UNIT-1

Industrial Management EHU-601

Introduction : Concept, Development, application and scope of Industrial Management.
Productivity : Definition, measurement, productivity index, types of production system, Industrial Ownership.
________________________________________________________________________________________
MANAGEMENT
Traditional Author says that management is an art of getting things done through people where as modern
authors says that management is a process of accomplishing certain objectives through the utilization of human
and other resource.

IMPORTANCE OF MANAGEMENT

For the accomplishment of the goals.

For effective utilization of the resources.

Sound Organization.

Providing vision &Foresight.

For the harmony in work.

To help employees in achieving personal objective.

Development of the society and nation.

Industrial Engineering is concerned with the design, improvement and installation of

integrated system of men, material and machines for the benefit of mankind. It draws
upon specialized knowledge and skills in the mathematical and physical sciences together
with the principles and methods of engineering analysis and design to specify predict and
evaluate the results to be obtained from such systems.
INDUSTRIAL MANAGEMENT

Industrial management is now a branch of engineering which facilitates creation of management system
and integrates same with people and their activities to utilize the resources.

Industrial management is structured approach to manage the operational activities of the organization.

Need of industrial management

To ensure maximum output with minimum cost of production.

To ensure that activities of different individuals are coordinated to attain the common purpose in the
factory.
Goods are produced and delivered on the promised dates.
Goods are manufactured in strict specification of customers orders.
Proper accounting, reporting and controlling the operations in the factory.
To classify the function of a factory into various categories and entrust duties and responsibilities to all
concerned so as to ensure specialization which increase the speed and accuracy of work.
To prevent wastage and losses.
Quality products.
Utilization of full capacity of the factory.
R &D.
Innovation
Industry is kept in perfect order.
The required materials are obtained at the time of their requirement.

Scope of industrial management

Industry Planning

Industry Organization

Factory Management

Materials Management

Labor Administration

Industry Control

APPLICATION OF THE INDUSTRIAL MANGEMNT

1. Planning Function

For Designing Conversion System

For Scheduling Conversion System

2. Organizing Function

Organizing for conversion

Structuring of Operation Staffing

Job & Work Design.

For Production & Operation Standard.

For Payment system.

3. Controlling Function

Quality

Quantity

Time

Inventory

Cost

Maintenance

DEVELOPMENT OF INDUSTRIAL MANAGEMENT

Phase 1 : Application of management knowledge

Development of management is of recent origin. The construction and completion of gigantic projects like great
wall of china and pyramids of Egypt shows the use of management abilities by the people of ancient world. The
concept of management has been developed and practiced in early days in Government and military
organization. Management principles such as unity of command , scalar principles, effective communication had
been practiced in administration of the army.

Phase 2 : Pre-Scientific management.

Robert Owen (1771-1858)
He conducted experiments in the field of personnel management of textile mills in Scotland. He took efforts in
improving working conditions in the factory, reduce working hours, increase minimum wages provide meals to
employees, allocate education provision , housing and other labor welfare facilities.
Charles Babbage (1792-1871)
He was a professor of Maths at Cambridge University.
He suggested Division of labor, work measurement, project sharing and engineering to improve the efficiency of
management. He had invented mechanical calculator.
Henry Robinson Towne(1844-1924)
He was the president of the famous manufacturing co ale and Towne in USA, He stressed upon the need to
develop management as a separate and distinct discipline and motivated engineers to study management.
Charles Dupin (1784-1873)
He emphasized on systematic education in management. He was a French engineer and tried to structure the
subject matter of management. These early contributors focused on managerial problem.

Phase 3 : Classical theory

It emphasizes on organizational efficiency to increase organizational success
It is based on the following assumptions
Management is the study of management experiences
Management principles can be distilled from experience in the management of different types of
organization
The theoretical research can be designed to develop a body of knowledge to improve the art of
management.
1 . Scientific Management :
Scientific management may be defined as the Art of knowing exactly what is to be done and the best way of
doing it.
In short it is the application of scientific principles and methods to management.
Frederick Winslow Taylor
Fredrick Winslow Taylor is know as the founder of Scientific Management. Taylor laid the foundation for
modern scientific management between 1880 and 1890. He reformed the management through a thoughtful and
systematic approach to its problems. Taylor found that much of waste (man, time, energy, efficiency etc) is due
to the lack of order and system in the management.
Taylor therefore suggested that management should adopt scientific methods for achieving higher efficiency.
Some of his significant achievements were
- Work study
- Standardization of tools and equipment or workmen and working conditions
- Incentive scheme
- Principles of management
- Application of scientific methods.
Essentials of scientific management

i)
ii)
iii)
iv)

To find out waste and its cost

To eliminate waste
To pay uniform wages with reduced labour cost
To increase purchasing power of customer by lowering unit cost.

