Unit-1 (Industrial Management))

April 27, 2018 | Author: Ankur Agrawal | Category: Joint Stock Company, Partnership, Board Of Directors, Factors Of Production, Business
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Importance of Management:

Accomplishment of Goals.

Effective utilization of resources

Sound organization organization

Providing vision vision and foresight

Harmony in work 

Help and motivates employees in achieving personal objectives.

Development Development of society and nation.



Science is a systematized body of knowledge pertaining to particular field of enquiry.

Contains concepts, hypotheses, theories and principles to explain cause and effect relationship between 2 or more factors.

To be organized as science, a discipline should have:

Have a method of scientific enquiry

Establish cause and effect relationship

Principles should be verifiable

Ensure predictable results

Universal applications

Management is systematized body of knowledge and the researchers uses scientific techniques to collect and analyse data about human cause and effect relationship.

Management is called as a science but its not a perfect science.

easons R easons

for inexactness of management as science:-

Many principles of mgmt. not supported by research.

Difficult to establish cause and effect relationship

Applications of principles depends upon situations and factors.

Mgmt. deals with the people at work and it is very difficult to predict their behavior  accurately.


Art signifies the application of knowledge and personal skills to brings out desired result.

Science is learnt, an art is practiced.

Science is to seek knowledge and art is to apply knowledge.

Features of AR T:T:

Denotes personal Skills

Signifies practical knowledge

Helps in achieving concrete results

Creative in nature

Management as an art :

Prac Practi tice ce of manag managem emen entt does does invo involv lvee the the use of management concepts, principles and techniques.

knowl knowled edge ge of 

Manag anageer has has to appl apply y his his pers person onal al skill killss to deal deal  problems in org.

with with vari vario ous

Management is situational

Art of management management can be mastered mastered through continuous continuous practice.

Management is creative.



both science and art.

Science as contains certain universal truth

Art as managing managing requires requires applicatio application n of certain certain skills which which are  personal  personal possession possession of manager. manager.

Manager be a applied scientist, possess the specialised knowledge of mgmt. and skills to put this th is knowledge into practice.


been remarked that management is the oldest of arts and the youngest of science.


Profession ³ an occupation backed by specialised body of knowledge and training and to which entry is regulated by representative body.

equirement R equirement

of Profession:-


Specialised Specialised field of knowledge


estricted R estricted


R epresentative epresentative or


Ethical code of conduct for self ± regulation.


Social recognition


Professiona Professionall fee.

entry based on the knowledge and training professional association

Profes rofessional sional Criter Criteria Criteria ia

Management Management

Specialised body of knowledge knowledge

Entry based training



It ha hass a syst system emat atis ise ed body body of knowl nowled edge ge an and d principles and

Entry does not require any prescribed qualification and training

Professional Association

No prof profes essi sion onal al assc assc.. Of whic which h me memb mber ersh ship ip is essential. In India, AIMA but not essential to hold its membership to be a manager

Code of Ethics

Managers are not bound by any common code of  conduct.

Service responsibilities

Service Ser vice is not the the only only goa goal for man managem ageme ent. nt. Growing concern for social responsibility of mgmt.

Management can be considered a profession :Mgmt. is supported by well defined body of knowledge that can be taught and learnt.


Ther Theree is ne need ed for the form formal al educ educat atio ion n and and trai traini ning  ng  in mana anagem gement to acq acquir uire compe ompettenc ency for appl pplicat cation of  management principles, techniques and skills.


have bee been for formed in C erta ertain in asso associ ciat atio ions ns of manag manager erss hav different countries countries in the world.


Several associations of Managers like A IMA have prescribed  code of conduct  for their members.


Managers are aware about their  social social res ponsibilities  ponsibilities that¶s how they are guided by service motive.


Management cant be fully regarded as a profession:E ntry ntry to management profession is not restricted  restricted .


eed not  to have a all India re presentati ve association.  presentative

     N

There are no ethical code of conduct  for the managers.



History can be traced to the industrial revolution in England and other European nations during 18 th and 19th century.

Deve Develo lopm pment ent of diff differ erent ent scho school olss of mgmt mgmt.. durin during g industrial revolution, rise of factory system, growth of  trade unionism, expansion of industrial trade, consumerism, etc.

Harold Koontz ³ Management theory Jungle´ due to divergent direction of management thoughts.

Industrial Revolution:

esult R esult


of inventions due to increased demand of products due to widening of markets.

Bey Beyond ond the the capa capaci city ty of the the indu indust stry ry to meet meet incr increa easi sing ng demand with labor intensive techniques.

Some prominent inventions:

of invention from 1760 to 1820.

James James Hargre Hargreave avess µspinn µspinning ing genny¶ genny¶ (1764) (1764),, R ichar ichard d Arkwr Arkwrigh ightt µ wate waterf rfra rame me¶¶ (177 (1779) 9),, Crom Crompt pto on µ Mule Mule spin spinne ner¶ r¶ , Cart Cartwr wrig ight ht µ Powerloom¶, and invention of steam engines.

