are introduced at different levels along with line people.
 This staffs who are experts in their fields will assist and share the work of the
line people and suggest and provide specialised services and technical
advises after studying the situations.
 The line people acts as ―doers‖ and staff people acts as ―thinkers‖.
 The authority flows vertically from top to bottom.
 This is represented as shown below.

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  Advantages:
 It provides expert advice.
 Line executives are relieved and enable to concentrate in other works.
 Wastage is decreased and quality is increased.
 It increases efficiency and flexibility.
 It is possible to execute work effectively.
 It possesses all advantages of line organisation.
 It facilitates growth and expansion.
 Better discipline is possible due to maintenance of unity of command.

 Disadvantages:
 It is complicated system.
 It increases cost of production.
 It may raise conflicts between line and staff personnel.
 There is no responsibility for staff personnel.
 There will be lack of co-ordination between line and staff.
 Line executive may lose their efficiency as they have to depend on staff
members.
 There may be a tendency to blame each other if anything goes wrong.
 The staff executives feel that they are unimportant and the quality of
advice will be adversely affected.

Application: This is applicable for medium and large-scale industries.

 Difference between line and staff personnel:

Sl.No Line Personnel Staff Personnel

1. Their function is to ‗act‘. Their function is to ‗think‘
2. They are assigned an authority to They are assigned and authority of
―command‖. ―ideas‖.
3. They represent the authority of ―men‖. They represent the authority of
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 ―ideas‖.
4. They are ―doers‖. They are ―thinkers‖.
5. Their duty to issue instructions to the Their duty is to ―sell‖ and not to
persons working under them. ―tell‖.

 Difference between Delegation and Decentralisation:

 In an organization, it is not possible for one to solely perform all the tasks
and take all the decisions.
 Due to this, delegation and decentralisation of authority came into existence.
 In delegation, superior delegates or transfers some rights and duties to a
subordinate but his responsibility in respect of that work does not end.
 On the other hand, decentralisation relieves him from responsibility and the
subordinate becomes liable for that work.
Basis for Delegation Decentralisation
comparison
Nature Process of transferring Decentralisation is
authority and creation of delegation and distribution
responsibility is called of authority. It is not
delegation. It can take place possible without
without decentralisation. delegation of authority.
Purpose It minimizes the burden of It prepares the
managers of unit, departments organisational participants
or plant. of the organization
Relationship Relationship is between Relationship is between
superior and immediate top level management,
subordinates are indicated. departments and units.
Techniques It is technique of management It is both philosophy and
used to get the things done technique of management.
through others.
Parties It is confined to manager and It involves all managers at
subordinates. all level and relates
relationship between
departments, sections and
units.
Responsibilities Authority is only delegated, not Superior is relieved from
responsibilities. responsibilities too.
Necessity Very important to management It is optional and
process. situational as per the need.
Control Control remains in hand of Control is delegated and
superior who supervise the decentralised to the
activities of subordinates. departmental managers.
Withdrawal of It can be withdrawn by Withdrawal of authority is
authority delegator at any time. not simple.
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 Factors (or) Requisites of effective Organisation:
 The organisation structure is the frame work within which the company
grows.
 So, it should be sound and carefully planned and framed.
 It must meet the requirements for which it has been designed and bring the
best results.
 The following are some of the main requisites of a good or effective
organisation.
 The functions of the company should be grouped in such a manner,
that action, consultation, coordination can take place with a minimum
of delay and confusion.
 It is essential that every department must contribute for realising
objectives, goals and purposes of the enterprise.
 Its structure should be simple so that even an ordinary people can
understand.
 Everybody should clearly know his specific job and also whom he is
responsible.
 The design of the organisation structure should be such that it
eliminates any friction between the employer and the employee.
 The span of control should be reasonable and as far as possible is
minimum.
 Line of communication should be from top to bottom.
 A good organisation must ensure discipline and team work.
 It should affect economy by reducing idle time and cost of production.

 Motivation:
 Management is an art of getting the work done by the people in the best and
efficient manner in order to achieve the organisational goal.
 Getting the work done depends upon the inducement of the people to better
his performance by inspiring the personnel with zeal to do work for the
accomplishment of objectives of the organisation.
 Organisational goals cannot be achieved without subordinate‘s willingness
to put their best efforts.
 Now arises the problem of motivation; ―willingness to work‖ and ―capacity
to work‖ are two different things.
 In simple sense, motivation may be regarded as the will to work.
 A man can physically, mentally and technically fit to work, but he may not
be willing to work.
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  Hence, motivation is needed.
 ‗Motivation‘ is a Latin word, which means to move or motive.
 Motive means any idea, need, emotion that prompts a man to action.
 It is an internal factor that integrates man‘s behaviour.
 Motivation is used to explain inner psychological forces and process in an
individual which arouse (or) awake in him the desire ‗to act‘ or ‗not to act‘
in a particular way.
 Since it is an inner, psychological process, it cannot be directly observed
but can only be known from his behaviour.
 A positive motivation will enable the increased output but negative
motivation will reduce their performance.
 Hence, it is defined as a process of stimulating people to action to
accomplish the desired goals.
 Motivating a worker is to create a need and desire on the part of the worker
to present his better performance.
 So, motivation is most important function which encourages persons to give
their best performances and help in reaching enterprise goal.

 Importance of Motivation: The importance of motivation can be well

understood from the following:
 Better utilisation of resources can be achieved.
 Better utilisation of manpower can be achieved.
 It influences willingness to work.
 It creates good relations with the management.
 It brings co-operation and it is the basis for co-operation.
 It increases production and productivity.
 It improves skill and knowledge.

 Types of Motivation:
Motivation may be positive or negative.
(i) Positive Motivation: Positive motivation induces the man to do their work in
the best possible manner to achieve the objectives of the organisation. It is a
pull mechanism. It provides rewards and facilities. They may be financial or
nonfinancial. Positive motivation includes
 Praise and credit for work done
 Sincere interest in subordinates as individuals
 Competition
 Participation
 Pride
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  Delegation of responsibility
 Appreciation
 Pay

The financial incentives are incentive wage plans, productive bonus,

promotion etc.

(ii) Negative Motivation: It is based on ―fear‖ and ―force‖. It aims in

controlling the undesirable activities of the workers by negative efforts. Fear
causes to act in a certain way they are afraid of the consequences if they don‘t
do. If the workers do not work, they are threatened with demotion, fines, fear
of job, stopping the increment, etc. In other words, it is a push mechanism.

 Theories of Motivation:
 It has already been tried to find out the factors which motivate employees.
 But no satisfactory generalisation could be reached.
 The motivations differ from time to time, place to place, situation to
situation and person to person.
 Same set of factors motivate some persons but not all; the same set of factors
may not motivate the same persons at different times.
 So it is very difficult to give a specific theory which will be universally
accepted.
 Some scholars have devised different theories which hold under given
situations. They are:
(i) Mc. Gregor‘s Theory ‗X‘ & Theory ‗Y‘
(ii) Mr. L.F. Urwick‘s Theory ‗Z‘
(iii) Herzberg‘s theory of motivation (or) Hygiene Theory
(iv) Victor.V. Room‘s Expectancy or valence theory of motivation
(v) Maslow‘s need Hierarchy

 Maslow’s Need Hierarchy:

 A.H. Maslow, an American social scientist, was the pioneer in contributing a
systematic approach to the problem of classification of human needs.
 He arranged the needs in order of priority.
 According to this theory, human needs tend to follow the systematic pattern
presented in the sequence.
 Maslow‘ has suggested the following hierarchy of needs which an individual
attempt to satisfy in order.
 He categorised human needs into five categories.

28
 He is of the opinion that a person tries to achieve category first, and then
moves on to the next and so on.
(i) Physiological needs: These are the lower level of hierarchy of needs
which must be satisfied to maintain life and are concerned to human body
such as food, shelter, clothing, sex, water, rest, temperature, etc. These are
more or less universal.
(ii) Safety and Security needs: These needs come to second in the hierarchy
order and are concerned with physical and financial security. These needs
includes physical security i.e., freedom from bodily threat, the financial
security i.e. security of income, old age provision, security from risk, job
security, etc.
(iii) Social needs: Man being a social animal, he always interested to live in
a society or group. Every individual aspires to be loved by others and love
others. These needs refer to the needs of conversation, sociability, exchange
of feelings, recognition, belongingness, etc.
(iv) Esteem and status needs: Next in this hierarchy is esteem or egoistic
needs. They include self-confidence, achievement, competence, knowledge,
self-respect and freedom (self-esteem) and praise, admiration, public
appreciation (public esteem).
(v) Self-realisation or Self actualisation needs: These are the individual
needs for realising his own potentialities, opportunity for creativity and for
continuous development of individual skill and power.

29
 Leadership in Organisation:
 Leadership comes from the word ―Lead‖ which means ―to be in advance‖
and ―to guide, govern and command others‖.
 It also means ―to head an organisation‖.
 Leader requires willing followers.
 Without followers there is no existence of a leader.
 The success of the organisation depends on the quality or ability of the
leader.
 The leadership is an abstract quality in a human being which will enable
others (followers) around him to listen and follow his instructions.
 [Leaders are born but not made.]
 Leadership is also the ability to build up confidence and zeal among
followers and create an urge in them to be led.
 Leadership is the essence of motivation.
 It integrates the efforts and motivates the followers to work efficiently and
effectively.
 Better leaders develop better employees and both together develop a more
effective organisation.
 Leadership is the activity of influencing people to strive willingly for group
objectives.
(Or)
It is the ability to exert interpersonal influence by means of communication
towards the achievement of a goal.
 Thus, it is clear from the above definitions that the ―Leadership is the process
of influencing the behaviour, activities and efforts of an individual or a group
for achieving common goal.
 Characteristics of Leadership:
 Leadership is basically a personal quality.
 There must be a group of followers.
 It is the reciprocal relationship between the leader and the followers.
 It is a continuous process.
 It guides the individual and group to achieve the common goal of the
organisation.
 It is related to a particular situation at a particular point of time and under
specific set of circumstances.
 It shares everything with his followers. He shares credits, blames, ideas,
opinions and experiences.

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 Importance of Leadership:
 Leadership plays a vital role in the management.
 Good leadership is an integral part of the effective organisations.
 It is true, that the whole part of a manager‘s job involves getting things done
through people.
 It made easier when the manager is skilful leader.
 The importance of leadership function in a modern organisation can be well
understood by the following points:
 It improves motivation and morale.
 It directs the group activities to get the work done effectively.
 Better utilisation of man power is possible under an effective leadership.
 It improves good human relations.
 It promotes the spirit of coordination among workers.
 It helps in fulfilling social responsibility towards various social groups
namely consumers, producers, government, investors.

 Functions of Leadership:
 He formulates the objectives of his group.
 He integrates the efforts of the followers.
 He inspires, motivates various members of his group.
 He represents the group to the outside world.
 He maintains unity and cohesiveness in the organisation.
 He takes important decisions for his group.
 He maintains communication in the organisation.
 He maintains discipline in his group.
 He gives orders and instructions to do work.
 He develops team work.
 He evaluates the performance of subordinates.
 He takes initiative to introduce change.
 He resolves conflicts in the group.

 Types of Leadership (or) Leadership Styles:

 Leadership styles are the pattern of behaviour which a leader adopts in
influencing the behaviour of his followers in the organisation.
 The various styles are:
1. Autocratic Style (or) Dictatorial Style
2. Participating Style (or) Democratic Style
3. Free-Rein Style (or) Laissez Faire Style

31
 Autocratic Style (or) Dictatorial Style:
 In this, the leader holds absolute power and he determines objectives,
policies and procedures.
 He alone has responsibility for assigning tasks to individual members.
 The leader feels that the people are lazy and avoid work.
 So, he uses threat, fear, authority towards his subordinates for achieving
the organisational goals.
 He does not care to know the feelings of his subordinates.
 He does not respect their personality.
 This is like X-theory of motivation and is not used in modern times.

 Participating Style (or) Democratic Style:

 In this type, the leader tries to lead mainly through an example other than
fear, force or status.
 He encourages the participation in decision making.
 He guides the subordinates rather than controlling by force.
 He appreciates the good work from his followers.
 They are friendly to their subordinates, they get approval from them and
they favour group decision making.
 Absence of leader will not affect the achievement of organisational goal.
 This is like Y-theory of motivation and this style is generally followed in
modern industries.

 Free-rein Style:
 This type of leader is a leader in name only.
 He gives complete freedom for the group to decide and perform duties.
 They are allowed to do so as they please.
 This leader neither appreciates good work nor punishes people to their bad
work.
 This type of leadership will result in laziness and indiscipline among the
subordinates.

 Suitability of different styles:

 No single style is suitable for all organisations, for all levels and for all
times.
 Different styles rather a mix of styles may be or should be used to attain
the organisational goals.
 In modern times, democratic or participating type should be encouraged.

32
 Job Analysis:
 ‗Job‘ in general usage involves all duties, responsibilities, functions and sub
functions which are assigned to a particular employee.
 In other words, job is a recognised collection of duties, tasks and
responsibilities assigned to an individual employee.
 The requirements of the job may vary from job to job, from situation to
situation and work to work.
 So, some procedure should be employed for discovering the personal
requirements of the job.
 The process of determining the requirements of personnel is known as ‗Job
analysis‘.
 Job analysis involves a careful study of each job to find out what the job
includes, what the job holder does how he does it, under what conditions the
job is performed and what special qualifications, the job holder must have.
 Thus, it is a process of identifying the facts with respect to job.
 Job analysis is the process of studying and collecting information relating
to the operations and responsibilities of a specific job.
 It reveals that the job analysis is a process by which the job:
(i) Duties and responsibilities are defined.
(ii) The various factors relating to the job are collected and compiled.
(iii) Qualities of persons to be employed on job, position of job.
 Job analysis is conducted by a job analyst.
 The major steps in the process of job analysis are as follows:
(i) Collection of back ground information of statistical data.
(ii) Completing job description.
(iii) Preparation of Job specification.
(iv) Preparation of report.
(v) Approval by top management and labour unions.

Job Analysis
A process for obtaining all pertaining job facts

Job Description Job Specification

A Statement containing items A statement of human
such as qualifications necessary to do the
1. Job title job. It contains:
2. Location 1. Education
3. Summary of duties 2. Experience
4. Tools, equipment, machines 3. Training
5. Materials used 4. Skill
6. Responsibility 5. Specialisation
7. Relation to other jobs 6. Initiative
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7. Responsibility
8. Working conditions
8. Analysis and judgement
9. Hazards 9. Adoptability
10. Mental and visual demand
 Assessing Applicants:

It is the primary duty of the personnel department to procure and maintain an

adequate and qualified working force of various personnel necessary for
maintaining the organisation.

 Better quality, increased productivity and economy is only possible when

the industry possess hard working and efficient workers.
 On the other hand, lazy and inefficient workers results loss of production.
 This necessitated careful selection to suit the requirements of the industry.
 Selection of employees should be made on scientific methods and this is
done by personnel department.
 In order to run the business successfully, sufficient trained, experienced
and capable employees are necessary.
 It must recruit, select and place right man in right job.
 As a basis for recruitment and selection, management must decide before
hand as to what type of men is to be recruited and the number of persons
needed.
 This is done by making job analysis and man power planning.
 Procurement function of personnel management includes four major sub
functions namely (i) Recruitment (ii) Selection (iii) Placement of
employees and (iv) Training and development.