Main elements of scientific management

a. Recognize the problem, analyze and define objectives
b. Collect and analyze the required data
c. Select alternatives
d. Evaluate and review each alternatives
e. Test conclusions and if required correct actions
f. Take selected action and
g. Formulate and test principles based on experimental results of all the cases,
Frank Bunker Gilberth was interested in improving the efficiency through improvement of methods of doing
work that is method study.
Henry . L Gantt the originator of Gantt chart laid much of the ground work for the developing activity
industrial engineering.
2. Henry Fayols Contribution: Administrative theory
Henry Fayol, a French industrialist and manager, was one of the first writers who propounded his theory of
management. He was the first who suggested the functions of management. These functions have been
recognized as the main task of manager in modern management theories. Management thoughts of Fayol can be
classified into the following three categories
1. Functions of management
2. Principles of management
3. Abilities required from the managers
Six activities identified by Henry Fayol
Fayol analyzed the process of management as he had observed it first hand. His conclusions was that all work
done in business enterprises can be divided into six groups. He believed that if any kind of business was to
operate successfully, these six functions had to be performed. If any one was neglected, the enterprise would
suffer accordingly. The six activities were:
1.
2.
3.
4.
5.
6.

Technical activities (Production, manufacture, adaptation)

Commercial activities (buying, selling, exchange)
Financial activities (search for optimum use of capital)
Security activities (protection of property and persons)
Accounting activities (stock taking, balance sheets, costs, statistics)
Managerial (administrative) activities (planning, organization, command, co-ordination and control)

Principles laid down by Henry Fayol

Fayol devoted most of his attention to the managerial activities. In doing so he enunciated certain principles
which hold ground (with suitable modifications) to this day. The principles laid down by him were
1. Division of work
2. Authority and responsibility
3. Discipline
4. Unity of command
5. Unity of direction
6. Subordination of individual to general interest
7. Remuneration
8. Centralization of authority
9. Scalar chain
10. Order
11. Equity of treatment

12. Stability
13. Initiative
14. Esprit de corps. (In union there is strength)
Criticism
. It is true that a manager must direct, command and order to get things done. But he also encourages,
communicates, develops, and stimulates.

4. Neo Classical Theory

Hawthrone studies
Elton Mayo and F.J Roethlisberger undertook the famous experiments at the Hawthrone plant of the western
electric company between 1927 and 1932. Mayo and his colleagues found that changing illumination for the test
group, modifying rest period, shortening workdays and varying incentive pay systems did not seem to explain
changes in productivity. They came to the conclusion that factors other than these were responsible for the
changes in productivity. They found that the improvement in productivity was due to such factors as morale, in
sense of belonging which came about due to improved interrelationships between members of a work group,
and effective management. Effective management was a kind of managing that would understand human
behavior, especially group behaviour and serve it through such skills as motivating, counseling, leading and
communicating. This phenomenon, arising basically from people being noticed has been known as the
Hawthrone effect.
The Hawthrone studies previously emphasized that humans are social, that business operations are not merely a
matter of machinery and method but also of gearing these with the social system to develop a complete sociotechnical system.
Elton Mayos contribution
He was recognized as the father of Human Relations Approach. Mayo led the team, which conducted the
study at Western Electrics Hawthrone plant to evaluate the attitudes and psychological relations of workers in on
the job situations. His idea was that logical factors were far less important than emotional factors in determining
production efficiency.

He was of the opinion that the cause of increase in productivity of the workers is not a single factor like
changing working hours or rest pauses, but a combination of these and several other factors such as less
restrictive methods of supervision giving autonomy to the workers allowing the formation of small
cohesive groups of workers, cooperation between workers and management, opportunity to be heard,
participation in decision making etc.,

Main aspects

It draws concept from psychology, sociology, human relations, inter-personnel relationships, satisfaction
of workers needs etc
Since management is getting things done through people the managers must have a basic understanding
of human behaviour and human relations in all its aspects, particularly in the context of work groups and
organizations
Management must study inter-personnel relations among people
Greater production and higher motivation can be achieved only through good human relations
Motivation, leadership, communication, participative management and group dynamics are the core of
this school of thought,

Phase 5 : MODERN APPROACH TO MANAGEMENT

It indicates to further refinement extension and synthesis of all classical and neoclassical approach to
management.

