Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

Unit 1 -Introduction 1. Define Management. Bring out its historical perspective

Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources. Historical Perspective of Management The verb manage comes from the Italian maneggiare (to handle, especially tools), which derives from the Latin word manus (hand). The French word mesnagement (later mnagement) influenced the development in meaning of the English word management in the 17th and 18th centuries. While management has been present for millennia, several writers have created a background of works that assisted in modern management theories. Classical economists such as Adam Smith (17231790) and John Stuart Mill (18061873) provided a theoretical background to resource-allocation, production, and pricing issues. About the same time, innovators like Eli Whitney (17651825), James Watt (17361819), and Matthew Boulton (17281809) developed elements of technical production such as standardization, quality-control procedures, cost-accounting, interchangeability of parts, and work-planning. Many of these aspects of management existed in the pre-1861 slave-based sector of the US economy. By about 1900 one finds managers trying to place their theories on what they regarded as a thoroughly scientific basis. Examples include Henry R. Towne's Science of management in the 1890s, Frederick Winslow Taylor's The Principles of Scientific Management (1911), Frank and Lillian Gilbreth's Applied motion study (1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first college management textbook in 1911. In 1912 Yoichi Ueno introduced Taylorism to Japan and became first management consultant of the "Japanese-management style". The first comprehensive theories of management appeared around 1920. The Harvard Business School offered the first Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (18411925) and Alexander Church described the various branches of management and their inter-relationships. In the early 20th century, people like Ordway Tead (18911973), Walter Scott and J. Mooney applied the principles of psychology to management, while other writers, such as Elton Mayo (18801949), Mary Parker Follett (1868 1933), Chester Barnard (18861961), Max Weber (18641920), Rensis Likert (19031981), and Chris Argyris (1923 - ) approached the phenomenon of management from a sociological perspective. Peter Drucker (19092005) wrote one of the earliest books on applied management: Concept of the Corporation. It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of the organization. Some of the more recent developments include the Theory of Constraints, management by objectives, reengineering, Six Sigma and various information-technology-driven theories such as agile software development, as well as group management theories such as Cog's Ladder.

2. Discuss Management is an Art or Science Harold Koontz has defined management as the art of getting things done through people. Art is an inborn talent and refers to creative skills and talents which people require to conduct certain activities in order to accomplish certain goals. Management is an art because of its following features. a. Creative: Managers have to come with creative ideas or solutions to handle unique business problems b. Individual approach: Every manager need to adopt his individual approach of managing to handle situations
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

c. Application and dedication: Management requires not only skills and knowledge but there is also a need for discipline, dedication and commitment d. Initiative: Managers are like artists take the initiative in doing the right things at right time. This helps to accomplish objectives more effectively and efficiently. e. Intelligence: Managers should possess mental intelligence, social intelligence, inter personal intelligence an d emotional intelligence Management as a Science Father of Scientific Management F.W. Taylor has declared management has to be scientific. Management is a social science because it deals with human beings. Following features of management states that it is a science. Systematic Decision making: Management starts with the process of systematic decisions. Before taking any right decisions from right source and at right time is to be collected. This process has to be followed systematically. Situational Output: The output management process may vary without change in input. This is possible by providing some resources, tools, incentive and by motivation. Science may be described as a systematized body of knowledge based on proper findings and exact principles and is capable of verification. It is a reservoir of fundamental truths and its findings apply safely in all the situations. In this sense, management is a science as it has also developed some systematized knowledge. Like other sciences, management has also developed certain principles, laws, generalization, which are universal in nature and are applicable wherever the efforts of the people are to be coordinated. But management is not as exact science as other physical sciences like physic, chemistry, biology, astronomy etc. The main reason for the inexactness of science of management is that it deals with the people and it is very difficult to predict their behavior accurately. In this way, management falls in the area of 'social sciences'. Thus, it is a social science. From the above, we conclude that management is an art and science both. According to American Society of Mechanical Engineers. "Management is the art and science of preparing, organizing and directing human efforts to control the forces and utilize the material of nature for the benefit of men. "Thus, it has now been accepted that management is an art as well as science. It has the elements of both arts and science. In the words of Dean Stanley, "Management is a mixture of an art an science - the present ratio is about 80% art and 20% science." 3. Explain the contribution of Taylor, Henry Fayol to the evolution of management. Fredrick W Taylor called as the father of Scientific Management, was born in 1856 in Philidelphia. He began his career in 1871 as an apprentice machinist and turner at Cramp Shipyard, USA. Then he joined Midvale Steel Works as machinist. By his hardwork, he became chief engineer in 1884. He developed the Principle of breaking the task i.e. the job is broken into elements for timing the same. He evolved a principle of investigating the work on scientific basis, by selecting the best worker for a task and training him further to acquire desired skill, developing the concept called scientific management. The four objectives of management under scientific management were as follows: The development of a science for each element of a man's work to replace the old rule-ofthumb methods. The scientific selection, training and development of workers instead of allowing them to choose their own tasks and train themselves as best they could.
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