 Recruitment:
 Recruitment is a systematic means of finding and inducing available
candidates to apply to the company for employment.
 Recruitment forms the second step in the process after man power
planning.
 Recruitment makes it possible to acquire the number and type of people
necessary for the organisation.
 It is a process of searching for prospective employees and stimulating
them to apply for jobs in an organisation.
 Recruitment consists of the following set of activities:
(i) Finding out possible sources of prospective candidates for
employment.
(ii) Publishing the specific needs of the organisation as and when
necessary so as to inform the people and induce them to respond.
(iii) Attracting and receiving applications for employment from
prospective candidates.
34
  The basic purpose of recruitment is to get the best qualified applicants to
fill vacancies in the organisation.
 This is done by personnel department.
 The personnel department gets requisitions of man power needs from the
other units and process them in an appropriate manner.

 Selection:
 Selection is a process of choosing a right person from a list of applicants.
 ‗Recruitment‘ often termed ―positive‖ as it stimulates people to apply for
jobs to increase the number of applicants for the job.
 ‗Selection‘ on the other hand is to be ―negative‖ because it rejects a good
number of those who apply leaving only best to be appointed.
 The eligibility and suitability of job applications are determined by means
of such process as screening, testing and interviewing. However, the
following procedure is adopted for scientific selection.
i) Job analysis (i.e.) analysing the job.
ii) Inviting applications.
iii) Receiving applications.
iv) Screening applications.
v) Conducting written examination.
vi) Conducting preliminary employment interviews.
vii) Formal and informal tests.
viii) Group discussion.
ix) Investigation of references.
x) Final interviews.
xi) Medical examination and physical examination.
xii) Final decision by the management.
xiii) Employment (placement and induction).
 The above tests will provide relevant information and insight on the
candidate‘s qualifications, knowledge, work experience, intelligence, skill,
attitude, aptitudes, expectation, performance potential, and personality and
so on.
 The selection techniques indicated above help filtering job applicants and
eliminate those who fall short of the selection criteria.

35
 Placement and Induction:
 Placement is the determination of job to which an accepted candidate is to
be assigned and his assignment to the job.
 Induction on the other hand is the process of receiving and welcoming an
employee when he first joins a company and giving him basic information,
he needs to settle down quickly and happily and start work.
 He is given information of matters such as: under whom and with whom
he should work, requirement of job performance and behaviour, facilities
and benefits available, hours of work and so on.
 Induction is also known as ―orientation‖.
 It is also a process of socialisation of new employee with his fellow
employees, supervisors, seniors, subordinates (if any).
 The purpose of orientation is to expedite the process of familiarization of
new employee to work, culture of the organisation.

 Training and Development:

 Training may be defined as a systematic design and application of
certain learning methods to make people grasp relevant knowledge
information and insight with a view to improve their attitudes, skills and
performance.
 Training is the key input for development of man power.

 Types of Ownerships (Forms of Business undertakings):

36
 Sole Private Limited
Basis for Distinction Partnership Public Limited Company Co-operation Society
Proprietorship Company
Easy, only an
Easiest, no legal Difficult, some Very difficult, several Easy, some legal
1. Formation agreement
formalities. legal formalities. legal formalities. formalities.
required.
2. Registration Not necessary. Optional. Compulsory. Compulsory. Compulsory.
Minimum: 2
One man shows: Maximum: 10 in Minimum: 2 Minimum: 7 Minimum: 10
3. Membership
single membership. banking and 20 Maximum: 50 Maximum: No limit Maximum: No limit
in others.
No separate legal No separate Separate legal
4. Legal status Separate legal entity. Separate entity.
existence. legal existence. entity.
Unlimited, joint
Unlimited, full May be limited or
5. Liability of Members and several, risk Limited. Limited.
risk. unlimited.
shared.
As perOn the basis of On the basis of shares On the basis of shares
6. Sharing of Profits All to the owner.
agreement. shares held. held. held.
Secrets limited Secrets shared
Secrets shared with public, Secrets shared by
Perfect secrecy, no to partners, no by members,
7. Business secrecy audit and reports members, audits and
audit or reports. audit or reports audit and reports
compulsory. reports compulsory.
compulsory. compulsory.
Restricted as
8. Transferability of With mutual Restricted as articles of
At will. articles of Freely transferable.
interest consent. association.
association.
9. Winding up At will. At will. Under the Act. Under the Act. Under the Act.
The
The Companies The Co-operative
10. Governing Act General law. Partnership Act, The Companies Act, 1956
Act, 1956 societies Act, 1912.
1932

37
 3. PRODUCTION & MATERIAL MANAGEMENT
 Objectives:
 Define production and explain its types (single, batch and mass production)
 Explain the stages of Production, Planning and Control
 Know the basic methods of demand forecasting
 Explain Break Even Analysis
 Draw PERT/CMP networks
 Solve the critical path in simple project
 Know functions of materials management.
 Explain ABC analysis.
 Define safety stock.
 Define reorder level.
 Derive an expression for economic ordering quantity.
 List out stores records.
 Explain the Bin card.
 Explain Cardex method.
 Explain general purchasing procedures.
 List out purchase records.

 Introduction to Production and Material Management:

 Production Management is a branch of management which is concerned with
production activities.
 It is the science of decision making regarding production of goods and
services at a minimum cost through management process.
 It is mainly associated with the factory management and includes two types
of activities namely (i) activities related to production system and (ii)
activities related to analysis and control.
 So, Production management deals with decision making related to
production processes so that the resulted goods or services are produced
according to the specifications in the amounts and by schedules demanded,
and at a minimum cost.
 The term materials refer to all those commodities which are used in the
production of goods and rendering services.
 Raw materials, components, spares, pacing materials and finished products
are included in the list of materials.
 Among which raw materials shares the major portion of the materials.
 The importance of materials in an industry needs no explanation because
production is not possible in its absence and moreover it affects the

38
 efficiency of men, machines, and money and marketing divisions of the
industry.
 So, materials have to be regularly purchased, stored and released for
production.
 The materials should be in hand even before the production is started and
they are guarded against pilferage, theft, fraud, deterioration and
obsolescence.
 Also, the supply of materials to the production department should be
continuous without any interruption so that production takes place without
any break and meet the production needs and delivery schedules.

 Relation of Production Department with other departments:

 Production is the transformation of raw materials into finished products.
The department where the products are manufactured is known as
production department.
 Production function is the basic function of an industrial enterprise around
which other activities of the organisation such as purchasing financing,
marketing, stores, personnel and research and development revolve.
 Therefore, it is essential that the production function must be managed
effectively and efficiently so as to achieve the organisational goals.
 The aim of every industrialist is to produce better quality products with
minimum cost of production and gets maximum profits.
 So, for achieving this goal, he divides his organisation into different
departments like production, planning, control, purchase, sales, quality
control and inspection, personnel, public relations, maintenance, industrial
engineering, research and development etc.
 Amongst these, production department is the most important to achieve the
goals of the organisation with the cooperation of other departments.
 Every department should be interrelated with other departments particularly
with production department.
 Every department should have good relations with other departments for
achieving the goals of the enterprise of getting profit by which both
employee and employer is benefited.
 Planning department coordinates production department by considering
future sale requirements. It determines the quantity of production, the type
of quality involved and schedule of dates.
 Control department will assist for smooth functioning of men, machines
and materials and produce products of right quantity, at right time by using
best and least expensive methods.
39
  The production department is very well related to other departments of
organisation for effective production, planning and control.
 Sales department will make effective sales in time and project the goodwill
of the firm to the customers and gets further orders which facilitates further
production.
 Purchase department will assist in controlling the flow of incoming
materials and maintains delivery schedules from right source, at right place
at right time with right materials and assists in continuous production
without break.
 Cost control department assists in giving essential cost information to the
production department.
 Quality control and inspection department helps in inspecting the
purchased, in process and finished goods in every stage of production and
maintains quality as per company‘s objectives and also helps in rejecting
the produced faulty products at early stage to avoid time and further
production.
 Maintenance department will attend day to day problems of keeping the
physical plant in good operating conditions.
 Research and Development department will assist in improving the quality
of products and developing new and sophisticated methods of
manufacturing.
 Personnel department will select the right type of people and impart
training for efficient working in producing the products.
 Public relations department will assist in giving publicity of the product
and of the firm and gains good reputation among customers and improve
sales; in turn increases production.
 Industrial Engineering department will assist in making work study and
develops new and improved methods of production and thus it helps in
reducing the cost of production.
 Thus, the overall objective of getting profits by an entrepreneur is fulfilled
by co-ordination of all other departments with production department.

 Define Production and Types of Production:

 The conversion of raw materials into finished product is known as
production.
 The following are the three main types of production:
 Job or Unit Production
 Batch or Quantity Production
 Mass or Continuous Production
40
 Job Production or Unit Production:
 This type of production is adapted mainly by specialised industries.
 They depend upon the job orders.
 If the job orders are repeated, then it can function effectively and
efficiently.
 Hence in this type general purpose machines are used.
 Generally items of odd nature involving workmanship technical skills are
undertaken and the workers will become very proficient as they would be
undertaking different items of artistic nature.
 Advantage:
 It meets the industrial taste and requirements.
 Due to the flexibility in taking up the jobs, even there is no
continuous order for a particular item; there is no chance of failure.
 It requires less capital and a quick start can be made.
 Risk due to loss is less.
 Disadvantages:
 It cannot grow to a greater structure.
 Workers of high skill are required.
 Purchase of raw materials will be in accordance with the job orders,
hence increase in the final cost of the production.
 Applications:
 The items that are generally manufactured by job order productions
are ships, gas turbine units, satellite launching vehicles, atomic
reactors, boilers, heat exchangers etc.

 Batch or Quantity Production:

 It is an intermediate stage between unit production and mass production.
 This is employed in medium scale industries.
 In this, limited quantities of each of the different types of products are
manufactured on same set of machines.
 Different products are produced separately one after another.
 Advantages:
 If the demand for one item is going down they can go in for the next
item.
 Naturally it requires less capital than mass production.
 Commercially it is advantageous than job production.
 Disadvantages:
 Unit cost is more when compared to mass production.
41
  Applications:
 The items that are generally made under batch production are cars,
drugs, forging machines, LPG cylinders, lathe machines, presses
etc.

 Mass or Continuous Production:

 This will be a continuous production on a large scale.
 They don‘t wait for orders and the production goes on irrespective of job
orders, knowing fully that there would be bulk orders for the product.
 This requires a planned layout with costly machinery and equipment.
 As the name suggests this is meant for mass production of a particular
component.
 Under this, the production run is conducted on set of machines arranged
according to the sequence of operations.
 A huge quantity of same product is manufactured at a time and is stocked
for sale.
 Different product will require different manufacturing lines.
 Since one line can produce only one type of product, this process is also
called as line flow.
 Advantages:
 More production and a better quality.
 Bulk purchase of raw materials, hence reasonable final cost.
 Wastage of time on men and machines is minimum.
 This can be managed by few skilled, along with semiskilled
workers.
 Disadvantages:
 If the demand is less profit will go down substantially.
 In such production type many of the workers will be on the same
job with the repeated nature of work they will lose interest.
 The layout is permanently made for a particular product hence it
cannot be changed.
 Applications:
 The following are few examples which are manufactured under mass
production, bolts, nuts, washers, bearings, stapler-pins, pens, tyres,
bulbs, tooth paste – tubes, soaps, televisions, vehicles, papers etc.

42
 Production, Planning and Control: Definition and Meaning:
 Production: It is a sequence of operations to convert raw materials into
finished products of desired quality and shape. In other words, Production
is an organised activity of transforming raw materials or purchased
components into finished components.
 Economic Production: It is a function aims at the manufacture of a quantity
required of a given product, at the required quality, at the required time, by
the best and cheapest method.
 Planning: ―Planning of production is known as production planning‖.

It involves what, when, where and

how and by whom, the particular
job has to be performed.
Planning anticipates possible
difficulties and decides in advance
as how to overcome the difficulties
and how the production should be
carried out in the best and
economical way.
It also involves the study of
requirements of the firm and
preparation of a scheme to utilise
the resources and facilities in the
most economical way.
 Control: It is a service function and defined as the supervision of all
relevant operations with the help of control mechanism to control over
production.
It involves actions to be taken during production to meet the desired goal,
by adjusting, modifying and redefining the targets.
The control phase makes sure that the programmed production is constantly
maintained as per plans.
 Thus production, planning and control can be defined as the process of
planning the production in advance, setting the route of each item fixing the
starting and finishing dates for each item, to give production orders to
shops and lastly to follow the progress of the orders according to schedule.
 The principle of production, planning and control lies in the statement
―First plan your work and then work your plan”.

43
 Stages of Production, Planning and
Control:
 In the manufacturing world,
production planning and control
features four stages: Routing,
Scheduling, Dispatching, and Follow
Up or Expediting.
 Proper planning and control for
production is beneficial not only for
the company but to its employees, shareholders, consumers.

 Routing:
 It is the determination of path
or route on which
manufacturing operations to be
followed in manufacturing a
particular product.
 It is defined as the selection of
path which each part of the
product will follow while being
transformed from raw material
to finished product.
 Path of the product will also
give the sequence of operations to be adopted while being manufactured.
 In other words, routing means determination of most advantageous path to
be followed from department to department and machine to machine till raw
materials gets its final shape.
 Routing determines:
(i) What work will be done on a product as well as where and how it will be
done.
(ii) Not only the product, but also men, materials and machines to be used
and the place where the product is to be carried out.
(iii) The best and cheapest sequence of operations.
Thus, routing helps to make the plant layout for minimum material handling.
 Objectives of Routing:
(i) To set the path over which the product has to be travelled.
(ii) To select the best and cheapest route or sequence of operations.
(iii) To utilize men and machines to the optimum capacity.
(iv) To influence upon the design of the factory building and machinery.
44
  Routing Procedure:
(i) The product and its parts are analysed to determine the parts to be
manufactured and the parts to be purchased.
(ii) The parts to be manufactured are analysed to determine the materials
required.
(iii) The product is analysed to determine the quality and quantity of
materials.
(iv) The product is analysed to determine possible methods of manufacture
and selection of the best method.
(v) The manufacturing operations are best determined with their sequence to
produce the product.
(vi) The lot size is determined.
(vii) Scrap factor at each stage of operation is determined.
(viii) Cost of the product is determined.
(ix) Manufacturing forms like production order, job order, labour cards,
inspection cards, move tickets, tool tickets etc. are filled.

 Routing Methods:
 Routing in continuous industry: Routing in continuous industry is simple
as the operations are automatic. The plan is laid as per the sequence of
operations during the entire stage. Here raw material enters the plant on one
side and automatically moves through different processes till it gets into
final shape. Ex: Steel plants
 Routing in assembly industry: In assembly industries like radios, scooters,
cars, electronic equipment, all the components to be assembled arrives at a
particular place and at a particular time. No component should fail to reach
proper place at proper time. In these industries, route sheets are prepared for
each of the component. The parts are to be routed either directly at
production centres or from stores so that they arrive at proper place at proper
time in form of travelling chain. Ex: Scooter, car etc
 Routing in job order industry: Since these types of industries handles
different type of products, the planning department has to prepare a detailed
drawing each time which indicate the proper sequence of operations. Ex:
BHEL, L&T

45
 Scheduling:
 The next phase of
production control is
‗Scheduling‘ which involves
the assignment of starting
and ending times.
 While ‗Routing‘ determines
where the work should be
done, ‗Scheduling‘
determines when the work
should be done.
 Routing is like a railway map which shows the routes and halting stations
where as scheduling is a railway time table which denotes not only the
routes, but also the halts and the time taken for each halt and total time
taken to cover the journey.
 Scheduling is defined as the determination of time that should be required to
perform each operation and also time necessary to perform the entire series
as routed, making allowances for all factors concerned.
 Scheduling involves preparation of time table which would indicate the total
time needed for manufacturing a product and also time expected to be spent
on each machine and process.
 Scheduling determines capacity of machines, allows setup and idle times,
maintenance times, break down time and other factors such that all parts are
ready for date of starting the assembly and the assembly is completed before
scheduled delivery date.