1. QUANTITATIVE APPROACH TO MANAGMGENT

It is known as management Science Approach. It offers quantitative aids to descision making develops tools to
assist in providing products and services.
Tools to management Science include :

Decision trees.
Network models
Game theory
Inventory Model
Simulation Models(Artificial Intelligence, management games etc )

It aims at achieving high degree of precision , perfection and objectivity by encouraging the use of mathematical
and statistical tools for solving complex problems.
2. SYSTEM APPROACH
It tries to solve problems by diagnosing them within a framework of inputs, transformation processes outputs and
feedback.
Features :

Organization is an open adaptive system which interacts with the environment .

It is also a dynamic system.
It is the responsibility of management to regulate and modify the system so as to optimize performance.
An organization is a system consisting of four main parts or subsystems namely task, structure people
and environment.
The subsystems of the organization system are interconnected and interdependent.

3. CONTINGENCY APPROACH

It argues that appropriate managerial action depends on particular parameters of the situation.
The founders of this approach says that Effectiveness if a given management is contingent upon many
factors and their interrelationship in a particular situation.
It is situation oriented urging upon management to study analyze and diagnose the situation

PRODUCTION
Production is transformation of inputs into the output of commodity in a specific period of time with the given
technology.
Production implies the creation of form, place and time utilities of different usable commodities and service.

Production System

The production system can be viewed as a framework or skeleton of activities within which the creation of
value can occur.
The difference between the value of input and the value of output represent the value created through
production activities.
At the one end of the production system are the input and at the other end are output.
Connecting the input and output are a series of operations or processes, storage and inspections represent
the simplified production system.

Figure : PRODUCTION SYSTEM

Input

Receiving Reports

Row material

Inventory Reports

Operation - 1

Schedules

Production Manager
Operation 2

Production
Route Sheets

Production Reports
Operation 3

Final inspection

Time and Cost Record

Inspection Reports

Finished goods storage

Inventory Reports

Output

Shipping Orders

Manager

INPUT OUTPUT MODEL (ANALYSIS OF PRODUCTION SYSTEM)

It is one of the basic models of the production system.
Production system is the set of interconnected input output element.
It is made up of three component parts namely Input, Output and Process.
A wide variety of inputs are transformed so that they give out a set of output.
The transforming process can be complicated and the design of an actual input and output system for
manufacturing may be expensive and difficult.

MATERIAL

PLANT

MEN

&

GOODS &
SERVICES

FACILITIES
INPUT

ENERGY

PRODUTION
PROCESS

OUTPUT

PRODUCTIVITY
Productivity is an overall measure of the ability to produce a good or service. More specifically,
productivity is the measure of how specified resources are managed to accomplish timely objectives as
stated in terms of quantity and quality. Productivity may also be defined as an index that measures
output (goods and services) relative to the input (labor, materials, energy, etc., used to produce the
output).
Hence, there are two major ways to increase productivity: increase the numerator (output) or decrease
the denominator (input). Of course, a similar effect would be seen if both input and output increased,
but output increased faster than input; or if input and output decreased, but input decreased faster than
output.
Productivity is an objective concept. As an objective concept it can be measured, ideally against a
universal standard. As such, organizations can monitor productivity for strategic reasons such as
corporate planning, organization improvement, or comparison to competitors. It can also be used for
tactical reasons such as project control or controlling performance to budget. Productivity is also a
scientific concept, and hence can be logically defined and empirically observed. It can also be measured
in quantitative terms, which qualifies it as a variable. Therefore, it can be defined and measured in
absolute or relative terms. However, an absolute definition of productivity is not very useful; it is much
more useful as a concept dealing with relative productivity or as a productivity factor.
Productivity is useful as a relative measure of actual output of production compared to the actual input
of resources, measured across time or against common entities. As output increases for a level of input,
or as the amount of input decreases for a constant level of output, an increase in productivity occurs.
Therefore, a "productivity measure" describes how well the resources of an organization are being used
to produce input.

