Function of organization

Before a device is designed an engineer must have the understanding of

its use. Requirement for the device gives the context. Before we can
manage people or resources we must know in what context we are
working and understand the requirement of management for it.
Various functions are carried out in any manufacturing organization in
order to operate the business. Consider the example of electric cattle
manufacturer. Before considering how the business will operate following
actions have already completed.
Research carried out and product found viable
The company has adequate money to finance the operation
Following areas be considered for profitable business of
manufacturing kettles
Buying of raw material
Transformation of raw material into saleable product
To sell the product at a price to earn profit
Buy parts
Manufacture and
assemble parts
package kettles
Sell kettles
Buying
Making
selling
Function of organization
The parts required for the manufacturing of the kettle have to
be procured and are to be kept in a safe storage where their
receipt and expense can be controlled. The store system is
also part of purchasing functions.
For expansion and development of the company, desired
market share be obtained and for that how the company's
product will be developed over a period of time must be
determined. Company can achieve this by using research
allied with design activity.
In case of kettle manufacturing a new type of heat exchanger
mechanism be designed and then design for its
manufacturing, producing drawing and parts list be
considered.

Function of organization
The business should be profitable and for that it must be
ensured that the expenditure for making kettle is less than its
selling price, this introduces two further functions.
Finance.
Calculating costs to make kettle including buying raw material
Enough cash for operating business is available and company can afford
to wait for the payment of bills.
Marketing
Match between customers need and product attributes to ensure profit
Customers need and competition offering
Companies should ensure the quality functions. In kettle
manufacturing appropriate safety standards should be
ensured and the people in the company should know and
have the ability to meet them.
People affairs like deployment, welfare, recruitment, selection
etc are also considered.
Function of organization
In order to manufacture any product following
functions are addressed.
Buying and safe storage of materials (purchasing and stores)
Manufacturing of product (operations)
Selling of product (sales)
Pricing of product and its competition (marketing)
Financing of business and cost of manufacture (finance)
Product development
Consistent product standards (quality)
People employed by the business (personnel)
Purchasing
A company has to purchase goods and services to feed all
aspects of its operation from special parts required for
research to paper products for washroom.
In purchasing activities it is necessary to clarify what is
required, obtain supplies and ensure that business objectives
are met.
It should ensure that the customer for the goods and services
gets whatever is required without any delay.
Diversity of goods and services are required by different
customers in a company and purchasing function has to meet
all those requirements.
In a very large organization a large purchasing department
handles all requirements of the number of buyers who are
responsible for a particular type of good or service.
Purchasing
In a small company different departments are allowed to do their
own purchasing.
The organization of purchasing is also affected by the quality
system. In a central control system quality is ensured by parent
company.
Role of purchasing function.
In an engineering company majority of the purchases will be used to
form a final product. This will require accounting of 50 % of total
expenditure of the company.
Purchasing might involve
Buying parts for production
Negotiating contracts for temporary staff
Assessing suppliers
Negotiating discounts for bulk purchases
Purchasing function exists to meet the needs of the customers inside the
organization in design, manufacturing, personnel or finance.
Purchasing
Organization of purchasing function
A centralized purchasing department established in a company controls
all aspects of procurement, stockholding and supply.
In smaller companies it is distributed to different departments having
responsibility for buying the goods and services that they require.
An overall central purchasing policy is made which allows minimum cash
flow control and define procedure for the selection of the suppliers and
payments made to them.
Different people in the centralized department are given particular areas
to which they specialize. Specific responsibilities for the procurement of
the food, furniture, stationary and production parts may be given to
different buyers.
Each user can develop very specialized knowledge of the market and
provide greater economies.
Bulk purchases will lead to price saving.
Cost of placing orders will be minimized
Duplication of efforts will be avoided.
Purchasing
Organization of purchasing function
In a decentralized purchasing department the buyer is able to react more
quickly to a problem.
Certain departments of research and product development activities are
given freedom to purchase items with minimum centralized control.
Designers and engineers can communicate with suppliers easily and
they can get goods on adhoc and quick turn around basis.
Alternative of using central buyer may delay orders or it may be very
bureaucratic.
Such problems should however not occur if purchasing function is
properly organized.
Adhoc system has a potential problem of control exerted by the central
management, it should therefore be accompanied by strict budget control.
Adhoc system should return to normalization as the device moves from
prototyping to manufacture.
Purchasing organization
Materials
manager
Buyer Non
production parts
Buyer
production parts
Store keeper
Progress
chaser
Store persons
packer
Purchasing
Activities in purchasing
Following activities will be undertaken in purchasing function
Establishing purchasing policy
Sourcing
Buying
Stock control
Establishing purchasing policy
It will define the rules by which the purchasing function will operate.
For example criteria for selection of supplier, geographical location of
supplier and specification of limits of amount on any one supplier.
Management should check implementation and monitoring of
purchasing policy. This will be difficult in decentralised purchasing
system.