 Purpose of Scheduling:
(i) To execute customer‘s orders within time.
(ii) To check whether production is according to dates planned.
(iii) To purchase the required items well in advance.
(iv) To interrelate manufacture of all items of one product to make delivery
in time.
 Preparation of Schedules:
(i) While preparing schedules the type of orders and their promised delivery
dates must be taken into consideration.
(ii) Scheduling starts with the preparation of master schedule for plant wide
activity for important features of production.
(iii) More detailed schedules namely, shop schedules, operation schedules
are prepared.
46
 (iv) Schedules are prepared for a month or fortnight or a week.
(v) Scheduling is done either for complete manufacture of the product or for
a part or for each department.

 Types of Scheduling:
 Master scheduling: It is prepared for all products and for all departments for
the complete year. Whenever any order is received it is accommodated first
in the master schedule considering the availability of machines and men
upon their delivery dates. When the capacities are full for the present week,
month or year the newly acquired orders are carried over to the next week,
month or year and so on.
 Operation (or) Production scheduling: This consists of total time required
to do given piece of work within a given machine or process. In this type,
time elements are assigned to each of the various operations which if
fulfilled will predict that the job will be completed at scheduled times.
 Detailed operation scheduling: This relates to assigning of time required to
do each detailed operation of a given job with in a given machine or process.
 Machine loading scheduling: Schedules are prepared for loading different
machines. For this we have to
(i) Collect complete data about all available machines.
(ii) Divide all machines into group of similar machines and subdividing
within division according to capacity.
(iii) Fix the available machine for maintenance depending on age and type of
unit.
(iv) Allocate total load to various machines.
 Final scheduling: Both order schedules and machine schedules are
preliminary schedules as they are prepared before production by planning
department. But final scheduling is done by foreman when he wants to start
the work. Change of final scheduling is very difficult and costly and these
leads to some of the machines to be idle and so increase the cost of
production.

 Despatching:
 ―Despatching‖ literally means starting something on its way.
 Authorisation to start production is known as despatching.
 It is done by releasing orders and instructions as per route sheets, master
schedules or part schedules.
 In other words, the despatching function involves granting of permission to
proceed according to plans already laid down.
47
  Functions of Despatching:
(i) To receive route sheets, master schedules and production schedules.
(ii) To procure materials, tools, jigs and fixtures necessary for each operation
for the works in advance.
(iii) To record the time of starting and time of completion of each operation.
(iv) To assign the work for men and machines.
(v) To guide and control the work in progress.
(vi) To record and report about performance.
(vii) To record and report idle time of machines and operators.

 Types of Despatching:
(i) Centralised despatching: In centralised despatching system, orders are
issued directly to work stations or departments. It maintains a full record of
specifications and capacity of each equipment and work load against each
machine. The orders are given to the shop supervisor who runs his machines
accordingly. This type of despatching is suitable for mass production like
automobile industry.
(ii) Decentralised despatching: In this system, the shop supervisor performs
the despatching function. He decides the sequence of handling different orders.
He despatches the orders and materials to each worker and is required to
complete the work within the prescribed duration. This type of despatching is
suitable for large concerns where the number or orders are more.

 Follow up (or) Expediting:

 Follow up or expediting activity of production control is the last in the series
of functions but is the most important step of production control.
 ―Follow up‖ means to see whether the work is being carried out according to
the plans.
 If there is any variation, it should be eliminated as soon as possible.
 These variations may be due to customer‘s specifications or change in
design by research and development.
 It is defined as the process of regulating the process of material and path to
new production schedules.
 There are 3 types of follow up, namely – (i) follow up of Material (ii)
Follow up of work-in-progress and (iii) Follow up of assembling or erection.
 The function of follow up section is to report daily the progress of work in
each shop in prescribed pro forma and investigate the causes of deviation
from the planned part.

48
  Basic Methods of Demand Forecasting:
 Demand forecasting is the art as well as the science of predicting the likely
demand for a product or service in the future.
 This prediction is based on past behaviour patterns and the continuing
trends in the present.
 Hence, it is not simply guessing the future demand but is estimating the
demand scientifically and objectively.
 Thus, there are various methods of demand forecasting. They are:
 Method of collective opinion
 Method of expert opinion
 Barometric method
 Method of market experimentation
 Buyer‘s choice survey
 Statistical methods
 Delphi method
 Sample survey method
 Graphical method
 Regression method

 Break Even Analysis:

 The break even analysis is a technique for determining level of production
where the total cost (the sum of fixed and variable costs) is equal to the selling
price (total revenue).
 Above that level, the firm earns profit and below that, it suffers with losses.
 It thus, establishes a relation between cost of production, volume of
production, the profits and sales volume.

 Uses of Breakeven analysis:

 Determining margin of profit.
 Ascertaining volume of sales needed to attain the targeted profit.
 Calculating the profits for different sales volume.
 Maintaining desired level of profit.
 Choosing the most profitable alternatives.
 Deciding the change in capacity.
 Taking ‗make‘ or ‗buy‘ decision.
 Fixing the selling price.
 Accepting a price less than the total cost.

49
 Break Even Chart:
 Break even chart is a graphical representation showing breakeven point and
cost volume profit relationship at different levels of activity.
 It deposits sales line, fixed cost line, total cost line and breakeven point in term
of units or sales revenue.
 It is also defined as the graphical representation of the relationship between
costs and revenue at a given time.
 Break even chart is drawn taking production in units on X-axis and sales in
rupees and total cost in rupees on Y-axis.
 The point of intersection of total cost line and sales line gives the break-even
point at which there is no profit or loss.

 Break Even Point:

 Break even analysis is made only
with the assistance of breakeven
point.
 Breakeven point is that level of
activity at which the total costs
(Fixed costs + Variable costs) is
equal to the total revenue.
 It is zero profit point at which the
firm neither earn profits nor suffer
losses.
 At this stage, the firm is said to be ―break-even‖.
 It is the point of activity where total revenues and total expenses are equal. It is
the point of zero profit.

 C.P.M and P.E.R.T. as Management Techniques:

 Before coming to understand the meaning and applications of management
techniques namely C.P.M. and P.E.R.T. we will go back for ―Gantt bar
chart‖ which was developed by ―Henry Gantt‖ in 1900 to show various
works or jobs required for
complex project pictorially.
 The bar chart consists of two
co-ordinates; horizontal
represents the time elapsed
and the vertical represent the
jobs or activities performed
as shown in figure (a).
50
 Each bar represents one specific activity of the project.
 The beginning and end of the bar represents the time of starting and time of
finishing of that activity; the length of bar therefore represents the time
required for completion of that activity.
 The above figure represents the bar chart for a project which has seven
distinct activities (P, Q, R, S, T, U and V) to be performed for its completion
and their timings to
complete the job.
 From the chart, we can
observe some of the
activities can be started
concurrently or
simultaneously and some
of the activities can be
started only after
completion of the previous
activity.
 The figure (b) shows another bar chart for the project related to purchase and
installation of lathe.
 The complete project consists of six distinct activities. Each cannot be
started unless the previous activity is completed.
 From the above two examples, we find that there are some activities which
can takes place concurrently while there are some activities that succeed a
preceding activity and cannot be started unless the preceding activity is
completed.
 Though it is useful for representing the various activities of the project, in
practice, it suffers with the following drawbacks or limitations.
(i) The bar chart cannot show clearly the interdependencies among various
activities.
(ii) It does not show the progress of work. Hence it cannot be used as control
device. However, a conventional bar chart can be modified to give this
additional information as shown in the figure (c). This can be done by
showing the progress of
each activity, by hatched
lines along the
corresponding bar of that
activity.
(iii) In bar charts, only
major activities are
51
 shown. Due to this, bar charts are not very useful for big projects.
(iv) Bar chart does not reflect the uncertainties in duration times estimated
for various activities.
 Due to the above drawbacks of the bar chart, these cannot be used as control
devices.
 Therefore, to deal with large and complex projects, a number of
management techniques called ―Network Techniques‖ have been developed
which overcome the drawbacks of the bar chart.
 Among which C.P.M (Critical Path Method) and P.E.R.T. (Programme
Evaluation and Review Technique) are considered to be most convenient for
application of various engineering projects.
 Scope:
 In large projects which are having number of activities, some are
independent and some are interdependent.
 In order to achieve the desired objective, the project manager should not
only plan, schedule, coordinate and optimise the various activities
effectively, but also identify critical activities which must be completed
within allotted duration.
 Otherwise, the total project completion time will require extension.
 Therefore, to do with large and complex projects number of management
techniques has been developed.
 A few of them which are popular are C.P.M. and P.E.R.T. which are most
convenient for application to various engineering projects.

 Network Diagram and Network Analysis:

A diagram which shows various activities and their positions in the project are
drawn with time to be taken in completing the route from one operation to
another. Such a diagram is known as ―Network Diagram‖ or ―Arrow Diagram‖
and analysis from such a diagram is known as ―Network Analysis‖.

 Critical Path Method (C.P.M):

 The critical path method commonly abbreviated as CPM was discovered by
Du Pont and Spery Rand Corporation in 1957 for applications to industrial
situations like construction, manufacturing, maintenance etc.
 Till then it has found wide acceptance by construction industry with
application to bridges, dams, tunnels, buildings, highways, power plants etc.
 Realistic and more accurate information can be obtained and results available
will be more reliable.

52
  CPM network generally used a) for repetitive type projects, b) for the
projects for which fairly accurate estimate of time for completion of each
activity can be made and c) for which cost estimations can be made with fair
degree of accuracy.
 The critical path in the CPM method plays an important role in planning and
scheduling.
 A critical path is the time wise longest path in a network.
 In CPM network a critical path is the one which passes through critical
activities.
 The critical path is determined on activity-oriented float philosophy.
 Features:
(i) C.P.M. stands for critical path method.
(ii) It is tool in production planning and scheduling
(iii) It is used for optimising resources and minimising overall cost of the
project.
(iv) It is based on the assumption that the time which each activity in the
project will take is precise and known.
(v) It has only one time estimate for each activity.
 Objectives:
(i) To find the difficulties in the course of production process.
(ii) To assign time for each operation.
(iii) To ascertain starting and finishing times of work.
(iv) To find the critical path and maximum duration time for the project as a
whole.

 Programme Evaluation Review Technique (P.E.R.T):

 P.E.R.T. stands for Programme Evaluation Review Technique.
 This was developed by the special project office of the U.S. Navy in 1958.
 It is applied for the planning and control of large projects in various
industries especially in defence, chemical and construction industries.
 This gives the information relating to the completion date, interdependency
and dependency of the activities.
 This also gives the information that certain activities have to be completed
before other can start.
 It helps for timely execution of the project.
 This has three-time estimates.
 In PERT, a critical path is the path joins the critical events; this path was
determined on the basis of slack at each event.

53
  In other words, in PERT the critical path is determined on the event oriented
slack philosophy.
 This is applicable for long range planning such as irrigation, electrification of
villages, providing tube wells, etc. along with conducting initial view of the
project; where the activities are subjected to considerable degree of
uncertainty.
 Features:
(i) All individual tasks are shown in the network. Events are shown in the
circles.
(ii) Each arrow represents an activity.
(iii) Critical path and slack time is computed.
(iv) It has three-time estimates.
(v) It is applicable in long range planning.
(vi) It is used in defence, chemical and construction industries.

 Materials Management: Meaning and Definition:

 Since materials play an important role in the industry, a maximum
importance has to be given in the management of the materials.
 Material management is the part of general management which is concerned
with the determination of material requirements, purchase, storage and
release for use in production.
 It also includes constant care which has to be exercised to maintain the
materials in good condition and to safeguard them against all hazards and
losses from the time of purchase till its use.
 So, materials management is defined as the planning, directing, controlling
and coordinating of all those activities concerned with materials and
inventory requirements.
 But it mainly concerns with planning and control of materials in the
industry.

 Importance of Materials Management:

 Materials management is basically the most important functional affair for
any organisation to achieve the best results so far, the profitability is
concerned.
 The percentage of materials contributes 77% of total expenditure in an
industry.
 The significance of materials management is judged by the fact that a typical
industrial establishment has to spend crores of rupees every year on
materials.
54
  So, even a small change in material cost result in large amount of money
saved.
 It is found that by proper methods and techniques of material management a
saving of 3% could be achieved in a period of 18 months.
 It gives an opportunity for preventing large amount of capital being locked
up for a long period of inventories.
 The prosperity, profitability, popularity and prestige of an industrial
organisation depend largely on its management of materials.

 Materials Management - Cost Reduction:

 Since materials contribute 77% of total expenditure in an industry, an
importance has to be given for materials management by which about 3% in
cost of materials can be saved due to efficient purchasing and therefore the
cost of final products can be reduced.
 Also, by proper inventory control, the amount of dead capital can be
reduced so that it can be used for other productive purpose.
 Also, by proper management of stores, which is the part of materials
management, losses of materials due to various reasons can be minimised,
so that the cost per unit is decreased.
 Also, by continuous supply of materials to the production departments
without any interruption, the productivity is increased by which the cost of
production is decreased.
 Also, by purchasing the right quality of materials the reduction of spoilage
is affected by which the cost of the final product is reduced.
 So, by proper management of materials, cost per unit can be decreased and
we can supply the goods at cheaper rate and at the same time, we can get
more orders and so more profits.

 Objectives of Material Management:

 To reduce the materials cost which reduces the cost of production.
 To control the inventories efficiently which helps in releasing the working
capital for productive purposes.
 To ensure uniform flow of materials.
 To ensure right quality and right quantity in right time at right price from
right suppliers (5 R‘s).
 To trace out new sources of supply and develop cordial relations with them
to ensure continuous supply.
 To train personnel in the field of materials management.
 To ensure maximum utilisation of materials.
55
 Functions of Materials Management:
The objectives of materials management can be fulfilled by various functions
and they are as follows:
 Material planning and estimation.
 Purchase of right materials of right quality in right quantities at right price, at
right time and from right suppliers (5 R‘s).
 Proper storing of materials.
 Control of inventory of materials.
 External transportation and material handling.
 Disposal of scrap, surplus and obsolete materials.
 Maintenance of close relations with other departments.
 Maintenance of proper records.

 ABC Analysis:
 When there are a large number of items in the inventory, it is essential
to have an efficient control over all the items of stores.
 However, comparatively greater attention should be given to items of
higher value.
 Certain industries may consist of a
small number of items represents a
major portion of inventory value
and a large number of items
represents a minor portion of
inventory value.
 In such cases, a selective approach
for inventory control should be
followed.
 The most modern technique for
controlling the inventory is a value
item analysis particularly known as ABC analysis.
 This analysis is based on ―Paretos law‖ which states that, fewer items of
high usage having high investment value should be paid more attention
than a bulk of items having low usage value and having low investment
in capital.
 Under this analysis, all the items of store are classified into three
categories namely, A, B and C.
1. Category A includes most important items which represents 70% of the
value of stores but constitute only 10% items.

56
 2. Category B includes lesser important items representing an investment of
20% and constitutes 20% of items.
3. Category C consists of least important items constituted 70% of stores
representing 10 % of the annual consumption cost.
 So, A category items are given priority over other items and orders should be
placed frequently but in small numbers.
 B category items are given less importance than A category items and orders
should be placed less frequently than A category items.
 C category items are given least importance than other items and order
should be placed once in a year or six months.
 This is represented graphically as shown in figure.