DEFINITION OF PRODUCTIVITY AND ITS MEASUREMENT

Productivity can be defined as the ratio of financial output in a period of time to the financial input in the same period of
time. Productivity can thus be measured as
Productivity = Financial efficiency=

Financial output (in a period of time)

-
Financial input (in the same period)

In simple terms productivity is the quantitative relationship between what we produce (output) and the resources
(inputs) which we used.
Term Productivity symbolizes

It relates the output to input in any system. Where some value addition is performed on the input resource.

Quantitaive measure of performance.

It intergrates performance aspects of quality +efficiency +effectiveness.

Efficiency (resource utilization): is the ratio of actual output to the expected output.
Therefore indicates a measure of how well the resources are utilized to accomplish a target or result.

Effectiveness (performance) : is the degree of accomplishing the objectives. Therefore effectiveness indicates a
measure of how well a set of targets or results are accomplished.

PRODUCTIVITY AND PRODUCTION

Production refers to absolute output.

Productivity is relative.

Production is related to the activity of producing goods and services. It is a rocess of converting input into
some useful , value added output.

Productivity is related to the efficient utilization of input resources into produced output in the form of value
added goods and services

Thus, if the input increases the output will normally increase in the same proportion. The productivity
remains unchanged. If. however, the output increases with the same input of resources or we get the same
output with lesser input of the resources, the productivity increases.
Production means the output in terms of money (or the number of units produced) without any regard to the
input of resources, while productivity is an attitude to produce more and more with less and less inputs of
resources so that the benefits of improved productivity will be distributed to a large number of people.

MEASURE OF PRODUCTIVITY IS PRODUCTIVITY INDEX

Productivity Index = Productivity during the current year/ Productivity during the base period

Productivity Index = (Aggregated output in the measured period/Resource input in the measured
period) (Aggregated output in the base period/Resource input in the base period)

Hence it is a measure of the change in productivity over time.

DIFFERENT APPROACHES TO MEASURE PRODUCTIVITY

These are of three types:
1. Partial productivity
2. Total factor
3. Total productivity

1. Partial productivity- It is defined on the basis of class of input being considered. Ex: If labor is
increased by 18% during last financial year, its effect on the increased output is represented by
labor productivity.
Labor productivity or human productivity = Output/Human Input
Material productivity = Output/ Material Input
Capital productivity= Output/Capital Input
Energy productivity = Output/Energy Input
Advertising and Media planning productivity = Output/Advertising and Media planning input
Other Expenses productivity = Output/Other expenses input
Advantages:

It is a good diagnostic measure to identify areas where improvements may be done.

Easy to calculate as it is independent of other inputs.

It is easy to compare with other industries. Ex: The labor productivity of a public limited
steel producing company(SAIL) may be compared with the labor productivity of a private
sector steel providing company(TISCO).

Disadvantages:

It does not tell the overall effect of the system on performance.

2. Total Factor Productivity- Total factor productivity = Net output/Labor + Capital Input

Where, Net Output = Total output- Intermediate goods/services purchased

Advantages:

Easy to compare in cross industry context.

Disadvantage:

Many important inputs, such as material, energy, energy etc. are ignored.

3. Total Productivity- The ratio of total output to the sum of all input factors. Total output must
be expressed in the same unit of measure and total input must be expressed in the same unit of
measure. However, total output and total input need not be expressed in the same unit of
measure. Resources are often converted to rupees or standard hours so that a single figure can
be used as an aggregate measure of total input or output. For example, total output could be
expressed as the number of units produced, and total input could be expressed in rupees, such as
tons of steel produced per dollar input. Other varieties of the measure may appear as dollar
value of good or service produced per rupee of input, or standard hours of output per actual
hours of input. Total productivity ratios reflect simultaneous changes in outputs and inputs. As
such, total productivity ratios provide the most inclusive type of index for measuring
productivity and may be preferred in making comparisons of productivity. However, they do not
show the interaction between each input and output separately and are thus too broad to be used
as a tool for improving specific areas.
Total productivity = Total output/ Total input
Advantages:

More accurate representation of real economic performance of an organization as it

considers all the input and output factors.

It is easy for top management to understand the company performance.

It is easy for cost accountants to compare the performance of different organizations.