Significant contributions of Industrial revolution were:i.

Growth of engineering industries


ise R ise


Use of power driven machines.


R evolution evolution


Advancement in coal mining.


Development of means of transport.

of chemical industries in iron making


of industrial Management:

Large scale production

Change of form of ownership

Factory system






Robert Owen (1771-1858):

Star Starte ted d fact factor ory y at Manc Manche hest ster er for for manuf anufac actu turi ring ng text textil ilee machinery.

Became Managing director of Charlton Twist company.

Began cooperative moment in 1828 in

R eferred eferred as Father of

Worked for developing spirit of coop. between management and works.

Practiced the idea that workers should be treated as human, made made prov. prov. like like reduce reduced d workin working g hours, hours, housi housing ng faci facili liti ties es,, education of workers and children, etc.

He preached personnel mgmt. pays dividend to the employees and is an essential essential part of every manager¶s job.

ochdale, England. R ochdale,

Personnel Management. Management.

Charles Babbage (1792-1871):

British mathematician mathematician at Cambridge Cambridge University from 1828 to 1839.


Know nown for the book Manufacture´ (1832).

Perceived that methods of science and mathematics could be applied to solve factory problems.

He was an mathematical management scientist

Especi Especiall ally y interes interested ted in econom economics ics of divisi division on of labor labor and the development of scientific principles.

mechanical calculator in 1832 and conceived analytical machine in 1833 later termed as computer. ³ On the Econom onomy y of Machine hinery ry and

Daniel C. McCallum:

Tried to find out solutions to managerial inefficiencies, plaguing rail roads at that time.

Approach to run railroad was one of system, commonsense, reports and control.


job descriptions, promotions on the basis of merits and made made eo le res onsible onsible and account accountabl ablee for their their o eratio erations. ns.

 APPROACHES TO MANAGEMENT Scientific Management Approach Management Process Approach Human Relation Approach. Behavioral Science Approach Quantitative Approach Systems Approach Contingency Approach. Operational Approach Empirical Approach.

Scientific Management:the

Industrial Revolution in England necessitated development of new management principles and practices.

Need of of bringing bringing people people together together for the purpose of working together.

Establishment of  formal organizational structure, formal lines of authority, factory systems and procedures.

Management movement known as ³ Scientific Management´

Fredrick Fredrick Winsl Winslow ow Taylor Taylor (1865-1915) (1865-1915),, emphasized the need the need for adopting scientific scientific approach.


Supporters, Henry L. Gantt, Frank Gilberth, Lillian Gilberth, Harrington Emerson, etc.

aspects, standard time, standard output, standard cost, standardisation of production process, change in the attitude of management and workers w orkers.

Management Process Approach:

Perceive management as a process consisting of planning, organising, commanding commanding and controlling.

R egards egards management management

The The proc proces esss scho school ol is als also call called ed as ³ Tradition Traditional´ al´ or ³Universalist´ Universalist´ school.

Henry Fayol is regarded as the father of this school.

Oliver er Shel Sheldo don, n, J.D. J.D. Moon Mooney ey and and Ches Cheste ter  r  I. Supporters, Oliv Bernard.

as a universal process.

Human Relations Approach:

ecognising R ecognising

the importance importance of human element in org.

Elton Elton Mayo Mayo,, Hawthr Hawthrone one Experi Experime ment nt and inves investi tigat gated ed the myriad of informal relationships, social cliques, patterns of  communication and informal leadership.

Lead to trend known as ³ Human relation movement´

Behavioral Science Approach:

Utilises and uses the methods and techniques of social sciences such as psychology, sociology, social psychology and anthropology. anthropo logy.

Pioneer of this school, Gantt and Munsterberg.

As per them, study of management must be centered around the  people and their interpersonal relations.

Concen Concentra trated ted on motiv motivati ation, on, indivi individua duall drives drives,, group group relat relation ions, s, leaderships, group dynamics and so forth.

Contributors, Abraham Maslow, Fredrick Herzberg, Victor Vroom, Douglas McGregor.

Quantitative Approach:

Using of scientific tools for providing scientific basis for managerial decisions.

Management problems can be expressed in terms of mathematical symbols and relationships.

Linea Linearr program programmin ming, g, CPM, CPM, PER T, T, Brea Break k even even analy analysis sis,, Game ame theory and queuing theory widely popular.

Systems Approach:

Comp Compos osed ed of elem elemen ents ts or subs subsy ystems tems that that are are rela relate ted d and and dependent on each other.

Based on generalization that an organisation is a system and its components are inter-related and independent. independent.

Basic feature, more importance given to the over- all effectiveness of the system rather then sub-system.


Emphasises on the communication and decision process through out the organisation.

Chester I. Bernard.

Contingency Approach:

Also known as situational approach. approach.

Basis, internal functioning of organisation must be consistent with the demands of technology and external environment and needs of its members.