 Steps in A.B.C. Analysis:

i) The quantity of each item should be calculated.
ii) The money value of item should be calculated.
iii) The items should be rearranged according to their value.
iv) The running total of value and quantity and their percentage to total should be
calculated.
v) Code letters A, B & C is given according their item value.

 Advantages of A.B.C. Analysis:

i) It ensures closer control on costly items.
ii) It helps in developing a scientific method of inventory control.
iii) It helps in achieving the main objectives of inventory control at minimum cost.

 Parameters of Inventory
Control:
(i) Maximum Quantity:
It is the upper or maximum
quantity of material that is
allowed to be kept in stores at
any time.

(ii) Minimum Quantity:

It is the lowest quantity of stores
below which the stock is not
allowed to fall in normal
circumstances.

57
 (iii) Standard Order:
It is the difference between maximum and minimum quantity and this is known as
economical purchase inventory size (or) economical order quantity.

(iv) Lead time or Procurement time:

It is the time taken by the material after placing the order and receiving the
materials.

(v) Reorder Point (or) Reorder Level:

It is the point in a day on which the fresh order is placed. It is fixed somewhere
between maximum and minimum inventory levels.

(vi) Safety Stock (or) Buffer:

It is the stock which is not usually consumed in normal circumstances. The
stock is utilised to keep the production continuous if lead time increases under
unavoidable circumstances.

(vii) Cycle time:

It is the time between two successive orders.

 Economic Order Quantity:

 The question ―How much to buy?‖ leads to the determination of economic order
quantity. It is the quantity of inventory which can reasonably be ordered
economically at a time. It is also known as ―Standard Ordered Quantity‖.
 While fixing economical order quantity, two costs namely
1. Ordering cost or procurement cost or buying cost.
2. Inventory carrying cost or setup cost is to be taken into consideration.

1. Procurement Cost: It is the expenditure made on

a) Calling quotations
b) Processing quotations
c) Placing purchase orders
d) Receiving materials and inspecting them
e) Verifying and payment of bills
f) Other incidental charges

2. Inventory Carrying Cost: It is the expenditure made on

a) Interest on capital investment
58
b) Cost of storage, handling, record keeping etc.
c) Cost of involving deterioration and obsolescence
d) Cost of insurance, property tax etc.

 Procurement costs decreases as the

order quantity increases (i.e.) the
number of orders per year decreases.
 Inventory carrying costs are directly
proportional to the order size or lot size.
 The total cost is calculated by adding
procurement cost and inventory carrying
cost.
 So, the economic order quantity is the
size of ordered quantity which
minimises the total cost.
 Procurement costs will be made minimum by reducing the number of orders.
 But this increases the inventory carrying costs.
 The inventory carrying costs can be reduced by increasing the number of
orders by purchasing in small quantities.
 But this increases the procurement costs.
 If we plot a graph between the quantity per order, and the annual costs
(procurement costs and inventory carrying costs separately) we can get
annual carrying costs.
 The inventory carrying costs are represented by a straight line and
procurement costs are represented by a rectangular hyperbola.
 The point of intersection of these two graphs gives the economic order
quantity where the total cost is minimum
 E.O.Q. can also be determined by the empirical formula

( ) √

Where

59
  Proof:

( ⁄ )

( )
( )

( ⁄ )

( ⁄ ) ( ⁄ )

This cost will be minimum, when ( ) ( ) √

 Stores and Stores Management:

 Generally un-worked material is known as stores and the place where it is
housed is called store room.
 Holding all kinds of stores and material, semi and fully processed goods in
custody is known as storage and the aspect of material control concerned with
physical storage of goods in known as store keeping.
 So, store keeping is the aspect of material control which is concerned with
physical storage of goods.
 The responsibility of stores management is ―to receive materials, to protect
them in storage from damage or theft, to issue the materials in the right
quantities at the right time and to the right place and provide the services
promptly and at least cost.‖

 Stores Records:
In order to maintain an efficient record of stores, the following books and records
are to be maintained for each type of material separately by the stores. This
facilities easy and smooth handling of stores.
1. Inward and Outward Registers: These registers are maintained for entering all
the receipts from the suppliers and all the issues to the use of various
departments. All the materials such as finished goods which are sent to the
customers are also entered in this book.

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 2. Stock Registers: These are
a) Non-consumable registers in which non-consumable items such as
machinery, equipment and furniture are entered.
b) Consumable registers in which all the consumable items such as coke, diesel,
waste, grease, paints, lubricants etc. are entered.
c) Tools registers in which all the items such as tools, jigs and fixtures, spares,
etc. are entered.
3. Daily receipt Register: This may be a register or loose-leaf form. When the
materials come into stores, it is entered date wise. If the material is found to be
defective after inspection, the material is sent back to the supplier and the
incidental charges if any are also entered in the stock register.
4. Issue Register: This also may be a register or loose-leaf form in which all stores
issued are entered date wise.
5. Stores Ledger: From issue and receipt registers, stores ledger is prepared. All the
materials in the stores are entered in this register. The entries should tally with
the bin cards. Also, the money value of the material is entered in the register. It
records the receipts, issues and balance in hand of each and every article.
6. Surplus stock Register: The items which are not used for a long period say 2 or
3 years which are known as surplus materials may be recorded in these registers.
7. Condemned article Register: Unserviceable materials after use or obsolete
materials which are authorised to be condemned are entered in these registers.
8. Loan Register: Non-consumable items are sometimes issued temporally by
production of slips to various departments. These items are entered in these
registers and signature of the bearer is taken in the register.
9. Suspense Register: The defective items or items received in excess from the
supplier should not be kept in the bins, but is kept in suspense cell and these are
entered in this register.
10. Empty containers and packages Register: Empty containers and packages are
entered in these registers till they are disposed off by auction.

 Bin Cards:
 Bin cards are maintained for
ready made check of stocks of
materials kept in the bins.
 This bin card is tagged to the bin
and a copy of the bin card is kept
on the table of the store keeper for
ready reference.
 All the materials received and issued daily are entered in these bin cards.
61
  Bin cards should tally with the ledger.
 The ledger number is also entered in the bin card.
 These are useful for finding out the stocks at glance at any time.
 These cards also contain the maximum and minimum quantities to be carried
out and the recorder level may be specified on this card, so that the materials
can be ordered and procured in time.

 Cardex System:
 This is a steel almirah with different number of shelves or drawers
manufactured by the Godrej and Remington companies and these are widely
used by various organisations when large number of materials are purchased
and stored.
 This system is used by both purchasing and stores departments.
 Different cards are maintained for different materials along with code numbers
and are kept in the inserted drawers and the serial number of code numbers are
marked on the face of the shelves.
 The following information is recorded on the cards.
1) Code number of materials 2) Minimum and maximum stock level and
3) List of suppliers.
 This system may replace both stock ledger and stock ledger card.
 When the order is to be placed by the purchasing department, the details of
order namely :
1) Order no 2) Date of order 3) Quantity ordered 4) Accepted rate 5) Delivery
point and 6) The name of the supplier is entered in these cards.

 Purchasing:
 Purchasing is an important activity frequently carried on by a separate
department under the control of purchasing officer.
 Purchasing department of a manufacturing concern is an extreme importance
because it has its bearing on every factor concerning the manufacture, i.e.,
quantity, quality, cost, efficiency, economy, prompt delivery, volume of
production etc.
 It is the scientific purchasing that can save much money, time and efforts of the
management.
 Materials are an important determinant of the cost of production and includes
70 to 80 % of its cost.
 Therefore, it requires serious attention.

62
  The profit of the organisation mostly depends upon how best we can procure
material with the reasonable cost, since the prime cost of the ultimate product
mainly depends upon the cost of purchased materials.
 It is the buying of material of right quality in right quantities, at right time, at
the right price, from the right source with delivering at a right place.
 Though the organisation of purchasing varies from company to company, the
procedure for purchasing is more or less same. The following procedure is
generally adopted for efficient purchasing:
1. Preparing Purchase Requisitions (PR) by the stores department.
2. Receiving purchase requisition in a prescribed form (indent) by stores
department.
3. Deciding quantity of materials to be purchased (EOQ).
4. Determining type of purchase (local or by tenders).
5. Calling tenders from some of the listed registered suppliers.
6. Receiving tenders from suppliers.
7. Opening tenders and preparing Comparative Statements (CS).
8. Selecting right source of supply (with lowest bidder).
9. Placing purchasing orders.
10. Sending copies of purchasing orders to the required departments.
11. Follow up of purchasing order.
12. Inspecting delivered goods with reference to quantity, quality and
specifications.
13. Delivering the materials to the stores.
14. Entering the purchased goods in the purchase records.
15. Arranging for payment of invoices.

 Purchase Records:
A few important purchase records are
1) Purchase Requisition form
2) Purchase enquiring
3) Suppliers quotation
4) Comparative Statement
5) Purchase Order
6) Bill / Invoice

63
 4. INDUSTRIAL SAFETY MANAGEMENT
 Objectives:
 Explain the importance of safety at work place.
 Explain hazard and accident.
 List out different hazards in the industry.
 Explain the causes of accidents.
 Explain the direct and indirect cost of accidents.

 Safety at Work Place:

 The importance of safety in industrial plants cannot be over emphasised.
 Modern industry with its sophisticated techniques of manufacture often
possess the problem of safety in industrial establishments.
 In spite of vast progress made in the direction to prevent industrial accidents,
accidents do takes place due to different reasons.
 The importance of industrial safety was realised after the occurrence of
millions of industrial accidents every year causing either death or temporary
or permanent disablement of the employees.
 The result is heavy financial loss due to man-hours and machine-hours both
for employer and employees.
 The importance of industrial safety can be realised by the following figures.
 Every 20 seconds of every minute of every hour, throughout the world some
one dies as a result of industrial accident. In India, out of 5 million industrial
workers, about 700 die every year and 2,20,000 receives injuries.
 So, the factory act stresses the management to provide safe working
conditions for the workers working in the factory and also certain financial
responsibilities like compensation to be pain for the victims.
 Because of the heavy losses due to accidents both for the worker and the
management, the management has got the moral responsibility of providing
safety for the workers.
 Therefor in order to avoid loss and as a responsibility, importance must be
given for safety.
 Safety, in simple words means freedom from the occurrence of risk of injury
or loss.
 Industrial safety refers to the protection of workers from the dangers of
industrial accidents.

64
 Provisions Related to Safety:
 By conducting safety programmes, we can create awareness about the safety
in public.
 Safety programme tends to discover when, where and why accidents occur
also it aims at reducing accidents and the losses associated with them.
 A safety programme includes mainly Four E‘s:
1. Engineering
2. Education
3. Enlistment
4. Enforcement
1. Engineering: Safety of the design and equipment installation stage.
2. Education: Educating the employees in safe practices.
3. Enlistment: It concerns the attitude of employees and management toward
the programme and its purpose. It is necessary to arouse the interest of
employees in accident prevention and safety consciousness.
4. Enforcement: To enforce adherence to safety rules and safe practices.
 The following important provisions for safety are provided in the factory
Act 1948.
 Every moving part of machinery should be safe guarded by casing and
fencing.
 Only trained adult male worker wearing tight fitting clothing should be
allowed to work on or near moving machinery.
 No women or young person shall be allowed to clean, lubricate or adjust
any part of prime mover or of any transmission machinery when it is in
motion.
 Devices for cutting of power from running machines in emergency shall
be provided.
 No young person shall work in dangerous machines unless he got trained
under adequate supervision.
a) Every hoist and lift shall be of good mechanical construction and
adequate strength and properly maintained.
b) Every hoist way or lift way shall be sufficiently protected by an
enclosure fitted with gates.
c) Every care has to be taken to avoid breakage of rope or chain by
providing two ropes or chains separately or rope shall be capable of
carrying the weight of the cage together with its maximum load.
 All parts including working gears, lifting machines, chains, ropes or
lifting tackles shall be of good construction and of adequate strength and
thoroughly examines at least once in a year.
65
  A detailed information should be affixed on every revolving machinery
indicating maximum speed of grinding wheels, speed of the shaft upon
which the wheel is mounted.
 No person shall be employed in the factory to lift, carry or move heavy
loads which causes injury.
 The workers are provided with suitable goggles and screens to protect
their eyes from exposure to
a) Welding rays, cutting metals with electric or acetylene flame.
b) Rivet cutting, removal of scales, dressing of metals or any other such
process involving risk of injury to the eyes from the particles thrown
off in the course of process.
 a) No person is allowed to enter any space, tank pit or other confined
spaces in which dangerous fumes are likely to be present unless
measures have been taken to remove fumes.
b) Portable electric light above 24 volts shall not be permitted to such
confined spaces.
 Every factory shall be provided with the facilities to escape in case of
fire by providing fire warning signals, unlocked doors towards outside
workroom, free passage ways and easily openable windows etc.
 All boilers and pressure vessels must be kept in proper condition. Safety
valves, pressure gauges and water gauges, etc. must be examined
thoroughly at regular intervals.
 Pits and openings in floors should be properly covered and floors, stairs
and means of access should be provided whenever necessary.

 Accidents:
 Accident can be defined as occurrence that interferes with orderly progress
of activity.
 Simply stated, an accident is any injury which the worker suffers in the
course of employment.
 An industrial accident is also defined as ―occurrence in an industrial
establishment causing bodily injury to a person which makes him unfit to
resume his duties in the next 48 hours.‖
 Due to accidents a worker may become disable partially (or) totally.

 Hazards:
 A hazard is an agent which has the potential to cause harm to a vulnerable
target.
 A source of danger, a possibility of occurring loss or misfortune.
66
  The term ―hazard‖ and ―risk‖ are often used interchangeably.
 Hazards can be dormant or potential, with only a theoretical probability of
harm.
 An event that is caused by interaction with a hazard is called an incident.
 The key difference between incident and accident is, the word accident has a
negative implication and could result in loss of life, or damage to goods.
 An incident on the other hand can refer to any event that happens; it could
be positive or negative.

 List of different hazards in the industry:

 Fire hazards
 Electrical hazards
 Mechanical hazards
 Chemical hazards
 Radiation hazards

 Causes of Accidents:
 An accident is an unplanned incident and for each such incident there is
usually a specific cause or causes if one could but discover them.
1. Technical Causes (unsafe condition)
a) Mechanical factors
b) Environmental factors
2. Human causes (Unsafe condition)
a) Personal factors

S. No Mechanical Factors Personal Factors

1. Unsafe mechanical design Age
2. Improper machine guarding Health
3. Unsafe apparel No. of dependents
4. Defective agencies Financial position
5. Improper material handling Home environments
6. Broken safety guards Lack of knowledge or skill
7. Leaking acid valve Improper attitude towards work
8. Untested boilers or pressure Carelessness and recklessness
vessels
9. Fatigue
10. High anxiety level
11. Non-use of safety device
12. Improper use of tool

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 Costs of Accidents:
 An accident on other words is cost (or) losses of an accident. There are
definite costs associated with the accident.
1. Direct cost
2. Indirect cost.
 Direct Cost: It consists of compensation, payment, insurance and overhead
cost, uncompensated wage loss of injured employee, cost of medical care of
hospitalization.
 Indirect Cost: They include
a) Damage of equipment cost
b) Cost of time last by neighbour worker
c) Cost of lowered production by the substitute worker
d) Cost of delays in production due to accident
e) Cost of reduction in efficiency of the injured worker when we joins the
concern after getting recovered.