Purchasing
Activities in purchasing
Sourcing
Sourcing is about finding suppliers who can meet the company
requirements for goods and services. It will be done in close
consultation with the department requiring the goods or services.
Sourcing should be carried out by a specialist in a specific area. For
example software consultant should carry out sourcing for a software
rather than someone with general knowledge of the field.
Second sourcing should also be carried out to find out an alternative
supplier for goods and services.
The criteria for selection of suppliers should be defined in terms of
Quality
Location
Delivery reliability
Financial stability of suppliers
Any other factors specific to the company objectives
Purchasing
Activities in purchasing
Buying
Buying will depend upon the types of parts or services being bought.
Buying production parts for stable production system will be done
from a list indicating the parts required and where they can be
obtained.
More specialist buying will require more detailed knowledge about
actual goods and an understanding of the commercial implications of
any contracts agreed.
Stock of frequently used items is held in stores. For these items new
stock is purchased when a specified reorder is reached.
The quantity of new parts will also be specified. (example of ssl). This
will be reorder quantity and will be calculated taking into account
purchase price, discounts and stockholding costs.
Purchasing
Activities in purchasing
Buying
Call off schedule
In this type of buying one order is placed and it covers all the parts that
will be required for a specific period although they all may not be needed
at the same time. The company then calls off the parts at the time when
they need them. In this way the administration is reduced. There is no
need to hold the stock of one large order.
Lead time
It is time required to get the goods into the stores and available for
manufacture after placing the order. it is a vital aspect and purchasing for
manufacturing should be able to predict it.
Buyers should have good communication with manufacturing so that
they can act quickly in cases of urgency or any difficulties in supply.
Progress chasing
It is following up of an order to ensure that goods are going to be
delivered on time and in right quantity. A chaser is employed for this job.
Purchasing
Activities in purchasing
Stock control
It concerns the procurement, safe storage and release of materials.
A data base for materials used in an organization should be
maintained.
Data base should include operation of store or ware house used for
receiving, holding and release of goods.
Operations
It is the central business activity of the company. In a
manufacturing company operations are the activities
that transform raw materials into finished goods.
Majority of the engineering companies are involved in
manufacturing even the designers should also be
aware of manufacturing processes.
Management activities in the operations area.
Management of people
In a manufacturing company majority of the workforce will be directly
employed with in the operations function.
There are people from many different back grounds with in the same
department.
Whatever is the no of people involved and whatever is their skill level
and position in the company, they all have to be managed in a way so
as to ensures that objectives of the operations function are met.