Suggest, there is no one best way to handle any management problem.

3 major jor part parts s :- i) envi enviro ronm nmen ent, t, ii) ii) mana manage geme ment nt conc concep epts ts,, principles and techniques , iii) contingent r¶ship between the two.

Operational Approach:

Advocated by Koontz and O¶Donnell. O¶Donnell .

Recong congn nises ses

the there is a cen central tral core core of kno knowled wledge ge about manag managing ing which which exist exist in manage managemen mentt such such as line line and staf staff, f, patterns of departmentation, span of management, managerial appraisal and various managerial control techniques.


Also recognises actual problem manager face and the envt. in which they operate may vary between enterprises and levels.

mana manage geme ment nt as univ univer ersa sally lly appl applic icab able le body of  knowledge that can be brought to bear at all levels of managing and in all types of enterprises.

Emperical Approach:


is the study of the experience of managers. managers .


based on experience of successful successful managers can be applied by other managers in solving problems and in making decisions.

Based on the analysis of the past experience and uses the case method of study and research.

 APPLICATIONS OF INDUSTRIAL MANAGEMENT elps in development of the org. for achievement of group goals. Helps in finding out efficient and economical work methods. Helps to find out the economic lot size work required during processing. Helps in schedule of work. Tries to find out standard performances. Maintains Keeps

discipline though control over the employees.

co-ordination among the staff at various levels.

Proper distribution of work and machines among the workers to secure maximum output. It improves efficiencies. Suggest new ideas and improvements. Helps in cost control, rating and budgetary control. Makes

arrangement for payment on scientific basis.

Takes care of trade, finance, insurance, store and banking policies. Gives due importance to labor grievances and their psychology. Helps in improving the competitive position of the organisation.

SCOPE OF IM Engineering Management

Improvement of 

work condition



Vendor  Development, Customer Need  Analysis, etc.

Lighting, Noise andvibration, fatigue, ventilations, etc.





Managerial Decisions

Workplace, method and procedures

Organizational problems:Leadership, Motivation,  Automation, Org. culture, etc.

Work study, system analysis, layout planning, planning, directing, control, scheduling, etc


in product and services

TQM, Value Value engg., engg. , Business process re-engg., Benchmarking.





Equipment selection and specialization


Design of tools, jigs and fixtures.


of Engineering:-


Work Measurement


Determination of allowances


Computation of standard time

Production planning and control:i.

Material Management



components) ii.


and manpower 













material, semi-finished , finished and

Plant layout and material handing.

Organization management

Inspection and quality control

Wages Wages and incenti incentives ves

Budgetary control and cost control.


Organization and management methods.

Plant location and plant layout



Time study

Production, planning and control.

Statistical quality control

Cost control

Job evaluation

Wage incentives

Operation research .

handling methods. engineering.



No single definition of productivity.

European Productivity Council ³ is an attitude of mind. It is a

mentality of progress , of the constant improvement of that  which exist. It is the certainty of being able to do better today  than yesterday, and continuously. It is the constant  adaptation of economic and social life to changing conditions; it is the continual effort to apply new tec echhniqu quees and  methods. It¶s the faith in human progress´. 

Another definition widely acceptable and commonly used ³ productivity as the ratio of output to input in a productive system´.

As per definition productivity can be improved by either:

Producing more output with the same inputs, or 

Using lesser inputs to produce same output.

Different views on productivity from different perspectives: 

 

Economics:Economics:- effect of envt. and govt. regulation. Industria Industriall engg.: engg.:-- Stre Stress ss on effec effects ts of metho methods ds and work work flow flow on productivity. Psychologist and management:management :- job design or other human relation approach.

omplex exit ity y to defin define e prod produc ucti tivi vity ty,, as it  encompass encompasses es inputs, inputs, Compl outp utputs ad the conversion process ess of techno hno-socialcommercial commercial environment environment of production production system. system. Difficult to measure when end product is multiple commodities, not not hom homogeneo neous in natur ture and has has a number of byproducts. Out is converted into standard hours i.e. time allowed for a product  delivered to stores by an individual worker or a group of workers. Eg. Total time allowed to product 1 unit = 15 mins (.25 hrs.) Units to be produced: 1000 units Total time = .25 x 1000 = 250 hours. Standard time is calculated with consideration to ideal situation with respect to normal speed of a worker and his willingness to work.

Productivity = Labor utilisation X Labor efficiency

= Standard hours X Available shift hours   Available shift hrs. Actual hours worked = Standard hours/ Actual hours worked 

In capitalist industry labor productivity has little significance.





It is the ratio of actual output attained to the standard expected output. Indicates how well the resources are utilised to accomplish the targets or results. Degree of accomplishing the objectives.

The combined result or effect of efficiency and effectiveness. ndex:Productivity Index:-

Perform Performanc ance e achiev achieved ed

Input resources consumed = Effectiveness/Effeciency

Efficiency, Effectiveness and productivity of a production system


Partial Productivity:

Defined on the basis of class of the input being considered.