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 5. ENTREPRENEURSHIP DEVELOPMENT
 Objectives:
 Define the word entrepreneur.
 Explain the requirements of an entrepreneur.
 Determine the role of entrepreneurs in promoting small scale industries.
 Describe the details of self-employment schemes.
 Characteristic of successful entrepreneurs.
 Explain the method of site selection.
 List the financial assistance programmes.
 List out the organisations that help in entrepreneur.
 Know the use of EDP Programmes.
 Understand the concept of Make in India, Zero defect and Zero effect.
 Understand the importance for start-ups.
 Explain the conduct of demand survey.
 Explain the conduct of a market survey.
 Evaluate Economic and Technical factors.
 Prepare feasibility report of any start-up plant / processing industry.

 Entrepreneurship: Definition, Meaning and Concept:

People call the word ―Entrepreneurship‖ by various names such as adventurism,
risk taking, thrill seeking, innovating etc.
Definition: Entrepreneurship is the purposeful activity of an individual or a
group of associated individuals undertaken to initiate, maintain, or getting
profit by production or distribution of economic goods and services.
(Or)
Entrepreneurship is a purposeful activity in promoting and maintaining
economic development for the production and distribution of wealth.
(Or)
The simple definition of entrepreneurship is doing new things or doing things
that are already being done, in a new way.
Meaning: Entrepreneurship is improving the yield of resources.
Entrepreneurship is meant for the function of seeking investment and
production opportunity, organising an enterprise, to take new production
process, raising capital, hiring labour, arranging the supply of new materials,
finding site, introducing new techniques and commodities, discovering new
sources of raw materials and select top managers for day to day operations of
the enterprise.
Entrepreneurship is essentially a creative activity, the entrepreneur being an
innovator who introduces something new into the economy – a method of
69
 production not yet tested by experience in the branch of manufacture
concerned, a product with which consumers are not familiar, a new source of
raw material or of new market hitherto unexploited and other similar
innovations.
Concept: The concept of entrepreneurship and its theory have been evolved
over a period of more than two centuries. There are different opinions on the
emergence of entrepreneurship. The opinions may be classified into three
categories.
(i) The economist’s view (ii) Sociological theory (iii) Psychological theory.

 Entrepreneur: Definition and Concept:

 The word ‗Entrepreneur‘ is derived from a French word ―Entreprendre‖
which means ―to undertake‖.
 So, the entrepreneur is a person who organises and manages an enterprise
and undertaking the risks for fulfilling some of his needs.
 The word entrepreneur can be defined in number of ways:
Entrepreneur is a person who innovates, tends to promote new venture, rise
to the occasion, assembles the other factors of production and sets the
business to start and keep it running.
(Or)
An entrepreneur is one who organises, manages and assumes the risk of
enterprise.

(Or)

The people who work for themselves are called entrepreneur.

(Or)

An entrepreneur is one who visualises a business, takes bold step to establish

undertaking, co-ordinates the various factors of production and gives it a
start.

(Or)

Entrepreneur is a person with a high need of achievement and desire for

responsibility and creates measure of performance.

(Or)

Entrepreneurs are the owners of the business who contribute the capital and
bear the risk of uncertainties in business life.

70
 Concept:
 An entrepreneur is one who has a strong desire to float a business enterprise.
 For this purpose, he must possess qualities of leadership, facing challenging
tasks, adventures, skill, ability and capacity to bring men, material and
money in coordination for the production of products.

 Requirements (or) Qualities (or) Traits of a true Entrepreneur:

 Capacity to take risk.
 Self or inner motivation.
 Above average intelligence and knowledge.
 Vision, foresight and creative thinking.
 Imagination and initiative.
 Inventive ability and sound judgement.
 Desire to take personal responsibility.
 Strong need for achievement.
 Ability to arrange resources.
 High degree of ambition.
 Will to prove superior to others.

 Promotion of Small Scale Industries:

 A business when managed by an entrepreneur can bring economic prosperity
to the country.
 General well-being and social, economic and political stability are the
necessary conditions for entrepreneurship business.
 For the purpose of creating new enterprises and promoting economic
development of the country, there are several persons who can make positive
contribution.
 Every country, therefore, needs such enterprising technical people, who can
foster the process of economic development.
 A person who possesses initiative and shows leadership a quality in the
promotion process is knows as a promoter.
 The process of promotion starts when such person gets positive ideas of
starting a venture and it ends when the enterprise actually comes into
existence and starts functioning successfully.
 Promotion of small business begins when an entrepreneur conceives ideas of
starting a new business enterprise.
 Such a promoter must have certain definite background.
 He must be technically well-versed and should possess perfect knowledge
about such an enterprise.
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 If a person is suitably qualified in respect of running the business and
implementing his ideas, the chances of his success are certainly enhanced.
 In some cases, a person may acquire knowledge by working in such areas
and become a successful entrepreneur.
 He must possess full knowledge about the product and government policies
regarding small-scale industrial units.
 It means he must know the products which have been kept aside by the
government for small-scale industrial units.
 A person with necessary background, eagerness and initiative of starting a
small scale industrial unit can surely succeed in establishing such a unit.
 The growth of small-scale industries in India has been one of the most
distinctive features of planned economic development during the last two
decades.
 Modern small-scale industries can be a powerful factor in the rapid and
decentralized growth of a developing economy.
 The vital role of the small-scale sector in the national economy has been
recognized on account of its potential for creating substantial employment
opportunities at a relatively small capital cost, facilitating mobilization of
local resources of capital and skill, and ensuring a more equitable
distribution of the national income.
 Modern small-scale industries in India were almost non-existent prior to the
Second World War.
 It was during the war years, that a number of small-scale industries were
established to augment and sustain the war effort to relieve pressure on
shipping and counteract inflationary trends in the economy.
 After independence especially during the fifties, organized effort were made
and a comprehensive programme for the development of small-scale
industries was conceived on the basis of the report submitted by a team of
‗Ford-Foundation‘ efforts who were invited to the country.
 Small enterprises both in the organized and unorganized sectors give
employment to nearly forty lakh workers in various fields, and account for
nearly half of the total annual industrial production in the country.
 Apart from the contribution to employment and production, the growth of
small industries has helped in the utilization of local resources and raw
materials, capital and skill which might otherwise have remained unutilized.
 Clusters of modern small-scale units humming with industrial activity can be
seen in almost all towns.
 There is a wide range of significant contributions that entrepreneurs and
entrepreneurship can make to the development process of small industry.
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  Entrepreneurship raises productivity through technical and other forms of
innovations.
 Entrepreneurship plays a strategic role in commercializing new inventions
and products.
 Entrepreneurship plays a critical role in the restructuring and transformation
of economy.
 Entrepreneurship and entrepreneurial behaviour can breather vitality into
the life of large corporations and governmental enterprises. ·
 Entrepreneurs make markets more competitive and thereby reduce both
static and dynamic market inefficiencies.
 Entrepreneurs improve the social welfare of a country by harnessing
dormant, previously overlooked talent.

 Details of Self-Employment Schemes:

Some of the self-employment schemes developed for the benefit of
entrepreneurs in different areas are:
1. SEEUY: Self Employment Scheme for Educated Unemployed Youth.
2. MUN: Mahila Udyam Nidhi Scheme.
3. SWS: Single Window Scheme.
4. SEMFEX: Self Employment Scheme for Ex – Service men.
5. NEFS: National Equity Fund Scheme.
6. PMRY: Prime Minister Rozgar Yojana

 Characteristics of Successful Entrepreneur:

 He is highly motivated and associated with innovations.
 He visualises business, takes bold steps to establish undertaking, and
coordinates various factors of production.
 He is action oriented and highly motivated.
 He is the main factor of production.
 He has the ability to evaluate business opportunities.
 He takes decisions regarding what to produce, how to produce, where to
produce and for whom to produce.
 He is responsible for both profits and losses.
Entrepreneur is responsible not only earning his own livelihood, but also
creating avenues for employment others and contributing to the gross
national product. Industrial development in the country depends largely
upon the type of human resources the country possesses and more
particularly on entrepreneurs.

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 Site or Plant Location:
 Selection of a place for locating a plant is one of the most important problems
which is faced by an entrepreneur while starting a new enterprise.
 The object of maximising profits through minimising the cost of production can
be achieved only when the plant of a right size at a right place where economies
of all kinds in production are available.
 From this point of view, the decision of location for a plant is very important
because it affects the profitability of the concern.
 It is very difficult to locate a place which fully satisfies all the requirements
namely availability of raw material, labour, power, transportation facilities,
cheaper land etc.
 But search has to be made for a place which enjoys as many facilities as
possible.
 While selecting a site, the entrepreneur must consider technical commercial and
economic aspects and then select a site that provides maximum advantages.
 A thorough study of all factors is necessary before reaching a final decision.
 First, the location of the plant has a direct influence on the cost of production as
well as on the effectiveness of the marketing.
 Secondly, once a plant location is chosen, it cannot be changed in the near future
without much difficulty.
 The guiding principle in the selection of site should be a place where the cost of
raw material and its fabrication cost plus the cost of marketing of finished
product should be minimum.
 Plant location may be defined as the function of determining where the plant is
to be located for maximum operating economy and effectiveness.

 Factors to be considered while selecting allocation of plant location:

In selecting a plant site attention will have to be given to the selection of region,
selection of locality, selection of exact plant site and the momentum of early start.
 Selection of region: It is influenced by
 Availability of raw materials.
 Nearness to the market.
 Availability of power and fuel.
 Transportation and communication facilities.
 Climate and atmospheric conditions.
 Selection of locality: Attention must be given to
 Availability of labour.
 Local taxes and restrictions.
 Local laws and government policy.
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  Commercial facilities.
 Protection from enemy attack.
 Existence of competing industries.
 Selection of exact site: The actual site may be selected by considering the
following features.
 Soil and Topography.
 Disposal of waste.
 Transport facilities.
 Civic amenities.
 Land.
 Taxes.
 Industrial peace.
 Availability of labour.
 Water.
 Service facilities.

 Financial Assistance Programmes:

 The various financial institutions which provide financial assistance to small
entrepreneurs are:
 State Government Agencies
 A.P. State Financial Corporation (A.P.S.F.C)
 A.P. State Small Industries Development Corporation (A.P.S.S.I.D.C)
 A.P. State Director of Industries.
 A.P. State Industrial Development Corporation (A.P.I.D.C)
 A.P. Industrial Infrastructural Corporation (A.P.I.I.C)
 A.P. Agro Industries Corporation (A.P.A.G.R.O.S)
 A. P. Handicrafts Development Corporation.
 A.P. Khadi and Village Industries (A.P.K.V.I)
 A.P. Mining Corporation (A.P.M.C)
 A.P. Non-Resident Indians Investment Corporation (APNRIIC)
 Regional Rural Banks
 Central Government Agencies
 Industrial Development Bank of India (I.D.B.I)
 Industrial Finance Corporation of India (I.F.C.I)
 Industrial Credit and Investment Corporation of India (I.C.I.C.I)
 Refinance Corporation of India.
 National Small-Scale Industries Development Organisation (N.S.S.I.D.O).
 National Small Industries Corporation (N.S.I.C)
 Life Insurance Corporation of India (L.I.C)
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  Unit Trust of India (U.T.I)
 Commercial Banks

 Organisations Assisting Entrepreneurs:

 All India Small Scale Industries Board (AISSIB)
 Small Scale Industries Development Organisation (SIDO)
 National Small Industries Corporation (NSIC)
 Small Industries Service Institutes (SISI)

 Entrepreneurial Development Programmes (E.D.P):

 The development of entrepreneurship is essential not only to help the
industrial growth, but also to solve various problems such as unemployment,
unbalanced development of region, concentration of economic power, and to
help diversification of profits from the traditional areas of investment into
industrial activities.
 Entrepreneurial development is necessary for economic growth of the
country.
 It is, therefore, necessary to run entrepreneurial development programmes
(E.D.P) which shall stimulate entrepreneurial behaviour among the
individuals. It is:
 To identify and train potential entrepreneur.
 To develop necessary knowledge and skills among the participants.
 To impart basic managerial understanding.
 To provide post training assistance.
 To create confidence among entrepreneurs to face risks and solving
unforeseen problems.
 To develop underdeveloped areas and create employment.

 Make in India:
 Make in India is a major new national programme of the Government of
India designed to facilitate investment, foster innovation, enhance skill
development, protect intellectual property and build best in class
manufacturing infrastructure in the country.
 The primary objective of this initiative is to attract investments from across
the globe and strengthen India‘s manufacturing sector.
 It is being led by the Department of Industrial Policy and Promotion (DIPP),
Ministry of Commerce and Industry, Government of India.

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  The Make in India programme is very important for the economic growth of
India as it aims at utilising the existing Indian talent base, creating additional
employment opportunities and empowering secondary and tertiary sector.
 The programme also aims at improving India‘s rank on the Ease of Doing
Business index by eliminating the unnecessary laws and regulations, making
bureaucratic processes easier, making the government more transparent,
responsive and accountable.
 The focus of Make in India programme is on 25 sectors.
 These include: automobiles, automobile components, aviation, chemicals, IT
& BPM, pharmaceuticals, construction, defence manufacturing, electrical
machinery, food processing, textiles and garments, ports, leather, media and
entertainment, wellness, mining, tourism and hospitality, railways,
renewable energy, biotechnology, space, thermal power, roads and highways
and electronics systems.
 The programme also puts focus on the live projects like industrial corridors
and policies in the area of foreign direct investment, national manufacturing,
intellectual property and new initiatives.

 Zero Defect (ZD) Concept:

 The ZD concept in a management programme which seeks the voluntary
participation of work-people in undertaking personnel responsibility for the
quality of the tasks in hand.
 Zero defects will provide with high quality products for consumers and zero
effect provides with minimal pollution of the environment.
 Principle:
 The main principle on which ZD concept based is ‗DO it right the first
time‘.
 Defects can be classified as management controllable and operator-
controllable.
 ZD concept is considered for reducing the operator-controllable errors.
 ZD concept advocates that if workers are properly motivated, they will
make no-errors, literally zero defects.
 Procedure in implementing ZD Programme:
The steps involved in implementing ZD programme are:
1. Personal Challenge:
 The employees should be challenged to attempt error-free
performance.
 Employees are requested to participate voluntarily and sign a pledge
card.
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 2. Identification of Error-Cause:

 The problems which obstruct the ZD aim should be identified.

3. Inspection:

 Employees are given freedom to express their personal responsibility

for the quality of his work.
 They are encouraged to point-out causes beyond their control.
 Conduct detailed defect cause removal programme to elicit ideas from
individuals.
 Identify the method, device, operation or equipment for the valid
causes to eliminate it.

4. Motivation:

 Management should motivate the employees taking interest in ZD

programme and for their contribution towards solving the problems.
 Necessary training and re-training arrangements may be provided
for employed if required.

 Zero Defect and Zero Effect (ZED):

 It aims to achieve a twin goal of production of high-quality products with
clean technology.
 It will have sector-specific parameters for each industry.
 It is an approach to the problem of securing a high level of error-free work
performance.
 Thus, scripting a new role for MSMEs according to changing socio-
economic scenario.
 Significance of ZED for MSME sector:
 Enhancing the global and the domestic competitiveness of the
manufacturing sector to broaden the customer base.
 ZED will act as a catalyst to accomplish the goals under Make in India.
i.e increasing the contribution of manufacturing sector to 25% of the
GDP and creating 100 million employment.
 ZED will enhance the productivity and efficiency of MSMEs. Thus,
enhancing their cost competitiveness and will result in increased profits.
 ZED will also aid in attracting investments as there is increasing
awareness across the world for protecting the environment by curbing
pollution.