Operations
Management activities in the operations area.
Management of people
The factors affecting managing the operations workforce
are
No of people in the operation function
How work force is organized
Level of automation in operation area
Personnel policy of the company
The activities in managing personnel of operations function are
Personnel management
Man power planning
Training
Operations
Management activities in the operations area.
Management of people
Manpower planning has direct effect on output.
Skill level of available peoples and company's output
targets should be compared to match the available
capacity to the requirements.
If a worker can produce 2 units of output per hour than
considering how many hours that worker is available,
available capacity can be calculated. When it is done for
whole workforce it will be possible to calculate any
difference between what is available and what is needed.
Decision about recruitment, redundancy, working hours,
shift work, overtime, planning for sickness, holidays and
training can be taken.
Operations
Management activities in the operations area.
Management of people
Training is an important activity in manufacturing
environment because of variety of skills and the fact that
people have to be trained in new technologies.
Decisions regarding training requirements will be taken
after employees appraisal interviews (assessing
employees work performance) and manpower planning.
Training can be conducted on or off site
Effects of the training are on out put, more experienced
people can be employed to provide on the job training to
less experienced people.
Operations
Management activities in the operations area.
Management of machines and processes
Manufacturing requires many different machines and
processes, many aspects of machine management have
to be considered.
Type of production
Level of automation
Complexity of processes
The processes used will depend upon
Products being made
the design
No of products being produced
Available skill

Operations
Management activities in the operations area.
Management of machines and processes
The management activities relating to processes are
Making decisions about types of production
Which processes are used
Monitoring and control of processes.
Monitoring and controlling processes are important. Standard of
workmanship and product specification should be set.
Many monitoring techniques have been developed, statistical
process control is an example of such techniques. All such
techniques are aimed to inform impending difficulties before the
process has drifted out of specification.

Operations
Management activities in the operations area.
Management of machines and processes
Selection of equipment in management of machines is an
important activity.
The factors in selection are
Processes used in the company
Desired capacity of the company
Return the company will expect from purchase of any
machine
Plans for expansion and technological changes that will
affect the company's processes
Operations
Management activities in the operations area.
Production planning and control
It involves planning of people, machines and materials in order
to ensure that output targets are met.
The factors are
Lead time for manufacturing and purchasing
Production system used and its level of complexity
Size of the operations function
Objective set for operation area.
Activities in production planning vary from long term forecasting
to daily shop floor scheduling
The data needed for production planning
Operational including stock data
Product information
Main management activity is collection, monitoring and control of
production data.
Operations
Organization of manufacturing
Manufacturing takes raw material, parts and
components and transform them into finished
products.
This involves some processes from simple
machining to complex assembly and test
procedures.
Manufacturing activity reflects size of organization
and diversity of products and processes.
Marketing and sales
Business sustains only if the company produces what customer
wants to buy. Funds from external sources such as banks etc
can only be drawn if they know that how the company will
develop over the next few years.
Some companies deals with sales and marketing by one
department and others deal them separately.
It has now been made part of product development function to
overcome the communication problem. The engineers involved
in product development function also carry out marketing.
Irrespective of Marketing method employed, market
intelligence must be provided to company to meet its strategic
goals.

Marketing and sales
Market research
An activity undertaken by the organization with the
purpose of gaining information about potential
customers. There are four key elements.
Analysis of current activities
It means monitoring current sales, trends in sales and so will
give a picture who is buying what and where.
Market intelligence
It involves what is happening in the market, analyzing new
developments particularly what the competition are planning.
Marketing and sales
Market research
There are four key elements
Market analysis
Consumers reaction to new pricing policies and new
advertisement campaign.
Assessment of the market potential of new products by
contacting and gathering information from customers and
potential customers.
Product evaluation
After launch of the product, its evaluation is done to determine
the effectiveness of the strategies adopted and to make any
changes for the future.