Eg. Increase in labor and its impact on the increased output is represented by productivity. Same for capital productivity, material productivity, productivity, etc. Advantages:-

 

     

Good diagnostic measure to identify areas where improvements may be done. Easy to calculate as independent of other inputs. Easy to understand. Easy pin-pointing the logic for improvement. Easy to benchmark (compare) with other industries. Data may be easily generate

Limitations:    

Misleading if used out-of-context. Doesnt contain overall effect of the system of performance. Focused areas of improvement are difficult to identify. It gives the myopic view of performance. Misses holistic approach.

Productivity of Labor = Output  Number of workers or No. of man hours Man Hrs = No. of workers employed x No. of hrs. worked.

Capital Productivity =

Output  Total Capital Employed Productivity of of Material Materia l = Output  Material Productivity of machine = Output  Machine Hrs. worked Productivity of Land = Output   Area of Land used.


Ratio of net input to the sum of labor and capital

inputs. Net outp output ut

= Tota Totall outp output ut  Inte Interm rmedi ediat ate e good goodss or se serv rvic ices es

Labor + capital inputs 

Labor + capital Input 


Relatively easy to compile data from company records

context. Preferred as easy to compare in cross-industry context.

Limitations: 

Many important important inputs like material , energy, etc., are ignored. Net-output does  not reflect the efficiency eff iciency of prod. System in a proper way.


It¶s the ratio of total output to the sum of all input factors.


Considers all the outputs and inputs factors.


Easy Easy for for top top mana anagem gement ent to unde underrstan stand d the the com company pany performance.

If used with the partial productivity, areas of improvement may be identified.

Easy for cost accountants to compare.

Easy to do sensitivity analysis.

accurate representation of real economic performances.


Difficult to generate company wise and sector secto r wise data.


indirect measures of input/output are ignored.

TPI = Total production of goods and services Labor + Capital +


+ Power 


Basic Productivity

Productivit Productivity y may be measured in terms of physical units, monetary units, depending upon the availability of data and requirement of specific situations.


Profitability = (Revenue

Profitability can be increased by reducing costs and that would also increase the productivity. pro ductivity.

A decr decre ease ase in the pr pric ice e of the pr prod oduc uctt may lead lead to decrease profitability even though productivity my be rising or vis-à-vis.

Ratio:Ratio:- Prod. = Output/Input.

in the productivity occurs when the ratio of output to input rises from one period to the next. ± Cost)/ Investment


Increase in Productivity

Reduction in Cost

Increase in Profits

Competitive advantage

Better Quality of life

FACTORS AFFECTING PRODUCTIVITY Internal Factors or controllable 

Categories of factors External Factors or uncontrollable

Internal factors:a)

Technological factor ::

Size and capacity of plant

Product design and standardisation

Timely supply of material and fuel

Rationalisation and automation measures


Production planning and control

Plant layout and location


Inspection and quality control



Inventory control.

and maintenance

handling system and equipment used

and development

b). Human Factors:Factors:

Existence of adequate adequate skilled personnel personnel in the org. for increasing increasing the productivity.

Two forces which which affect the productivity of of human labor are:are:-


Ability to work


Willingness to work.

Factors:c). Financial Factors:

Adequate amount of capital required for running the org.

d). Material and


Efforts to reduce consumption of energy and materials.


to be considered:-


Selection of quality material


Control of wastage


Effective stock control


Development of sources of supply


Optimum energy utilization and energy savings.

External Factors:


factors ( physical, geographical and climatic conditions)

Sociological Factors

overnment Government

( social customs, traditions and social institutions) in stitutions)

policy policy (indust (industrial rial policie policies, s, licensin licensing g polici policies, es, taxati taxation on

policy, etc. 

Managerial Talent ( Professional managers)


Improved raw materials Better technology Scientific selection selection and training of workers worker s Work study Research and development  Good working conditions Provision for incentives Harmonious relationship Quality and cost consciousness Workers participation in management  Quality Circles (small group of workers which regularly disc discus usss prob proble lems ms,, inve invest stig igat ate e caus causes es,, reco recomm mmen end d authorised to take corrective actions)

meets to solu soluti tion onss an and d


Process by which goods and services are created.

Othe Otherr words ords,, conv conver ersi sion on of ra raw w mate materi rial alss into into se semi mi-fini finish shed ed ad fini finish shed ed produ product ctss with with the the he help lp of cert certai ain n production process. Aim Aim of an any y prod. prod. syst system em is produ produce ce econo economi mica calllly y the the goods and services required by the customers. Essential to plan, organize, direct and control. All these activities together known own as production management. Performed by the production manager.