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 Importance of Start-Ups:
 Start-ups are the new word for SME (Small & Medium Enterprises).
 SMEs/Start-ups are the highest job creators in any economy, so there are a
lot of people employed because of start-ups.
 They become economically well off – so start-ups improve the lifestyle of a
lot of people.
 Start-ups are the blood of any economy, without them, we all will be
deprived of so many things.
 India needs 10 million jobs a year and global data shows that it is start-ups,
not large enterprises that create net new jobs in any country.
 Start-ups are also the centres of innovation and are a great way to enhance
employment creation in the economy.
 However, the more important aspect is the technological enhancement they
bring to the country.
 Start-ups involve dealing with new technology which generally lies at the
highest end of value addition chain.
 With more and more start-ups, India can aspire to be world leader in skilled
work and not just an outsourcing destination for cheap IT services.
 Brining new competitive dynamics in the economic system - start-up
companies are the most dynamic economic organizations on the market,
since they provide additional dynamics and competitiveness to any
economic system.
 This means that the economy stays healthy, vital and diligent.
 India is a home to almost 3100 start-ups starting per year standing just
behind the US, UK and Israel according to the NASSCOM (National
Association of Software and Services Companies).
 In spite of a ‗Start-up unfriendly environment‘‘, Indian entrepreneurs have
already made India one of the tope 4 entrepreneurial hotbeds in the world.
 The Government must help start-ups promote themselves, not just in India
but across the globe.
 The Government should enable easy availability of loans across the country.
 Indigenous Start-ups will not only make the lives of the people easier
through their affordable and convenient services but will also act as a major
booster for the development and the progress of the Indian economy.

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 Feasibility Study:
 The word ―feasibility‖ means, the capacity of being practical and ―study‖
means examine closely.
 Thus, feasibility study is to examine closely the capability of a product being
practicable. In other words,
 It is the systematic method adopted to find out the possibility of manufacturing
a product at a particular place with all merits and demerits.
 An entrepreneur uses feasibility study as the first tool for deciding the project
to be under taken.
 Before taking an activity, an entrepreneur has to make enquiries about the
product he chooses.
 The feasibility study helps:
 To make an investment decision.
 To assess viability of the project for financial agencies for giving financial
assistance.
 To work out the economics of production.
 To estimate the profitability of the venture.
 To know the breakeven analysis for recommended size of the product.
 Thus, feasibility study is made by (i) entrepreneur (ii) industrial economist (iii)
development organisations.
 Elements of Feasibility Study:
The elements of feasibility study are 1) Demand Survey 2) Market Survey.

 Demand Survey:
 Demand survey is an essential aspect on the part of the entrepreneur.
 Demand survey is the process of knowing the demand of a particular
product that he intends to manufacture from the market before actual
production.
 Unless demand exists for products, no entrepreneur can flourish.
 The estimation of demand should be reasonably accurate for any project to
be successful.
 The demand survey will help the entrepreneur to forecast well in advance
about various factors for selecting raw material, equipment etc.
 Though demand survey is difficult, it is essential in formulating the project.
 The size of the demand survey at any time is a function of the following
variables.
1. Composition of the market.
2. Competition from other source of supply of the same product.
3. Distributive channels.
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 4. Income and price elasticity of demand market to socioeconomic patterns.
5. Consumption growth value.
 Demand survey will be carried on for short term needs and also for long
term needs. This is done by the following methods.
1. Historical estimate method;
2. Prior knowledge;
3. Sales force composite method.
4. Related information;
5. Trend line method;
6. Correlation method;
7. Delphi methods.

 Market Survey:
 A market survey is to be conducted by an entrepreneur as often as possible to
predict changes in the demand.
 It helps the entrepreneur to ensure himself about the future sales of his
proposed product.
 Market survey will furnish the following information about competitors,
traders and consumer.
(i) About competitors: Regarding installed capacity of the product, terms of
business, marketing areas, trade practices, and plans for expansion etc.
(ii) About distributors and retailers: Regarding the business terms, turnover,
relation with suppliers of other similar products, levels of stock etc.
(iii) About consumers: Regarding annual consumption, present source of
supply, preference to other brands, purchasing power etc.
 Steps involved in Market Survey:
1. Selection of product.
2. Identification of a product
3. Selection of specific product.
4. Determination of size and design of random sample.
5. Recruitment of trained field force.
6. Organisation of field work.
7. Scrutiny and computation of data.
8. Analysis of data.
9. Interpretation of data.

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 Feasibility Report of a Start-Up Plant / Processing Industry:

82
83
 6. TOTAL QUALITY MANAGEMENT
 Objectives:
 Explain the concept of quality
 List the quality systems and the elements of quality systems
 State the principles of quality assurance
 Understand the basic concepts of TQM
 Know the pillars of TQM
 List the evolution of ISO standards
 Explain ISO standards and ISO 9000 series of quality systems
 List the beneficiaries of ISO 9000
 Explain the concepts of ISO 14000
 Know the overview of PDCA cycle

 Introduction:
 Product quality plays an important role in the progress of a nation.
 Only quality product can establish its leadership in the global market.
 The present trend of the market reveals that the customers have been
demanding for quality, so it has become one of the sensitive issues for the
product survival in the open market.
 It is particularly very true for developing countries that are facing tough
competition in the global market.
 Thus, their export and market development are affected.
 Therefore, for developing countries, the industries have to pay attention in
producing products which can attain international standards.
 One of the common objectives of every organisation, whether large or small,
engaged in production of goods or services are to attain excellence in its
economic performance.
 The good economic is the most essential for survival and growth of any
organisation in the highly competitive circumstances of today.
 The single important factor which leads to economic performance of the
organisation is the quality of the products or services.
 When the quality is maintained in the products, the customers would be
satisfied.
 If the quality is not present, the demand for the products would reduce.
 Also maintaining too much quality would also cost more.
 For this, optimum qualities are to be maintained so that the cost is minimum.
 If the quality is maintained and at the same time the cost is minimised, then
the demand for the product increases and the management would get
maximum profit.
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  With the result the reputation of the industry increases.

 Concept and Meaning of Quality:

 Quality is a relative term and generally explained with reference to the end
use of the product.
 A component is said to be a good quality if it works well in the equipment
which it is meant.
 Quality is a customer‘s determination, not a producer‘s or supplier‘s
determination.
 It is based on the customer‘s actual experience with the products or service,
measured against his requirements.
 The concept of quality concern how well and for how long a product/service
meets the requirements of the customer.
 Meaning of Quality: The term ‗quality‘ has variety of meanings. In
industry, the meanings given to the word ‗quality‘ include-
 The degree to which a specific product satisfies the wants of specific
consumers. This is termed ―market-place quality‖.
 The degree to which a specific product conforms to a design or
specification.
 The degree to which a class of product possess potential satisfactions.
 The degree to which a specific product is preferred over competing
products of equivalent grade, based on comparative tests by consumer.
 For industrial purposes, the most fundamental of all these meanings is the
historical ―market-place quality‖.

 Definitions of Quality:
 Different investigators defined ‗Quality‘ in different ways since it applies to
a broad range of items.
 However, they all share the common assumption that the quality is defined
by the customer.
 Quality is referred in several ways such as ‗fitness for use‘, ‗fitness for
purpose‘, ‗customer‘s satisfaction‘ or ‗conformance to requirements‘.
 The complete explanation leads to the definition of quality as per ISO 9000
series as “The totality of features and characteristics of a product or
service, that bear on its ability of satisfy stated or implied needs.”
 According to Philip Crosby, quality is defined as “conformance to
requirements or specification”.
 According to Josaph. M. Juran, quality is defined as “fitness for use”.

85
  According to W. Edwards Deming, quality is defined as “continuous
improvement”.
 According to Kaoru Ishikawa, quality is defined as “most economical,
most useful and always satisfactory to the customer”.
 According to Bavid Thomes, “there can be no limit to quality that can be
produced even in the most menial jobs”.
 According to Armard Feigenabaun, “quality is what the customer says, it
is”.

 Quality Systems:
 Quality system is the organisational structure, responsibilities, procedures,
processes and resources for implementing quality management.
 Quality system can be defined as ―The collective plans, activities and events
that are provided to ensure a product process, or service will satisfy given
needs.‖
 Quality system is also sometimes referred to as Total Quality Control
System which also emphasises on replacement of conventional quality
control or quality inspection-oriented system.
 Application of quality system results into the cost savings.
 As per ISO, there are five documents of international standards of quality
system for implementation by the organisations.
1. I.S.O. 9001 Quality Systems – Model for quality assurance in
design/development, production, installation and servicing.
2. I.SO. 9002 Quality Systems – Model for quality assurance in production
and installation.
3. I.S.O. 9003 Quality Systems – Model for quality management in final
inspection and test.
4. I.S.O. 9004 Quality Systems – Model for quality management and quality
system elements and guidelines.
5. I.S.O. 9000 – Quality Management and Quality Assurance standards
(guidelines for selection and use).

 Elements of Quality Systems or Quality System Requirements:

 A quality system for design, development, production, installation and
service has twenty requirements (elements) which have to be established and
compiled for 9001 certifications.
 Similarly, for ISO 9002 which is subset of ISO 9001 has 18 elements and for
ISO 9003 has 12 elements.

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  The characteristics of these elements are common for all series 9001 to
9003. The first ten are the main elements of ISO 9001.
Sl. No. Elements ISO 9001 ISO 9002 ISO 9003
1. Management responsibility   
2. Quality system   
3. Contract review   ×
4. Design control  ×
5. Document control   
6. Purchasing  
7. Purchaser supplied products  
Product identification and
8.   
traceability
9. Process control  
10. Inspection and control   
Inspection, measuring and test
11.   
equipment
12. Inspection and test status   
Control of non-confirming
13.   
products
14. Corrective action  
Handling, storage, packing and
15.   
delivery
16. Quality records   
17. Internal quality audits  
18. Training   
19. Servicing  ×
20. Statistical techniques   
Applicable Not Applicable

 The terms used in these standards are defined in ISO 8402, but commonly
used terms ‗suppler‘, ‗purchaser‘ and ‗subcontractor‘ in these standards
mean to:
a) Supplier: The organisation to which the requirements of ISO 9001, ISO
9002 or ISO 9003 apply
b) Purchaser: The recipient of the products (including services) delivered
by the supplier.
c) Subcontractor: The organisation which provides products to the supplier.

1. Management responsibility: The management is responsible for establishing a

policy and customer satisfaction and provide organisational structure and resources
required for implementation of quality policy. The management should
 Define quality policy.
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  Create organisation.
 Provide resources.
 Define responsibility and authority.
 Appoint quality co-ordinator.
 Conduct periodic review.

2. Quality System:
 The quality system is the organisational structure, responsibilities, procedures,
processes and resources for implementing the quality management.
 The quality system is documented to ensure that the product (or service)
conforms to specified requirements.
 The quality system normally is documented by a ‗Quality Manual‘.
 The quality manual could be one document supported by several tiers of
documents, each tier becoming progressively more detailed.
 The most commonly used documented quality system consists of quality
manuals, quality plans and quality records as three tiers of it as shown in the
following triangle.
 Quality manual provides Quality
Manuals
complete description of quality
Quality Plans
management system. It
communicates quality policy and Quality Records
objectives of the company to
customers and company personnel. It is the foundation of the system.
 Quality plans are used to define how the quality system requirements will be
met in specific contracts or for a specific class of product.
 Quality records are used for recording quality objectives pertaining to design,
inspection, testing, survey, audit, review etc.

3. Contract review:
 The supplier should establish and maintain the procedures for contract review
and for the co-ordination of these activities.
 Each contract is reviewed by the supplier to ensure that
a) Purchaser‘s requirements are defined.
b) Requirements are understood.
c) Any deviation from tender are resolved.
d) Supplier is capable to meet producer‘s requirement.
 The contract has to be reviewed by both supplier and purchaser.
 Based upon the contract review, quality plans should be developed for
implementation of contract.
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4. Design Control:
 The purpose of design function is the translation of customer needs from
product brief into specifications for materials, processes and products.
 The perfect design results to a product that provides customer satisfaction at an
acceptable price that enables satisfactory return on investment for the
enterprise.
 ISO 9001 specifies for design control requirements for the design function
process as
a) Design planning.
b) Design input description.
c) Design output description.
d) Design verification.
e) Design change procedure.

5. Document Control:
 To meet the quality system requirements, various types of documents such as
quality manual, procedures, plans, forms, records, books, files, test certificates,
etc. has to be developed and maintained.
 All these quality system documents should be precisely controlled and the
responsibilities for the issue, distribution and administration including the
removal of obsolete documents should be clearly specified. Document control
consists of
a) Document approval.
b) Distribution of documents.
c) Removal of obsolete documents.
d) Document changes/modification.
e) Updating of documents.

6. Purchasing:
 The purchased materials, components and sub-assemblies become part of
company‘s final product quality.
 To ensure that purchased item and services conform to specified purchaser‘s
requirements and regulatory requirements, the purchasing should be planned
and carried out by the supplier under adequate control. The purchasing
activities include:
a) Assessment and selection of component subcontractors.
b) Preparation of clear and detailed specifications.
c) Verification and inspection of purchased items.
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7. Purchaser specified products:
 Purchaser supplied product is the product owned by the purchaser and furnished
to the supplier for use in meeting the requirements of the contract.
 The supplier should examine the product upon the receipt to check the quality,
its identity and detect any damage in transit.
 The proper storage, identification and use of material and performance of the
final product are the responsibility of the supplier.
 The supplier has to ensure that he has received right material from the
purchaser as per the contract. This includes:
a) Check to ensure freedom from any defect.
b) Store with proper traceability.
c) Prevent any unauthorised use.

8. Product identification and Traceability:

 Traceability is the ability to trace the history, application or location of an item
or activity by means of recorded identification, where in – plant traceability of
material is important for quality, the appropriate identification of the process.
 A person who performs the operations in each phase is also important. This
a) Provide for making or tagging on product / containers.
b) Proved identifiers for the process, tools, and batches.
c) Provide identifiers for the persons who perform the work.

9. Process Control:
 The desired product quality can be obtained by effective process control to
prevent non-conformities at various stages of process.
 The supplier shall identify and plan the production and installation process
which directly affect the quality and ensure that these processes are carried out
under controlled conditions. Process control constitute
a) Identifying critical characteristics of products.
b) Documenting standard operating procedures.
c) Monitoring and controlling critical characteristics.
d) Defining practical criteria for workmanship.
 The measurement and testing processes should adequately include in the
process control.

10. Inspection and Testing:

Inspection and testing of material and products should be done at receiving
stage, in-process stage and final stage before despatch. This include:
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 a) Verifying at receiving stage.
b) Conducting in-process inspection and tests.
c) Final inspection and testing of product.
d) Maintaining of all test records.

11. Inspection, measuring and Test Equipment: To control, calibrate and maintain
inspection, measuring the test equipment.

12. Inspection and Test status: The status of a product to be clear at all times, to
ensure that only products conforming to requirements are despatched, used or
installed.

13. Control of non-conforming product: To establish and maintain procedures to

prevent accidental use of installation of non-conforming products.

14. Corrective action: To establish and maintain procedures for the investigation and
rectification of all instances of non-conformity.

15. Handling, Storage, Packaging and Delivery: To establish and maintain

procedures for handling, storage, packaging and delivery of products aimed at
preventing damage or deterioration.

16. Quality recording: To establish and maintain procedures for record keeping and
usage to facilitate easy access and prevent loss, damage or deterioration.

17. Internal quality audits: To plan, execute and document a programme of internal
quality audits to ascertain whether quality activities conform to planned
arrangements and to evaluate the quality systems effectiveness.

18. Training: To establish and maintain procedures for identification of training

needs.

19. Servicing: To establish and maintain procedures for servicing and for ensuring
that, service meets requirements.

20. Statistical techniques: To initiate procedures for determining suitable statistical

techniques to check process capability and conformance to product specification.