Marketing and sales
Customers and markets
All wealth and support for business comes from the
customers. Some businesses have only one type of
customer. E.g. a medical instrument company may supply
to health services but a metal forming company may
supply simultaneously to customers in food industry and
car industry. There are many types of customers
End users
They are the one who purchase a product and actually use it for
its intended purpose. Every product is intended for an end user
through distributors, who sell them to smaller retail outlets or a
manufacturer of a product. (example chip manufacturer)
Selling direct to end user has an advantage to directly develop
contacts with customers.
Marketing and sales
Customers and markets
OEM (original equipment manufacturer)
OEM purchases products from organization and incorporate
them into product of their own which are then sold to end user or
even to another OEM. (use of magnetron in microwaves) the
company selling magnetron have several OEM customers/market
Such customers are very much desirable since they represent
continues business for the organization. OEM contracts run for
several years. organizations should have several OEM customers
in order to overcome the danger of taking over the supply by the
customer in order to reduce price.
Retail customers
It means selling directly to individual customer. Retail is
described as final point of sale of product that requires extensive
distribution. Manufacturer supplies to the distributors who sell it to
the retailer and he then sells it individually at a higher retailed
price than that he bought from distributor.
Marketing and sales
Customers and markets
Displaced customer
They are the customers who have been separated from the
person responsible for purchase. The product must meet the
requirements of purchaser and actual customer. (example of
scientific equipment needed by researcher and purchased by
purchase committee, toys purchased by parents are used by the
children and not by the parents)
Segmentation
It is a process of dividing large number of customers into smaller
groups each having its own distinct characteristics.
Car manufacturer may sub divide into smaller groups of
customers of hatch back, saloon, sports or luxury cars. There are
various range of engine sizes, accessories, instruments and
colors etc.
The enormous range is offered to get greater number of
customers.
Marketing and sales
Customers and markets
Segmentation
The segmentation of the customer groups becomes one off
manufacturing. Heavy cost is involved in making a new model so
it is very expensive. However so many choices are made
available so that every user consider the model specifically
tailored for him.
Market refreshment
After segmentation of customers base and organizations have
sold their products extensively, the demand status falls because
all customers have best product to meet their needs
The organization stimulates customers base to offer something
new. Market refreshment is the process through which this is
achieved.
The customer buy a product not because of an absolute need for
a given level of performances but because a relative need for
performance.

Marketing and sales
Customers and markets
Market refreshment
The customer buy a product not because of an absolute need for
a given level of performances but because a relative need for
performance.
Camera with easy operating features but not of 40s
computer advancements
Power to weight ratio of jet engine required by fighter jet
Paint can not be refreshed every time it is changed when
deteriorated.

Marketing and sales
Sales
Selling means that buyers are found for the
products that are available. Sales should ensure that
customers needs are translated into production
targets and to provide data for marketing and
product development.
Following activities are carried out in sales
department.
Selling
Following type of selling may be used
Selling by catalogue. Market products are sold to customers
off the shelf. specifications for the product, price and delivery
lead time will be known. Sales person should only have a
superficial knowledge of the product but he should have good
sales skills.

Marketing and sales
Sales
Following activities are carried out in sales
department.
Selling
Following type of selling may be used
Selling by tender or quotation. This method is used when
very specialist product/service is sold or when capital
equipment purchases are made. Sales manager should have
extensive knowledge of product. Following procedure will be
adopted.
Purchaser sends out tender/quotation request to suppliers
A bid is prepared and is sent for evaluation to supplier.
Supplier include full specifications of what ey can supply and
in addition it includes all contractual terms for example cost,
delivery, after sales service and warranty arrangements.