Disadvantage:

It is difficult to generate companywide and sector wide data.

FACTORS AFFECTING PRODUCTVITY

There is quite a variety of factors which can affect productivity, both positively and negatively. These
include:

1. capital investments in production

2. capital investments in technology
3. capital investments in equipment
4. capital investments in facilities
5. economies of scale
6. workforce knowledge and skill resulting from training and experience
7. technological changes
8. work methods
9. procedures
10. systems
11. quality of products
12. quality of processes
13. quality of management
14. legislative and regulatory environment
15. general levels of education
16. social environment
17. geographic factors
The first 12 factors are highly controllable at the company or project level. Numbers 13 and 14 are
marginally controllable, at best. Numbers 15 and 16 are controllable only at the national level, and 17 is
uncontrollable.
WAYS TO IMPROVE PRODUCTIVITY
Productivity improvement can be achieved in a number of ways. If the level of output is increased
faster than that of input, productivity will increase. Conversely, productivity will be increased if the
level of input is decreased faster than that of output. Also, an organization may realize a productivity
increase from producing more output with the same level of input. Finally, producing more output with
a reduced level of input will result in increased productivity.
Any of these scenarios may be realized through improved methods, investment in machinery and
technology, improved quality, and improvement techniques and philosophies such as just-in-time, total
quality management, lean production, supply chain management principles, and theory of constraints.
A firm or department may undertake a number of key steps toward improving productivity.

Develop productivity measures for all operations; measurement is the first step in managing and
controlling an organization.

Look at the system as a whole in deciding which operations are most critical, it is over-all
productivity that is important.

Develop methods for achieving productivity improvement, such as soliciting ideas from
workers (perhaps organizing teams of workers, engineers, and managers), studying how other
firms have increased productivity, and reexamining the way work is done.

Establish reasonable goals for improvement.

Make it clear that management supports and encourages productivity improvement. Consider
incentives to reward workers for contributions.

Measure improvements and publicize them.

Don't confuse productivity with efficiency. Efficiency is a narrower concept that pertains to
getting the most out of a given set of resources; productivity is a broader concept that pertains to
use of overall resources. For example, an efficiency perspective on mowing the lawn given a
hand mower would focus on the best way to use the hand mower; a productivity perspective
would include the possibility of using a power mower.

RELATIONSHIP BETWEEN PRODUCTIVITY AND STANDARD OF LIVING

A relationship between productivity and standard of living can be represented as follows:

Higher Productivity

Enhanced
Wages

Better utilization of
resources

Employee
training

Increased national
wealth

Better career
prospects

More industries

Better living
standards

More
employment

Increased
purchased power

Prosperity

Purpose to Increase Productivity

FOR MANAGEMENT
To produce good earning (profit).
To clear the debt or loans acquired from different sources.
To sell more.
To stand better in the market.
FOR WORKERS
HIGHER WAGES.
Better Working Conditions.
Higher standard of living.
Job Security and Satisfaction
FOR CUSTOMER
To reduced price of the article.
The details regarding productivity improvement techniques currently in use are
discussed in the following paragraphs.

PRODUCTIVITY IMPROVEMENT TECHNIQUES

Productivity improvement techniques are as follows:

. .

1. Technology based
(a) CAD/CAM/C1MS are computer techniques and have profound influence on human productivity
(b) Robotics
(c) Laser technology
(d) Modern maintenance techniques
(e) Energy technology
(f)Flexible manufacturing system (FMS).
2. Employee based
(a) Incentives (financial/non-financial) at individual and group level
(b) Promotion
(c) Job design, job enlargement, job enrichment
(d) Worker participation
(e) Quality circles, small group activities
(f) Personal development.

3. Material based
(a) Material planning and control
{b) Purchasing logistics
(c) Material storage and retrieval
(d) Source selection for quality
(e) Waste limination
(f) Recycling and reuse of waste material
4. Process based
(a) Methods Engineering and work simplification
(b) Process design
(c) Human factors engineering

5. Product based
(a) Valueanalysis/valueengineering

(b) Product diversification

(c) Simplification/standardisation
(d) Reliability engineering
(e) Product mix and promotion
6. Management based
(a) Management technique

(b) Communication in the organisation

(c) Workcutture
(d) Motivation
(e) Promoting group activity.

Levels of Productivity Measurements

Productivity can be measured at international, national and industry (sector) levels. It can also be measured on
company level and on individual resource level.