 


Concept of Production:

Traditionall Traditionally y use used d with the reference reference to manufactu manufacturing ring activity resulting in output of goods. Scope have been widened as its also include the production of services, services, as banking, insurance, teaching, defense , etc. Production  function of acquiring inputs ( materials, capital, manp manpow ower er,, etc.) etc.) and and tran transf sfor ormi ming ng them them into into good goods s and and services desired by customers. customers. Output it measured in terms of predetermined standards of quantity, quali quality ty an and d time time sche schedu dule less an and d prov provid ides es feed feedbac back k to inpu inputt an and d transformation subsytems for corrective actions.

Inputs: humans, financial , physical, technological.

Transformat -ion process

Input-output model


Outputs: Outputs: goods and services

Production Management:

As pe perr Elwo Elwood od S. Buff Buffa, a,  Prod. rod. Mgmt. Mgmt. deals deals with with decisi decision on making related to production process, so that resulting goods and services is produced according to the specifications, in the amounts and by schedule demanded and at minimum cost. In simple words, prod. Mgmt. deals with the managerial functions related to the design of the production system and operation and control of the production system i.e. production planning and control.


Design of production system

Production planning and control

Selection of location

Layout of plant

Selection of plant a and nd equipment equipment

Research and development


Prod. system a framework within which conversion of input 

into output occurs. Types of production system: A. Production or continuous manufacturing. a) b)

Line production or synthetical industries. Flow production or analytical analytical industries

B. Job production production C. Intermit Intermittent tent production production


Where facilities are standardised as to routines and flow since inputs are standardised. Involves continuous production of goods in anticipation of  customer demand rather then in response to customer demand. Eg. Petro etrolleu eum, m, che chemic mical, al, ceme cement nt,, stee steell an and d sugar ugar industries. Class lassif ifie ied: d: (i) (i) Flow Flow or an anal alyt ytic ical al indu indust stri ries es (ii) (ii) Line Line or synthetical industries. Flow or analytical industries:

 

Breaks up the material into several parts along with the processor production. Arrangement is not flexible. Eg. Oil refinery.

Mass Production or synthetical industries:  

Involves mixing upto two or more materials to manufacture a product. Identical particles are produced in vary large la rge quantities. Eg. Electrical appliances.

Continuous manufacturing process lends to standardization

of prod. techniques and to mechanization, in order to keep labor cost comparatively lower. Main ch charac aracter teristi istics cs :

   

Flow of material is continuous with little or no queuing at any stage of processing. Machines and plant layout ( Special purpose machines and plant  and assembly stages are laid out on the basis of product layout). Material handling comparatively less, firstly materials move through through shor sh ortt dist distan ance ce be betw twee een n stage stagess an and d seco second ndly ly mate materi rial al ha hand ndli ling ng is mechanised by conveyors and transfer machines. Relatively low skilled labor is necessary. Manufacturing Manufacturing cycle time is very short. Supervision is relatively easier as only few instructions are required. Interruptions due to breakdowns and absenteeism seriously affect  rod.


 

Manufacture of products to meet specific customer requirements of special orders. Quantity is usually small. Mainly concerned with special projects, models, proto-types, special machinery or equipments to perform specialised and spec sp ecif ific ic task tasks, s, comp compon onen ents ts or su subb-as asse semb mbli lies es to prov provid ide e replacement or repairs. 3 types of on the basis of regularity of production:i. A small number number of pieces produced produced only once. ii. A small number of pieces produced intermittently intermittently when the need arises. iii. A small number number of pieces pieces produc produced ed periodical periodically ly at a known interv intervals als of  time.

Planning become complex as one order all together different 

from the other. Skilled labor is required to handle variety of jobs. Eg. Brick making, shoe industry, customized machine making.

Outp Output ut is main mainly ly gove govern rned ed by the the plan plantt capa capaci city ty an and d immediate increase in plant capacity is impractical. Scheduling is dependent on the assessment of production times. Main Characteristics:

  

Smal Smalll prod produc ucti tion on runs runs,, singl ingle e or pro product de dessigned an and d manufacture strictly to customer specifications. Flow of materials and components between different stages, highly discontinuous discontinuous due to imbalanced operation. Relatively longer manufacturing cycle time as relatively long delays occur due to lack of materials, imbalanced work flow, design changes , etc. Machines are arranged according to process layout as it differ from product to product. Highly skilled and versatile workers are necessary. Highly competent general engineers used for close supervision. supervision. Unit cost of production is high as cannot take advantage of large scale buying and automation.


Manufacture of number of similar articles, either to meet a specific order or to satisfy continuous demand. When the production of particular batch is completed, plant  and equipment can be used for the production pr oduction of similar or other products. 3 types under batch production:i. ii.


2 principle problems: 

A batch produced only once. A batch produced repeatedly at irregular intervals when the need arises. A batch produced periodically at known intervals to satisfy continuous demand. Size of the batch ( number of components to be produced per lot) Scheduling of production.

Solution depends on whether the production is governed by the external orders or whether the plant is producing for interna internall consum consum tion.