Marketing and sales
Sales
Following activities are carried out in sales
department.
Selling
Following type of selling may be used
Selling by tender or quotation.
It is sent to customer for valuation and if accepted a legal
contract is made.
Providing customer contact
Sales department provides first line contact to customers to
answer the queries and problems resolved. It has an advantage of
building relationship with the company and that other peoples in
the company are not affected who are also not in a position to pay
attention to customer.
Marketing and sales
Sales
Following activities are carried out in sales
department.
Translating customer requirements into production orders
Sales procedure should ensure that customers order be met in a
way that they receive what they want. If the product is not
available in stock, and is to be manufactured to order then
customer's requirement should be fully understood. A production
order form be filled and keying requirement be mentioned in it.
Finance
Finance function is concerned with bringing money into
the company, how it is used and paying it out. Finance
function should ensure effective control of these
activities to meet the corporate goals.
Organization of finance department.
A large organization has a director and finance function will be
operated through a finance department. In small companies the
owner/executive director will have this responsibility and he may use
the services of an external advisor.
The department will employ accountant, ledger clerk, pay roll clerk .
and others like some one dealing with taxation. It can also perform
purchasing function. The size of the department will depend upon the
size of the company.
Finance personnel have no other responsibilities, they are
responsible for setting and monitoring financial policies such as
defining spending limits and procedures for expenditures. They will
also deal with external organizations such as revenue and banks etc.

Finance
Activities of finance department
Bringing money into company.
Finance department is responsible for capital planning. Directors are
asked to provide their requirements to execute their plans. Funding is
managed by finance department. It involves taking loans, using reserves
or increasing shareholding.
Using money
To ensure that money is being used effectively cost of product should
known so as to set sales price. Cash flow requirements should also be
known. Finance department determines this info on the basis of data
provided by operation department. The analysis of the product cost gives
info about profit margin and then budgets are made.
Cash flow forecasting is an important task. It defines what company
wants to achieve over a period of time and then shat would be required in
terms of cash to be paid out. For example if a product takes three months
to complete and gives require d profit, in between this period, material
has to be procured and staff has to be paid. The finance function will
strike a balance between making and receiving money

Product development
When the design of a product is undergoing improvements it is
known as product development. The aim of this process is to
produce products that customer will continue to buy.
Activities of product development function
Identifying customers need
Product design specifications
Technical design
Preparing documentation
Product implementation
Organization of product development function
Making structure. Meeting customer's requirement through marketing.
Design structure. Meeting customer's requirement through product designer.

Research
Research describes enquiry into fundamental workings of nature and is very
intellectual process
Commercial engineering it describes extending the technologies of the
organization. This may involve fundamental research as microprocessor
manufacturer constantly research the fundamental operation of the miniature
circuit. Commercial research means bringing established technologies into an
organization.
Research function must managed like all other functions of the company. It is
very expensive part time if not managed properly.
Communication issues are very important because researchers have to sell
their ideas to others in the company.
The issues involved in successful management of research are how much
profit it should consume, how radical be the organization new product and
how links b/w research and customers made.
People in research are more technical and innovative in nature. They are
more qualified and specialists than in other areas. Due to nature of the work
the organization in research is less formal and relaxed.
Quality
ISO 8402 quality vocabulary defines quality
the totality of features and characteristics of a product or service that
bear on its ability to satisfy stated or implied needs
Quality should not be confused with expense. High quality does
not mean high cost. A cheap pen that does it job for which made
still be of high quality.
Quality goods are provided using two approaches
Detecting defects using inspection and quality control to prevent
defective product from being sold.
Preventing defect using quality assurance and Total Quality
Management.
Quality system. ISO 8402 defines
the organizational structure, responsibilities, procedures, processes and
resources for implementing quality management

Quality
Quality system. ISO 8402 defines
the organizational structure, responsibilities, procedures, processes and
resources for implementing quality management
All good companies have some form of quality system to ensure
implementation, use and monitoring of quality policy of their company.
Many follows ISO 9000 quality system. TQM is an extension of this
standard. The philosophy of TQM is that quality should pervade al aspects
of the business of the company and standard is limited to certain section
of the business. In TQM there is emphasis on philosophy of employees
and customer involvement .
The aim of the quality system is to provide systematic approach to
design and manufacture in order to prevent failure and to provide
objective, documented evidence that an agreed quality level has been
achieved.
If quality standards of ISO 9000 are achieved it can be certified by an
independent third party approved by UKAS (UK Accreditation service).
Certification means that company can address new markets and increase
sales.