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 Quality Assurance:
 This is the quality function for making a product.
 This is concerned with determining the procedures to be used and the type
and frequency of tests to be made within the system in order to ensure that
the system is meeting the specification embodied in the product design.
 It is not enough to produce goods in right quantity at right time, but it is
equally important to assure the customers that the goods produced are of
―specified quantity‖.
 So, the assurance system involves continuous evaluation of the adequacy
and effectiveness of the overall quality control programme with the view to
have the corrective measures wherever necessary.
 Quality assurance means ―A system of activities whose purpose is to provide
assurance to customers by the company and to show evidence that the
overall quality control is in fact being effective”.
 Quality assurance is defined as ―All those planned and systematic actions
necessary to provide adequate confidence that a product or service will
satisfy given quality requirements.”

 Principles of Quality Assurance:

Ishikawa has stressed the need of seven fundamental principles (points) as pre-
requisites for quality assurance.
1. The top management along with all employees must be quality conscious.
2. Adopt quality first as policy.
3. Adopt consumer-oriented policy.
4. Responsibility of the quality lies with the producer.
5. Follow product-oriented quality assurance.
6. Quality must be assured in product as well as in service.
7. Implement the quality standards whole heartedly, faithfully as everybody is
committed to achieve quality.

 Total Quality Management (TQM):

 As emphasised earlier, in this increasingly competitive world, quality is no
longer and optional extra, but needs to be integral part of the business.
 To meet these requirements, it demands total commitment from the entire
organisation.
 One approach which has been developed to highlight this need and to
provide the direction necessary to achieve these goals is that of total quality
management.

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  Definition: TQM is defined as ―A management approach to an organisation
centred on quality, based on the participation of all its members and aiming
at long-term success through customer satisfaction, and benefits to the
members of the organisation and to the society.”

 Importance of TQM:
 The survey conducted in 1979, over 50 % of customers emphasised on
quality and preference is given for quality rather than quantity.
 In 1986 survey, eight out ten buyers (international), industrial and consumer
markets made quality more important than price in the purchase value
decision.
 This change has a major influence on business results of organisations,
which led to recognition of the need to develop it as an integral part of a
business.
 One part of this response is TQM.

 Principles of TQM:
 Quality is neither a technical function nor a department but a systematic
process extending throughout the organisation.
 Quality is the concern of every one and must be correctly structured within
the organisation.
 The emphasis of quality must take place through all phases of the business.
 Quality achievement must be driven externally (by the customer) and not
internally (by the company).
 Quality provision needs appropriate new technology from Computer Aided
Design (CAD) to computer aided quality measurement and control.
 Achieving quality improvement based on participation and contribution of
those responsible for completing the task, but not group of specialists.
 Organisation should have a clear, customer-oriented quality management
system.

 Steps to be followed while introducing TQM:

 Taking decision to make quality leadership, a fundamental goal.
 The importance of TQM is conveyed in the phase itself.
 Make it companywide commitment for successful adoption.
 Involving TQM in reorientation of number of approaches including
continuous improvement in quality levels and process control.
 Introducing quality in the product/service at the design stage.

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  Optimising both product/service design and process/delivery system
development in line with quality and cost.
 Applying quality control principles to design.

 Pillars of TQM:
 The TQM implementation
should be successful if it
stands on eight pillars.
 The pillars should not be
isolated, but they need to
be bonded together for
better cohesion.
 Once the implementation
become successful, an
organization can achieve
its ultimate goal through
TQM, which is to supply
the quality product or
service to its customers.
 The proposed framework
of TQM implementation
is depicted in figure.
 SPC = Statistical Process
Control; PDSA = Plan –
Do – Study – Act;
FEMA= Foreign Exchange Management Act; TPM = Total Productive
Maintenance

 Evolution of I.S.O.:
 B.S. 5750 and ISO 9000 are becoming increasingly recognised as symbols
of quality in both manufacturing and service industries.
 Written quality standards date from early part of twentieth century and were
first adopted by Britain and America for defence items and this
standardisation give rise to MIL-Q-9858 and MIL-Q-45208 as quality
system specification and inspection respectively and both these standards are
ever currently used in American defence contracts.
 These standards form the basis for the series of standards designed for the
use within the ―North Atlantic Treaty Organisation‖ (NATO) and they are
referred as ―Allied Quality Assurance Publications‖ (AQAP) 1,4 and 9 of
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 these AQAP-1 was quality system specification covering manufacturing,
inspection and test, while AQAP-4 and 9 were the inspection system
specifications and as final inspection only.
 This system became the foundation of all subsequent standards including BS
5750.
 BS5750 was introduced in 1979. It was product of various Governments
dating from 1967 and this appeared in three parts 1, 2 and 3 based on
AQAP-1, 4 and 9.
 Later, a committee of International Standards Organisation (I.S.O), under
the chairmanship of Canada, worked to produce an international quality
standard.
 The committee considered many national inputs 1987, and came out with a
series of standards mainly based on BS 5750 with notes and commentaries.
This series includes ISO 9000 which embraces ISO 9001, ISO 9002, ISO
9003 and ISO 9004 titled as

ISO 9000 Quality Management and Quality Assurance Standards (Guideline of

selection and use)
ISO 9001 Quality systems – Model for Quality Assurance in design/development,
production, installation and servicing.
ISO 9002 Quality systems – Model for Quality Assurance in production and
installation.
ISO 9003 Quality systems – Model for Quality Assurance in final inspection and
test.
ISO 9004 Quality Management and Quality System elements - Guidelines.

 Necessity of International Standards:

 The basic aim of standardisation is to make a product, process or service fit
for its purpose.
 Such aims can include capability, interchange ability, variety control, safety,
protection of the environment, product protection, mutual understanding,
economic performance, trade etc.
 The basic purpose of quality series standard is for a company to be enable to
establish quality systems, maintain product integrity and satisfy the
customer.

 Beneficiaries of ISO 9000:

 Today more than 45 countries worldwide have got ISO 9000 certification.
 About 3000 Indian industries have already got ISO 9000 accreditation of
their quality systems.
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  Small scale industries are also getting interested for their products, ISO
9000 certified.
 Apart from the manufacturing units, educational institutions, hospitals,
transport systems and many software solution centres are also getting ISO
9000 certification.
 Few Indian industries listed below have got ISO 9000 accreditation:
 Reliance Industries Limited – ISO 14001
 Nilkamal Plastics Limited – ISO 9002 & ISO 14001
 Ashok Leyland Limited – ISO 9002
 L & T Constructions – ISO 9001
 BHEL, Hyderabad - ISO 9001
 Finolex Cables Limited – ISO 9002
 Moser Baer India Limited – ISO 9002

 Aims of BS 5750 and ISO 9000:

 To specify quality management system requirements.
 To provide a basis for contracts between purchaser and supplier.
 To enable any type of organisation to establish a clear, written and practical
quality management system.
 To provide a means of ascertaining the capability of a prospective supplier.
 To raise standards by promoting quality as a competitive weapon.
 To clarify the distinctions and inter - relationships among the principal
quality concepts.

 Advantages of ISO 9000 Series of Standards:

 It meets the customer‘s requirements by providing quality products or
services.
 It improves overall competitiveness.
 It gives worldwide recognition.
 It enhances marketing creditability.
 It establishes production creditability.
 It creates uniform quality systems.
 It improves internal operations.
 It avoids duplicative quality audits.
 It controls risks and exposures.
 It develops self-discipline.
 It is advertised and the people know about it and it may bring more business.
 It provides motivation to the staff.
 It reduces quality costs and so increases profits.
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  There will not be any rework or nothing for rectification, so easy to meet the
demand.
 It increases profitability and productivity.
 It creates confidence to management to deliver the goods of good quality
and create confidence to the customer about the capability of the company.
 It improves the financial performance by reducing the quality costs.
 It helps in organisation of Quality Management System (QMS).
 It increases export potential.
 It provides continuous improvement in the quality and innovation of new
products.

 Disadvantages of ISO 9000 series of standards:

 It increases Government involvement.
 It arises political confusion.
 It causes over-certification.
 It adds cost, but not value.
 It loses creditability.
 It gives no guarantee of customer‘s satisfaction or product quality.
 It appears conflicts of interest.
 It varies auditor quality.
 It gives difference in interpreting ISO 9000 standards.
 It does not satisfy customers in documentation.
 It will not emphases on continuous improvement.
 It delays in creativity and innovation.
 It creates over-promise and under-deliver.

 Outstanding features of ISO 9000 series of standards:

 It is produced by people who are very well conversant with the problems
and failure which occur in industries.
 There are three standards; each of them is a specification for quality system.
These three standards are progressive and additive.
 There is a little directive in this standard. In most cases it requires the
company to establish its own procedures.
 These standards are quite different from the traditional confines of metal
cutting industries.
 ISO 9004 standard addresses quality costs and product safety and liability
consideration where no reference is made in any one of the current operating
standards.

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 Beneficiaries (Areas of application of ISO 9000 series of standards):
These can be applied in various fields such as:
1. Marketing
2. Design and Development
3. Procurement
4. Production
5. Quality Assurance
6. Packing and storing
7. Sales and Distribution
8. Servicing
These are implemented to all type of organisations involved in production of
goods, providing services or developing software, belonging to Government
sector, public sector, joint sector, private sector or multinational.
Also, those organisations who want to survive in the continuous increasing
competition market and want to grow their business in the global market, must
implement ISO 9000.

 Concept of ISO 14000:

 The primary objective of the ISO 14000 series of standards is to promote
effective environmental management systems in organizations.
 The standards seek to provide cost-effective tools that make use of best
practices for organizing and applying information about environmental
management.
 ISO14000 is a series of environmental management standards developed and
published by the International Organization for Standardization (ISO) for
organizations.
 The ISO 14000 standards provide a guideline or framework for
organizations that need to systematize and improve their environmental
management efforts.
 The ISO 14000 standards are not designed to aid the enforcement of
environmental laws and do not regulate the environmental activities of
organizations.
 Adherence to these standards is voluntary.

 PDCA (Plan-Do-Check-Act) Cycle:

 PDCA (plan-do-check-act, sometimes seen as plan-do-check-adjust) is a
repetitive four-stage model for continuous improvement (CI) in business
process management.

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 The model is implemented to improve the
quality and effectiveness of processes within
product life cycle management, project
management, human resource management
(HRM), supply chain management (SCM) and
many other areas for business.
 PDCA was popularized by Dr. W. Edwards
Deming, an American engineer, statistician
and management consultant.
 Deming is often considered the father of
modern quality control (QC).
 Deming‘s theories form the basis for TQM and ISO 9001 quality standards.
 TQM processes are often divided into the four sequential categories: plan,
do, check and act.
 Plan: Define the problem to be addressed, collect relevant data, and
ascertain the problem‘s root cause.
Do: Develop and implement a solution; decide upon a measurement to
gauge its effectiveness.
Check: Confirm the results through before-and-after data comparison.
Act: Document the results, inform others about process changes, and make
recommendations for the problem to be addressed in the next PDCA cycle.

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 7. SMART TECHNOLOGIES
 Objectives:
 Get an overview of IoT
 Define the term IoT
 Know how IoT work
 List the key features of IoT
 List the components of IoT: hardware, software, technology and protocols
 List the advantages and disadvantages of IoT
 IoT applications
 Smart Energy and the Smart Grid

 Introduction:
 The internet of things, or IoT, is a system of
interrelated computing devices, mechanical
and digital machines, objects, animals or
people that are provided with unique
identifiers (UIDs) and the ability to transfer
data over a network without requiring human-
to-human or human-to-computer interaction.
 Out of the potential Internet of Things
application areas, Smart Cities (and regions),
Smart Car and mobility, Smart Home and
assisted living, Smart Industries, Public safety, Energy & Environmental
protection, Agriculture and Tourism as part of a future IoT Ecosystem have
acquired high attention.
 In line with this development, the majority of the governments in Europe, in
Asia, and in the Americas consider now the Internet of Things as an area of
innovation and growth.
 Although larger players in some application areas still do not recognise the
potential, many of them pay high attention or even accelerate pace by coining
new terms for the IoT and adding additional components to it.
 Moreover, end-users in the private and business domain have nowadays
acquired a significant competence in dealing with smart devices and networked
applications. As the Internet of Things continues to develop, further potential is
estimated by a combination with related technology approaches and concepts
such as cloud computing, Future Internet, Big Data, Robotics and Semantic
technologies.
 The idea is of course not new as such but becomes now evident as those related
concepts have started to reveal synergies by combining them.
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  In analogy to the definition that a universe is commonly defined as the totality
of existence, an Internet of Things universe might potentially connect
everything.
 As a further analogy to new theories about parallel universes, different Internet
of Things worlds might develop and exist in parallel, potentially overlap and
possess spontaneous.
 These forward-looking considerations do certainly convey a slight touch of
science fiction, but are thought to stimulate the exploration of future living
worlds.
 The overall scope is to create and foster ecosystems of platforms for connected
smart objects, integrating the future generation of devices, network
technologies, software technologies, interfaces and other evolving ICT
innovations, both for the society and for people to become pervasive at home,
at work and while on the move.
 The Internet of Things continues to affirm its important position in the context
of Information and Communication Technologies (ICT) and the development
of society.
 Whereas concepts and basic foundations have been elaborated and reached
maturity, further efforts are necessary for unleashing the full potential and
federating systems and actors.

 Internet of Things Vision:

 Internet of Things (IoT) is a concept and
a paradigm that considers pervasive
presence in the environment of a variety
of things/objects that through wireless
and wired connections and unique
addressing schemes are able to interact
with each other and cooperate with other
things/objects to create new
applications/services and reach common
goals.
 In this context the research and development challenges to create a smart world
are enormous.
 A world where the real, digital and the virtual are converging to create smart
environments that make energy, transport, cities and many other areas more
intelligent.

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 The goal of the Internet of Things is to enable things to be connected anytime,
anyplace, with anything and anyone ideally using any path/network and any
service.
 Internet of Things is a new revolution of the Internet.
 Objects make themselves recognizable and they obtain intelligence by making
or enabling context related decisions thanks to the fact that they can
communicate information about themselves.
 They can access information that has been aggregated by other things, or they
can be components of complex services.
 New types of applications can involve the electric vehicle and the smart house,
in which appliances and services that provide notifications, security, energy-
saving, automation, telecommunication, computers and entertainment are
integrated into a single ecosystem with a shared user interface.
 Obviously, not everything will be in place straight away.
 Developing the technology in Europe right now - demonstrating, testing and
deploying products – it will be much nearer to implementing smart
environments by 2020.
 In the future computation, storage and communication services will be highly
pervasive and distributed: people, smart objects, machines, platforms and the
surrounding space (e.g., with wireless/wired sensors, M2M devices, RFID tags,
etc.) will create a highly decentralized common pool of resources (up to the
very edge of the ―network‖) interconnected by a dynamic network of networks.
 The ―communication language‖ will be based on interoperable protocols,
operating in heterogeneous environments and platforms.
 IoT in this context is a generic term and all objects can play an active role
thanks to their connection to the Internet by creating smart environments,
where the role of the Internet has changed.
 This powerful communication tool is providing access to information, media
and services, through wired and wireless broadband connections.
 The internet of Things makes use of synergies that are generated by the
convergence of Consumer, Business and Industrial Internet, as shown in figure.
 The convergence creates the open, global network connecting people, data and
things.
 This convergence leverages the cloud to connect intelligent things that sense
and transmit a broad array of data, helping creating services that would not be
obvious without this level of connectivity and analytical intelligence.
 The use of platforms is being driven by transformative technologies such as
cloud, things, and mobile.