      

Characterised by short production run and frequent changes in set 

ups. It needs high investment. Planning, routing and scheduling changes with fresh batch of orders. Skilled labor capable of handling variety of jobs is required. Supervisors need considerable knowledge of specific process. Plant and equipment are procured and arranged a rranged to obtain flexibility. Material handling is less as compared to job order production. Disruptions due to machine breakdown, absenteeism do not seriously affect production as another machinery can be used, another operator from another machine can be shifted.

Eg. Electronic goods, medicines, eatable products, etc.



Job orde derr ty typ pe

Batch Production



models, mach machin ine e tool tools, s, spcl spcl.. rojects ects,, larg large e turb turbo o Proj generators, ship building material, etc.

Shoe-m oe-mak akiing, cloth oth manufa manufactu cturin ring, g, casting casting process, chemical plants, etc.

  Aut Autom omob obil ile e indu indust stry ry,, elec electr tric ical al appl applia ianc nces es,, house househo hold ld appli applianc ances es,, suga sugarr mills mills,, toy manf. manf. Co., glass manf., etc.

End Product quality and product design

Non-st -standa andarrd. Very small. Th e product  desi design gn chan change gess from rom one order to another

Standard Standard (similar) (similar) wide rang range e of produ product ctss are are manufa manufactu ctured red in small small quan quanti titi ties es of lots. lots. The The product design changes from from lot lot acco accord rdin ing g to product specifications

Stan Standa dard rd (ide (ident ntic ical al). ). Few standards products are are manu manuffact acture ured in larg large e quan quanti titi ties es.. The The product design is to be done only once.

Equipment Used

General Purpose

General Purpose

Special purpose

Type of plant layout


Plant  Process

(functional) Skill of Worker

Highly skilled to handle special jobs

layout combination

Continuous production


Skil Skille led d sinc since e ther there e is frequ requen entt change angess in product design machine set up for each lot 

Product layout 

Semi-skilled or unskilled. Since manufacturin manufacturing g activities activities become routine function


Job order type

Batch production

Continuous production

Supervising Supervising difficulties



Quite less

Material handling equipment


Less mobile, conveyors can also be used

Built Built in type type wide wide scope scope for mechan mechanised ised materia materiall handling systems

In Process inventories


Relatively low

Low, since production is continuous

Unit Cost of item



Quite less

Prior Planning



Very easy




Very easy

Balance of load

Easier and flexible

Relatively difficult

Very difficult coz of   perfect balancing of prod. Line

Job instructions

Complex and in details as

the the job chan change gess time Investment in machine and equipment

Few job instructions instructions when Only at the out set of new eve every the the prod. prod. of anoth another er lot    job job.. Once Once inst instru ruct ctio ion ns begins. given becomes routine

Few machines are Inve Invest stmen mentt in mach machine iness requ requir ired ed as arran arrange ged d in comparatively more process layout. Investment in machine is less

High investment in machine since there may be duplication of machine for each production line


Firm an ownership organization which combines factors of production in a plant for the purpose of producing goods or services and selling them at profit. Selection of type of ownership:    

Size and nature of business to be started Technical difficulties. Market competition and scope of the articles a rticles in the market. Capital required Limitations and restrictions put forth by the Govt. in connection with grant of loans , foreign exchange and other such things.



sector enterprise


Individual ownership


Joint Stock companies

Private Ltd. co.

Public Ltd. co.

Producer co-

op. society

Consumer co-


Housing co-op society

Credit co-op


Public sector


Govt. Deptt.

Govt. co.

Statutory corp.

Statutory Board.


 

Also known as single proprietorship or one man business Simplest and oldest form. Individual entrepreneur supplies the entire capital. Organises and manages and take entire risk. Have the entire authority and responsibility for decision making, policy making and working. Profits and losses are of his own. Can be started by anyone having initiative, tact, selling aptitude and little capital. Legal Liability:Liability:- covers all his possessions and creditor can collect  his personal property. Applications:Applications:

  

For small scale business requiring small capital which can be spared by one man. Eg. Agriculture, cottage industries, retail trade, etc. Where the the risk cover is not to heavy. Where management by one person is possible. Where local market is available.

Advantages:         

Simple and easy Least legal formalities Quick decisions and prompt actions Quality production Better labor relationship Personal attention to customers Small capital Maintenance of secrecy Incentive Flexibility.

Disadvantages:       

Limited capital Unlimited liability Personal limitations Small income Cannot compete with a big business Short life ( if a owner dies business may collapse Division of labor is not possible (one man show) No economies of large scale.


    

At one stage of development it becomes impossible for one man to control the business and to contribute the necessary capital. Enters into a partnership with other person who can provide the assistance as well as capital for business. may be formed to start a new business altogether. Partnership may Formed usually usually to combine capital, labor and varied skills. Partnership is owned by 2 or more people (upto 20). Shares powers, responsibilities and profits according to agreement. As per Indian Partnership Act, 1932  The relation between two or more persons who have agreed to share profit of a business, carried on by all or any of them acting for all. Formation:  

 

Formed either verbally or written agreement (preferred). Written agreement is known as Partnership Deed. Contains terms and conditions relating to partnership and regulations governing internal management. Lay down rights and duties of partners. Have to be duly stamped and sealed and registered in Court of Law.