PRODUCTIVITY IMPROVEMENT MODELS

1. Craig and Hams Mode/: It is also called "Service flow model" because physical inputs are substituted in rupees
paid for services provided by inputs. Productivity is measured as efficiency of this conversion process.
Total productivity is thus expressed as P = O/(L+C+R+Q)
where,

P = Total productivity

C = Capital input factor

O = Output (services rendered)
L = Labour input factor
R = Raw material and purchased parts
Q - Other miscellaneous goods/services.
2. American Productivity Centre <APC) Model: APC has developed a model based on the fact that profitability is a
function of productivity and price recover. Productivity relates to the quantities of output and inputs while price recovery
relates to price of output and costs of inputs. Price recovery can be thought of as degree to which input cost increases are
passed on to the customers in the form of higher output price. Productivity, profitability and price recovery are related as
follows.
Profitability =REVENUE = Output quantities xSales price
COST
=

Input quantities x Unit cost

Output Quantities x Sales price

Input quantities Unit cost

Profitability = Productivity * Price recovery.
The model compares data from base period with the data from the current period.
NATIONAL AND INTERNATIONAL PRODUCTIVITY MEASURES FOR COMPARISONS
1. Organization for European Economic Co-operation (OEEC) uses two
measures:
(a) Gross Domestic Product (GDP) per capita and
(b) GDP per employee civilian
2. Rosta(1955)used
(a) Gross output per one hour of labor
(b) Physical output per one unit of labour.
3. At National Level the productivity measures used are:
(a) National Product: Market value of output of final goods and services produced by Nation's economy. Final product means
a product that is not resold. Intermediate goods means the products that are resold.

(b) Gross National Product includes capital consumption allowances (reserves for depreciation, accidental damage to
fixed capita
(c) Net National Product. It excludes above such allowances. Bureau of Labour Statistics (BLS) use (a) Labour
productivity index, (b) Capital productivity index and (c) Labour and capital utility productivity index for this
purpose.

PLANT LAYOUT

It is a physical arrangement of machinery, equipments, facilities and staff within a plant.

It is floor plan indicating distances between different work stations and departments in a plant.

OBJECTIVES OF A PLANT LAYOUT

Minimization on material handling.

Optimum utilization of floor space.

Balancing of plant capacities.

Easy supervision and better production control.

Elimination and improvement of objectionable operations.

Elimination of physical efforts required by workers.

Avoiding industrial accidents.

Effective utilization of labor by elimination of idle time.

Better working conditions like light, ventilation, control of noise.

Improvement in quality of output.

ESSENTIALS OF A GOOD LAYOUT

Integration of factors and interdependence

Minimum movement and handling

Continuous flow

Optimum utilization of available space

Maximum visibility

Maximum accessibility

Flexibility

Safety requirements

TYPES OF LAYOUT
There are mainly four types of plant layout:
(a) Product or line layout
(b) Process or functional layout
(c) Combined or group layout
(d) Fixed position layout
(e) Cellular layout

PRODUCT OR LINE LAYOUT:

In this type of layout the machines and equipments are arranged in one line depending upon the sequence
of operations required for the product. It is also called as line layout. The material moves to another
machine sequentially without any backtracking or deviation i.e the output of one machine becomes input
of the next machine. It requires a very little material handling.
It is used for mass production of standardized products.

Advantages of Product layout:

Low cost of material handling, due to straight and short route and absence of backtracking

Smooth and continuous operations

Continuous flow of work

Lesser inventory and work in progress

Optimum use of floor space

Simple and effective inspection of work and simplified production control

Lower manufacturing cost per unit

Disadvantages of Product layout:

Higher initial capital investment in special purpose machine (SPM)

High overhead charges

Breakdown of one machine will disturb the production process.

Lesser flexibility of physical resources.

PROCESS LAYOUT:
Process layouts are found primarily in job shops, or firms that produce customized, low-volume products
that may require different processing requirements and sequences of operations. Process layouts are
facility configurations in which operations of a similar nature or function are grouped together. As such,
they occasionally are referred to as functional layouts. Their purpose is to process goods or provide
services that involve a variety of processing requirements. A manufacturing example would be a machine
shop. A machine shop generally has separate departments where general-purpose machines are grouped
together by function (e.g., milling, grinding, drilling, hydraulic presses, and lathes). Therefore, facilities

that are configured according to individual functions or processes have a process layout. This type of
layout gives the firm the flexibility needed to handle a variety of routes and process requirements.
Services that utilize process layouts include hospitals, banks, auto repair, libraries, and universities.
Example of process layout of an automobile service station:

Advantages of Process layout:

Lower initial capital investment is required.