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 The cloud enables a global infrastructure to generate new services, allowing
anyone to create content and applications for global users.
 Network of things connect things globally and maintain their identity online.
 Mobile allows connection to this global infrastructure anytime, anywhere.
 The result is a globally accessible network of things, users, and consumers,
who are available to create business, contribute content, generate and purchase
new services.
 Platforms also rely on the power of network effects, as they allow more things,
they become more valuable to the other things and to users that make use of
the services generated.
 The success of a platform strategy of IoT can be determined by connection,
attractiveness and knowledge/information/data flow.
 Enabling technologies for the Internet of Things such as sensor networks,
RFID, M2M, mobile Internet, semantic data integration, semantic search, IPv6,
etc. are considered and can be grouped into three categories:
(i) Technologies that enable ―things‖ to acquire contextual information.
(ii) Technologies that enable ―things‖ to process contextual information, and
(iii) Technologies to improve security and privacy.
 The first two categories can be jointly understood as functional building blocks
required building ―intelligence‖ into ―things‖, which are indeed the features
that differentiate the IoT from the usual Internet.
 The third category is not a functional but rather a de facto requirement, without
which the penetration of the IoT would be severely reduced.
 Internet of Things developments implies that the environments, cities,
buildings, vehicles, clothing,
portable devices and other
objects have more and more
information associated with
them and/or the ability to
sense, communicate, network
and produce new information.
 In addition, we can also
include non-sensing things
(i.e. things that may have
functionality, but do not
provide information or data).
 All the computers connected
to the Internet can talk to each other and with the connection of mobile phones
it has now become mobile.
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  With the Internet of Things, the communication is extended via Internet to all
the things that surround us.
 The Internet of Things is much more than M2M communication, wireless
sensor networks, 2G/3G/4G, RFID, etc.
 These are considered as being the enabling technologies that make ―Internet of
Things‖ applications possible.

 Internet of Things Common Definition:

 The use of IP to communicate with and
control small devices and sensors opens
the way for the convergence of large, IT-
oriented networks with real time and
specialized networked applications.
 Currently, the IoT is made up of a loose
collection of disparate, purpose-built
networks, which are mostly not inter-
connected.
 Today‘s vehicles, for example, have multiple networks to control engine
function, safety features, communications systems, and so on.
 Commercial and residential
buildings also have various
control systems for heating,
venting, and air conditioning
(HVAC); telephone service;
security; and lighting.
 As the IoT evolves, these
networks, and many others,
will be connected
with added security, analytics,
and management capabilities
and some of them
will converge.
 This will allow the IoT to become even more powerful in what it can help
people achieve.
 A presentation of IoT as a network of networks is given in figure.
 The Internet of Things is not a single technology, it‘s a concept in which most
new things are connected and enabled.
 Distribution, transportation, logistics, reverse logistics, field service, etc. are
areas where the coupling of information and ―things‖ may create new business
processes or may make the existing ones highly efficient and more profitable.

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 The Internet of Things provides solutions based on the integration of
information technology, which refers to hardware and software used to store,
retrieve, and process data and communications technology which includes
electronic systems used for communication between individuals or groups.
 The rapid convergence of information and communications technology is
taking place at three layers of technology innovation: the cloud, data and
communication pipes/networks, and device as presented in the figure.
 As a result of this convergence, the IoT applications require that classical
industries are adapting and the
technology will create
opportunities for new industries to
emerge and to deliver enriched and
new user experiences and services.
 In addition, to be able to handle the
sheer number of things and objects
that will be connected in the IoT,
cognitive technologies and
contextual intelligence are crucial.
 This also applies for the
development of context aware applications that need to be reaching to the
edges of the network through smart devices that are incorporated into our
everyday life.
 The Internet is not only a network of computers, but it has evolved into a
network of devices of all types and sizes, vehicles, smartphones, home
appliances, toys, cameras, medical instruments and industrial systems, all
connected, all communicating and sharing information all the time as presented
in figure.
 The Internet of Things had until recently different means at different levels of
abstractions through the value chain, from lower level semiconductor through
the service providers.
 The Internet of Things is a ―global concept‖ and requires a common definition.
 Considering the wide background and required technologies, from sensing
device, communication subsystem, data aggregation and pre-processing to the
object instantiation and finally service provision, generating an unambiguous
definition of the ―Internet of Things‖ is non-trivial.
 The International Energy Research Centre (IERC) is actively involved in ITU-
T study group 13, which leads the work of the International
Telecommunication Union – Telecommunication (ITU) on standards for next
generation networks (NGN) and future networks and has been part of the team
which has formulated the following definition:
 “Internet of things (IoT): A global infrastructure for the information society,
enabling advanced services by interconnecting (physical and virtual) things
based on existing and evolving interoperable information and communication
technologies. NOTE 1 – Through the exploitation of identification, data
capture, processing and communication capabilities, the IoT makes full use of
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 things to offer services to all kinds of applications, whilst ensuring that
security and privacy requirements are fulfilled. NOTE 2 – From a broader
perspective, the IoT can be perceived as a vision with technological and
societal implications.”
 The IERC definition states that IoT is “A dynamic global network
infrastructure with self-configuring capabilities based on standard and
interoperable communication protocols where physical and virtual “things”
have identities, physical attributes, and virtual personalities and use intelligent
interfaces, and are seamlessly integrated into the information network.”

 Key Features of IoT:

 Artificial Intelligence (AI)
 Connectivity
 Sensing
 Active Engagement
 Scale
 Dynamic Nature
 Energy
 Safety
 Integration

 Components of IoT:
 Hardware: It makes physical objects responsive and giving them capability to
retrieve data and respond to instructions. The desktop, tablet and cell phone
remain integral parts of IoT as the command centre and remotes.
 Accelerometers
 Temperature sensors
 Magnetometers
 Proximity sensors
 Gyroscope
 Image sensors
 Acoustic sensors
 Light sensors
 Pressure sensors
 Gas RFID sensors
 Humidity sensors
 Micro flow sensors
 Software: It enables data collection, storage, processing, manipulating and
instructing. The various applications of software are:
 Data collection
 Device integration
 Real-Time Analytics
 Application
 Process Extension

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  Technology and Protocols: Technologies and protocols enable two physical
objects to exchange data. The major enabling technologies and protocols of
IoT are:
 RFID
 NFC
 Low-energy Bluetooth
 Low-energy wireless
 Low-energy radio protocols
 LTE-A
 Wi-Fi-Direct

 Advantages of IoT:

(i) Communication:
IoT encourages the communication between devices, also famously known as
Machine-to-Machine (M2M) communication. Because of this, the physical
devices are able to stay connected and hence the total transparency is available
with lesser inefficiencies and greater quality.

(ii) Automation and Control:

Due to physical objects getting connected and controlled digitally and centrally
with wireless infrastructure, there is a large amount of automation and control
in the workings. Without human intervention, the machines are able to
communicate with each other leading to faster and timely output.

(iii) Information:

It is obvious that having more information helps making better decisions.

Whether it is mundane decisions as needing to know what to buy at the grocery
store or if your company has enough widgets and supplies, knowledge is power
and more knowledge is better.

(iv) Monitor:

The most obvious advantage of IoT is monitoring. Knowing the exact quantity
of supplies or the air quality in your home, can further provide more
information that could not have previously been collected easily. For instance,
knowing that you are low on milk or printer ink could save you another trip to
the store in the near future. Furthermore, monitoring the expiration of products
can and will improve safety.

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(v) Time:

As hinted in the previous examples, the amount of time saved because of IoT
could be quite large. And in today‘s modern life, we all could use more time.

(vi) Money:

The biggest advantage of IoT is saving money. If the price of the tagging and
monitoring equipment is less than the amount of money saved, then the
Internet of Things will be very widely adopted. IoT fundamentally proves to be
very helpful to people in their daily routines by making the appliances
communicate to each other in an effective manner thereby saving and
conserving energy and cost. Allowing the data to be communicated and shared
between devices and then translating it into our required way, it makes our
systems efficient.

(vii) Automation of daily tasks leads to better monitoring of devices:

The IoT allows you to automate and control the tasks that are done on a daily
basis, avoiding human intervention. Machine-to-machine communication helps
to maintain transparency in the processes. It also leads to uniformity in the
tasks. It can also maintain the quality of service. We can also take necessary
action in case of emergencies.

(viii) Efficient and Saves Time:

The machine-to-machine interaction provides better efficiency, hence; accurate

results can be obtained fast. This results in saving valuable time. Instead of
repeating the same tasks every day, it enables people to do other creative jobs.

(ix) Saves Money:

Optimum utilization of energy and resources can be achieved by adopting this

technology and keeping the devices under surveillance. We can be alerted in
case of possible bottlenecks, breakdowns, and damages to the system. Hence,
we can save money by using this technology.

(x) Better Quality of Life:

All the applications of this technology culminate in increased comfort,

convenience, and better management, thereby improving the quality of life.

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 Disadvantages of IoT:

(i) Compatibility:

Currently, there is no international standard of compatibility for the tagging

and monitoring equipment. This disadvantage is the easiest to overcome. The
manufacturing companies of these equipment just need to agree to a standard,
such as Bluetooth, USB, etc. This is nothing new or innovative needed.

(ii) Complexity:

As with all complex systems, there are more opportunities of failure. With the
Internet of Things, failures could sky rocket. For instance, let‘s say that both
you and your spouse each get a message saying that your milk has expired, and
both of you stop at a store on your way home, and you both purchase milk. As
a result, you and your spouse have purchased twice the amount that you both
needs. Or maybe a bug in the software ends up automatically ordering a new
ink cartridge for your printer each and every hour for a few days, or at least
after each power failure, when you only need a single replacement.

(iii) Privacy/Security:

With all of this IoT data being transmitted, the risk of losing privacy increases.
For instance, how well encrypted will the data be kept and transmitted with?
Do you want your neighbours or employers to know what medications that you
are taking or your financial situation?

(iv) Safety:

Imagine if a notorious hacker changes your prescription. Or if a store

automatically ships you an equivalent product that you are allergic to, or a
flavour that you do not like, or a product that is already expired. As a result,
safety is ultimately in the hands of the consumer to verify any and all
automation.

As all the household appliances, industrial machinery, public sector services

like water supply and transport, and many other devices all are connected to
the Internet, a lot of information is available on it. This information is prone to
attack by hackers. It would be very disastrous if private and confidential
information is accessed by unauthorized intruders.

(v) Lesser Employment of Menial Staff:

The unskilled workers and helpers may end up losing their jobs in the effect of
automation of daily activities. This can lead to unemployment issues in the
society. This is a problem with the advent of any technology and can be
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 overcome with education. With daily activities getting automated, naturally,
there will be fewer requirements of human resources, primarily, workers and
less educated staff. This may create Unemployment issue in the society.

(vi) Technology Takes Control of Life

Our lives will be increasingly controlled by technology, and will be dependent

on it. The younger generation is already addicted to technology for every little
thing. We have to decide how much of our daily lives are we willing to
mechanize and be controlled by technology.

 SMART ENERGY AND THE SMART GRID:

 There is increasing public awareness about the changing paradigm of our
policy in energy supply, consumption and infrastructure.
 For several reasons our future energy supply should no longer be based on
fossil resources.
 Neither is nuclear energy a future proof option.
 In consequence future energy supply needs to be based largely on various
renewable resources.
 Increasingly focus must be directed to our energy consumption behaviour.
 Because of its volatile nature such supply demands an intelligent and flexible
electrical grid which is able to react to power fluctuations by controlling
electrical energy sources (generation, storage) and sinks (load, storage) and by
suitable reconfiguration.
 Such functions will be based on networked intelligent devices (appliances,
micro-generation equipment, infrastructure, consumer products) and
grid infrastructure elements, largely based on IoT concepts.
 Although this ideally requires insight into the instantaneous energy
consumption of individual loads (e.g. devices, appliances or industrial
equipment) information about energy usage on a per-customer level is a
suitable first approach.
 Future energy grids are characterized by a high number of distributed small
and medium sized energy sources and power plants which may be combined
virtually ad hoc to virtual power plants; moreover, in the case of energy
outages
or disasters certain areas may be isolated from the grid and supplied from
within by internal energy sources such as photovoltaics on the roofs, block
heat and power plants or energy storages of a residential area (―islanding‖).
 A grand challenge for enabling technologies such as cyber-physical systems

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 is the design and
deployment of an
energy system
infrastructure that is
able to provide blackout
free electricity
generation and
distribution, is flexible
enough to allow
heterogeneous energy
supply to or withdrawal
from the grid, and is
impervious to
accidental or intentional
manipulations.
 Integration of cyber-physical systems engineering and technology to the
existing electric grid and other utility systems is a challenge.
 The increased system complexity poses technical challenges that must be
considered as the system is operated in ways that were not intended when
the infrastructure was originally built.
 As technologies and systems are incorporated, security remains a paramount
concern to lower system vulnerability.
 These challenges will need to be address as well by the IoT applications that
integrate
heterogeneous
cyber-physical
systems.
 The developing
Smart Grid, which
is represented in
figure is expected
to implement a new
concept of
transmission
network which is
able to efficiently
route the energy
which is produced
from both
concentrated and
distributed plants to
the final user with high security and quality of supply standards.
 Therefore, the Smart Grid is expected to be the implementation of a kind of
―Internet‖ in which the energy packet is managed similarly to the data
packet—across routers and gateways which autonomously can decide the
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 best pathway for the packet to reach its destination with the best integrity
levels.
 In this respect the ―Internet of Energy‖ concept is defined as a network
infrastructure based on standard and interoperable communication
transceivers, gateways and protocols that will allow a real time balance
between the local and the global generation and storage capability with the
energy demand.
 This will also allow a high level of consumer awareness and involvement.
 The Internet of Energy (IoE) provides an innovative concept for power
distribution, energy storage, grid monitoring and communication as
presented in Figure.
 It will allow units of energy to be transferred when and where it is needed.
 Power consumption monitoring will be performed on all levels, from local
individual devices up to national and international level.
 Saving energy based on an improved user awareness of momentary energy
consumption is another pillar of future energy management concept.
 Smart meters can give information about the instantaneous energy
consumption to the user, thus allowing for identification and elimination of
energy wasting devices and for providing hints for optimizing individual
energy consumption.
 Sophisticated and flexible data filtering, data mining and processing
procedures and systems will become necessary in order to handle the high
amount of raw data provided by billions of data sources.
 System and data models need to support the design of flexible systems
which guarantee a reliable and secure real-time operation.
 Some research challenges:
 Absolutely safe and secure communication.
 Addressing scalability and standards interoperability.
 Energy saving robust and reliable smart sensors/actuators.
 Technologies for data anonymity addressing privacy concerns.
 System partitioning (local/cloud-based intelligence).
 Mass data processing, filtering and mining; avoid flooding of
communication network.
 Real-time Models and design methods describing reliable interworking
of heterogeneous systems (e.g.
technical/economical/social/environmental systems). Identifying and
monitoring critical system elements. Detecting critical overall system
states in due time.
 System concepts which support self-healing and containment of
damage; strategies for failure contingency management
 Scalability of security functions
 Power grids have to be able to react correctly and quickly to fluctuations
in the supply of electricity from renewable energy sources
such as wind and solar facilities.
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 Glossary

 OEM: ORIGINAL EQUIPMENT MANUFACTURER

 Telematics: The branch of information technology which deals with the long-distance
transmission of computerized information.
 NFC: NEAR FIELD COMMUNICATIONS
 Moore's Law is a computing term which originated around 1970; the simplified version of
this law states that processor speeds, or overall processing power for computers will double every
two years.
 API = An application Programme Interface

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