Contain Contains s of Deed:Deed:            

Enjoys legal status and serve as legal evidence. Name of the firm Nature of business Date of starting of business Duration of partnership Rate of interest in the capital invested. Money contributed by each partner. Allotment of managerial functions among partners. Share profit and loss and proportion. Salary if any allowed to managing partners. Basis of inclusion of new partners. Amount which can be withdrawn by each partner. Aim of partnership and manner of dissolution. Provision of arbitration for settling the disputs.

Statement to be prepared by partners containing:    

Name of the firm. Place of business  principal place and branches if any. Name and addresses of all partners Date of joining the firm in case of every partner. Duration if any.

TYPES OF P ARTNERS General Partner

 Participate in the working  Jointly responsible for liab., obligations and

defects.  Liability and debts limited to the extent of 

Limited partner  Active or Managing Partner Sleeping and silent  partner Nominal Partner Minor Partner

capital.  Not entitled to interfere in the administation  Take active part in the formation and management of 

business and may also get salary in addition of profit.  Dont take active part in business.  Contribute capital and get the part of profit.  Lend their reputed name for the companys reputation  Dont invest money nor take part p art in the management.  Below 18 yrs of age.  Allowed with the consent of other partners.  Liability limited to their investment.

Advantages:         

Easy formation More capital Diverse talent  Less possibility of error of judgement  Prompt decisions Large economies Personal factor ( personal relationship with employees and the customers) Division of labor Simple dissolution Cautious and sound approach.

Disadvantages:       

Unlimited liability Short life ( death or retirement of any partner, it can come to an end) Insufficient capital Disagreement  Less secrecy Non-transfer of partnership No direct relation between efforts and rewards Lack of public confidence.


Individual ownership



Individual owner

Minimum 2 and max. 50


No agreement is required

Through Partnership Deed


Limited capital

Comparatively larger capital


Not required


Individual owner bear entire risk and Risk isk sp spre read ad amon among g part partne ners rs an and d enjoy entire profit  profit is shared as per agreement 


Indivi Individua duall manages manages entire entire busine business ss


Indivi Individua duall owner owner can eas easily ily mainta maintain in Can be leaked if partner leaves the the secrets business.

Soundness of Decisions

Individual not be expert in all aspects Problem examined from more than of business one view point hence decisions are more sound


For small scale business

Small as well as medium scale business

Division of labor

Not possible

Part artners ers

Necessary under the Partnership  Act, 1932

Share Shared d by the partne partners rs

may divi divid de among themselves.

the the

work ork


 

Formed and registered under Indian Companies Act, 1956. Capital is contributed by a large number of persons, in the form of shares of different values. The purchaser of shares are known as shareholders. Managing body ody i.e. Board of  Direc irecto tors rs, , elec electe ted d by shareholders. Def efin init itio ion n of compa ompany ny  an ar arti tifi fici cial al pe pers rson on ha havi ving ng an independent legal entity and a perpetual succession with dist distin inct ctiv ive e na name me an and d a comm common on se seal al ha havi ving ng a comm common on capital divid vided into share ress of fixed value which are transferable and carry limited liability.


Cre reat ated ed by re regi gist steri ering ng or inco incorp rpora orati ting ng an as asso soci ciat atio ion n of  persons under the Company Act.

Has a separate legal entity distinct of its members. member s. Artificial person Perpetual life and a very stable existence. Have a common seal. Separation of ownership from management. Limited liability liability of shareholders. Lower tax liability. Easy transferability of shares Wide distribution of risk of loss. Large membership Statutory regulations provided under Indian Companys Act, 1932.

         

Definition of Joint-stock company  legal business business owned owned

by the shareholders having limited liability and managed by an elected Board of directors. Formation:

Promoter prepares a scheme of business.

Secure the cooperation of 6 more persons ( min. 7 to form a co.). Promoters prepares the following documents:-

  

 

Memorandum of association Articles of association List of persons who have consented to be the Directors of the com pany along with the consent in writing of such persons. Declaration by an advocate confirming all the requirement of Act fulfilled. Name and addresses of promoters.

Memorandum of Association contains:    

Name of the company Its name and objectives Location of head office. Amount of share capital Kind and value of each share. Declaration of limited liabilit .

Sales deptt.  Auditor Purchase deptt.


Board of  Directors

Executive committee

General Manager

 Accounting Deptt.

Bankers Production Deptt.

Organization structure of Joint-Stock company.