There is high degree of machine utilization, as a machine is not blocked for a single product

The overhead costs are relatively low

Breakdown of one machine does not disturb the production process.

Supervision can be more effective and specialized.

Greater flexibility of resources.

Disadvantages of Process layout:

Material handling costs are high due to backtracking

More skilled labour is required resulting in higher cost.

Work in progress inventory is high needing greater storage space

More frequent inspection is needed which results in costly supervision

COMBINED LAYOUT:
A combination of process & product layout is known as combined layout.Many situations call for a
mixture of the three main layout types. These mixtures are commonly called combination or hybrid
layouts. For example, one firm may utilize a process layout for the majority of its process along with an
assembly in one area. Alternatively, a firm may utilize a fixed-position layout for the assembly of its final
product, but use assembly lines to produce the components and subassemblies that make up the final
product (e.g., aircraft).

FIXED POSITION OR LOCATION LAYOUT:

Fixed position layout involves the movement of manpower and machines to the product which remains
stationary. The movement of men and machines is advisable as the cost of moving them would be lesser.
This type of layout is preferred where the size of the job is bulky and heavy. Example of such type of
layout is locomotives, ships, boilers, generators, wagon building, aircraft manufacturing, etc.

Advantages of Fixed position layout:

The investment on layout is very small.

The layout is flexible as change in job design and operation sequence can be easily
incorporated.

Adjustments can be made to meet shortage of materials or absence of workers by changing the
sequence of operations.

Disadvantages of Fixed position layout:

As the production period being very long so the capital investment is very high.

Very large space is required for storage of material and equipment near the product.

As several operations are often carried out simultaneously so there is possibility of confusion
and conflicts among different workgroups.

INDUSTRIAL OWNERSHIP
It is classified into three categories

Private sector

Public sector

Joint sector

 Sole Proprietorship
Sole Proprietorship is that form of Industrial ownership in which Individual Exercise & enjoy all rights
related to business in his own interest. The sole owner arranges the capital, takes the risk of business and
managers it. This type of ownership is easy to form and there is little legal formalities. This type of
ownership is very suitable for service systems. The business can be easily taken care by one person. This
requires small capital to start the business and run it.
Merits

Easy Formation

Easy to Operate

Secrecy

Simplicity

Preferential treatment by the Govt.

Flexibility

Demerits
Limited Resources
Lack of Continuity
Unlimited Liability
Limited Managerial Ability
Partnership
Partnership may be defined as the relation between person who has agreed to share the profits of a
business carried on by all or any of them acting for all.
Merits
Legal Entity
Risk Sharing
More Funds
Continuity
Mutual Agency
Demerits

Unlimited Liability

Limited Resources

Possibility Of Conflict

Lack of Public Interest

Joint Stock Company

A joint stock Company means an association of several people who contributed money or moneys worth
to a joint or common stock & employ it in same business & share among themselves the profit or loss
arising from it.
Characteristics
1.
2.
3.
4.
5.

It is a voluntary association of persons.

It has separate legal existence.
There is a perpetual succession.
It is a registered body with common seal.
It is run by elected representatives known as directors.

Merits

Limited Liability

Transfer of Interest

Perpetual Existence

Scope for Management

Professional Management

Demerits

Complexity in Formation

Lack of Secrecy

Impersonal Work Environment

Numerous Regulation

Delay In Decision Making

Co Operative Undertaking
The Co Operative society is voluntary association of person, who join together with the motive of
welfare of the members and society.

Main Characteristics
1. It is a voluntary organization.
2. It is formed by relatively economically weaker sections of. society.
3. There is open membership.
4. The main objectives of the society is service motive, mutual help and for common interest of the
members.
5. It works on the principle of one person-one vote and has democratic organization.

Merits

Limited liability

Economy in Operation

Support From Government

Stable Existence

Ease of Formation

Demerits

Limited Resources

Inefficiency in Management

Lack Of Secrecy

Government Control

Difference Of Opinion