The development of a spirit of hearty cooperation between workers and management to ensure that work would be carried out in accordance with scientifically devised procedures The division of work between workers and the management in almost equal shares, each group taking over the work for which it is best fitted instead of the former condition in which responsibility largely rested with the workers. Self-evident in this philosophy are organizations arranged in a hierarchy, systems of abstract rules and impersonal relationships between staff. F.W. Taylor's Contribution to Organizational Theory This required an organization theory similar for all practical purposes to that advocated by those organizational theorists who followed. These theorists developed principles of management which included much of Taylor's philosophy His framework for organization was: clear delineation of authority responsibility separation of planning from operations incentive schemes for workers management by exception task specialization Contribution of Henry Fayol: Henry Fayol, the father of Principles of Modern Management was born in 1841 in France. He graduated as a mining engineer in 1860 from National School of mining. Henri Fayol was concerned with the principles of organization and the function of management. Fayol laid the foundation of management as a separate body of knowledge. He always insisted that if scientific forecasting and proper methods are used in management than company can get satisfactory results. According to Fayol, management was not personal talent; it is a knowledge base skill. Henri Fayols Administrative Management is based on six admin activities. They are1. Technical : Production and manufacture 2. Managerial : Planning, controlling, co-ordination 3. Commercial : Purchasing and selling 4. Financial : Use of capital 5. Accounting : Asset, Liabilities, cost, profits 6. Security : Protection of goods and Person Fayol derived the following fourteen principles. Division of work: Division of work means specialization. Each job and work should be divided into small task and should be assigned to specialist of it. Authority and responsibility: Authority means right to give order and command while responsibility means to accomplish objective. Discipline: Discipline is required at every level in every organization. Fayol stated discipline in terms of obedience, application, and respect to superiors. Unity of command: A subordinate should receive order from only one boss.
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

Unity of direction: It means that all the works of an organization must work together to accomplish a common objective in under one plan and head. Subordination of individual interest to common interest: Worker follows the common interest of organization rather than individual. Remuneration: Remuneration should be fair and adequate. It includes both types of incentives financial as well as non-financial. Centralization: There should be one central point in organization which exercises overall direction and control of all the parts. Scalar Chain: Scalar chain is the chain or line of command from superior to subordinates. Order: Only proper order can give an efficient management. Equity: Equity creates loyalty and devotion among the employees. Stability of tenure personnel: Security of job for an employee in an organization is very important and pre-requisite condition. Retaining productive employee should always a higher priority of management. Esprit de corps: Management should encourage harmony and proper understandings between workers. Fayol said that in union there is strength. Whole organization should work as a team. Initiative: Manager should be encouraged the employees Initiative for creative working

4. Discuss the contribution of Frank B Gilbreth to Management F.B. Gilbreth was an American Engineer, building contractor and management consultant. He made his most distinctive contribution to scientific management. He made studies in applying principles of motion economy and is considered to be the originator of motion study. He took an analysis approach and stressed the importance of giving attention to minute details of work. This approach was to become an important characteristic of all scientific management. He felt that if the one best way to do work could be discovered for each and every element in a workers movements and surroundings, the resulting gains in productivity is significant, He was the first to apply the motion picture camera to record and analyze the operations. His particular contribution was to develop management as a social science with the human being the centre of interest. 5. Explain the characteristics of scientific management. Discuss further, any two schools of management thought. Characteristics of Scientific Management Replace working by "rule of thumb," or simple habit and common sense, and instead use the scientific method to study work and determine the most efficient way to perform specific tasks. Rather than simply assign workers to just any job, match workers to their jobs based on capability and motivation, and train them to work at maximum efficiency. Monitor worker performance, and provide instructions and supervision to ensure that they're using the most efficient ways of working. Allocate the work between managers and workers so that the managers spend their time planning and training, allowing the workers to perform their tasks efficiently. The Schools of Management thought The schools of management thought are theoretical frameworks for the study of management. Each of the schools of management thought are based on somewhat different assumptions about human beings and the organizations for which they work. Since the formal study of management began late in the 19th century, the study of management has progressed through several stages as scholars and
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