2 types of joint stock companies:

Private limited company

Public limited company

Private Limited Company:

 

 

 

Capital collected from the private partners, partners , some may be active while others being sleeping. Restricts the right to transfer shares and avoid public to take up shares Number Number of  memb member er betw betwee een n 2 to 50, 50, excl exclud udin ing g em empl ploy oyee ee an and d exexemployee shareholders. Need not to file documents like consent of directors, list of directors, etc. with the Registrar of Joint Stock Companies. Need not obtain certificate of commencement of business from the Registrar. Need not to circulate, the balance sheet, P /L account, account, etc. among its members, but need to hold its annual general meeting. Must get its account audited. audited. Have to send a certificate along with the annual return to the Registrar stating does not have shareholders more than 50 excluding employee and exemployee shareholders.

Public Limited Company:

Capital is collected from the company by the issue of shares.

Number of shareholders should not be less than 7, no limit for the maximum number of shareholders. Have to file the documents like consent of  Directors, list of directors, direct director orss contra contract, ct, etc., etc., along along with with memora memorandu ndum m of ass associ ociati ation on and articles of association. Have to issue prospectus to the public. Have to allot shares within 180 days from the date of prospectus. Can start business only after getting the certificate of commence business. Has to hold statutory meeting and to issue a statutory report to all members and also to Registrar of companies. Easy transferability of shares. Directors are subject to rotation Have to get the account audited every year by registered auditor. Send financial statement to all its members and to the registrar. registrar. Had to hold general meeting every year. year . Managing agents gets a fixed percentage of net profit every year.

  

     

Advantages:      

Large capital Limited liability of members Transferability of shares. Perpetual succession. Specialist services Risk is shared. Have stability, efficiency and flexibility of management. ma nagement.

Disadvantages:  

 

  

Too much legal formalities. Managed by big shareholders. Managed by the high paid official and objectives might contradict that  with of owners. Commitment of frauds are possible. BODs can use their position for personal profits ( sell or purchase of  shares) Difficult to maintain secrecy. Team spirit lacks. Lack of accountability due to divided responsibility.

.No. 1.

Particulars Membership

Pvt. Ltd.

Public Ltd.

Confined to the close friends and

relatives, they contribute for capital and public can not be invited.

Its open to the General public and any person can contribute and become shareholders.


Limits to membership

Min. 2 and max. 50

Min. 7 and no max. limit.


Election of directors

No need of holding statutory meeting to elect directors

Statutory meeting has to be held and the shareholders elect the directors.


Resale of shares

Cannot be resold or transferred

Shares can be easily resold and transfer without the co. consent.

without the consent of the co. 5.

Audit of Accounts

No legal provision of the audit of co.s account.


Min. capital

Can be started with any amount 

 Accts. have to be audited and circulated among the members.

without any legal binding

Min. lay down capital is legally required before starting of a business.



Has to use words Pvt. Ltd. at the end of its name

Has to use only the word Ltd. at the end of its name.


No. of Directors

Min. 2



Legal Control

Less legal controls

Regulations are more strict 


Remuneration of Directors

Less restrictions for Directors  remuneration

Remuneration of directors is restricted

to 11% of net profit.


 

Due to the hardships suffered by exploited class compelled

it to unite for their economic uplift through self and mutual help. Lead to the evolution of cooperative movement. Indu Indust stri rial al coop coop.. an and d cons consum umer er coop. coop. were were de deve velo lope ped d in Germany. Definition of Coop. Organization:

it is a form of org., wherein persons, irrespective of caste, creed ad religion voluntarily associate together as human beings, on the basis of  equality for the fulfillment of their common economic interest. As per ILO, ILO,  A coop. org. is an association of persons, usually of  limite limited d means, means, who have have volun voluntar tarily ily joined joined togeth together er to achiev achieve e a common economic even through the formation of a democratically controlled organization, making equitable contributions to the capital requ requir ired ed an and d acce accept ptin ing g a fair fair sh shar are e of risk riskss an and d be bene nefi fits ts of the the undertakings.

FEATURES        

Voluntary organizations Open memberships Economic and democratic management  Profit is not important  Spirit of cooperation Unity Common interest  Cooperative status



@ @ @ @



To purchase and supply raw materials, tools and equipment  to members. To secure contracts and execute them with the help of  members. To market the finished goods of members. To purchase machinery for giving on hire to members. To borrow funds from members and non-members. non-member s. To grant loans and advances to members on the security of  raw-materials and finished goods belonging to them. To unde undert rtak ake e all all such uch act activi ivities ties as ar are e cond onduci ucive or incidental to the accomplishment of aforesaid objectives. o bjectives. To safeguard the interest of poorer poo rer sections of community.


 

Application to be submitted to the Reg egiistrar trar of  Cooperative societies. Application provide all essential information like name and address of the society, its aims and objectives, particulars of share capital , etc. Application should be signed by atleast 10 members. Should be accompany duplicate copies of Bylaws i.e. rules and an d re regu gula lati tion on gove govern rniing inte intern rnal al orga organi niza zati tion on an and d management of the society. Registrar afte fter scrutiny of docu ocume men nts will iss ssu ue a certificate of registration and the society will be formed. for med.

Producerss Cooperative

Consumers Cooperative




Housing Cooperative Society

Credit Cooperative Society.

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