practitioners working in different eras focused on what they believed to be important aspects of good management practice. Over time, management thinkers have sought ways to organize and classify the voluminous information about management that has been collected and disseminated. These attempts at classification have resulted in the identification of management schools. Five Major Schools of Management Thought MANAGEMENT SCHOOLS Beginning Emphasis Dates CLASSICAL SCHOOL Managing workers and organizations more efficiently. Scientific Management 1880s Administrative Management 1940s Bureaucratic Management 1920s BEHAVIORAL SCHOOL Understanding human behavior in the organization. Human Relations 1930s Behavioral Science 1950s QUANTITATIVE SCHOOL Increasing quality of managerial decision-making through the application of mathematical Management Science 1940s and statistical methods. Operations Management 1940s Management Information Sys- 1950s1970s tems SYSTEMS SCHOOL 1950s Understanding the organization as a system that transforms inputs into outputs while in constant interaction with its' environment. CONTINGENCY SCHOOL 1960s Applying management principles and processes as dictated by the unique characteristics of each situation.
1. THE CLASSICAL SCHOOL

The classical school is the oldest formal school of management thought. Its roots pre-date the twentieth century. The classical school of thought generally concerns ways to manage work and organizations more efficiently. Three areas of study that can be grouped under the classical school are scientific management, administrative management, and bureaucratic management. SCIENTIFIC MANAGEMENT: In the late 19th century, management decisions were often arbitrary and workers often worked at an intentionally slow pace. There was little in the way of systematic management and workers and management were often in conflict. Scientific management was introduced in an attempt to create a mental revolution in the workplace. It can be defined as the systematic study of work methods in order to improve efficiency. Frederick W. Taylor was its main proponent. Other major contributors were Frank Gilbreth, Lillian Gilbreth, and Henry Gantt. Scientific management has several major principles. First, it calls for the application of the scientific method to work in order to determine the best method for accomplishing each task. Second, scientific management suggests that workers should be scientifically selected based on their qualifications and trained to perform their jobs in the optimal manner. Third, scientific management advocates genuine
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

cooperation between workers and management based on mutual self-interest. Finally, scientific management suggests that management should take complete responsibility for planning the work and that workers' primary responsibility should be implementing management's plans. Other important characteristics of scientific management include the scientific development of difficult but fair performance standards and the implementation of a pay-for-performance incentive plan based on work standards. Scientific management had a tremendous influence on management practice in the early twentieth century. Although it does not represent a complete theory of management, it has contributed to the study of management and organizations in many areas, including human resource management and industrial engineering. Many of the tenets of scientific management are still valid today. ADMINISTRATIVE MANAGEMENT. Administrative management focuses on the management process and principles of management. In contrast to scientific management, which deals largely with jobs and work at the individual level of analysis, administrative management provides a more general theory of management. Henri Fayol is the major contributor to this school of management thought. Fayol was a management practitioner who brought his experience to bear on the subject of management functions and principles. He argued that management was a universal process consisting of functions, which he termed planning, organizing, commanding, coordinating, and controlling. Fayol believed that all managers performed these functions and that the functions distinguished management as a separate discipline of study apart from accounting, finance, and production. Fayol also presented fourteen principles of management, which included maxims related to the division of work, authority and responsibility, unity of command and direction, centralization, subordinate initiative, and team spirit. Although administrative management has been criticized as being rigid and inflexible and the validity of the functional approach to management has been questioned, this school of thought still influences management theory and practice. The functional approach to management is still the dominant way of organizing management knowledge, and many of Fayol's principles of management, when applied with the flexibility that he advocated, are still considered relevant. 2. THE BEHAVIORAL SCHOOL The behavioral school of management thought developed, in part, because of perceived weaknesses in the assumptions of the classical school. The classical school emphasized efficiency, process, and principles. Some felt that this emphasis disregarded important aspects of organizational life, particularly as it related to human behavior. Thus, the behavioral school focused on trying to understand the factors that affect human behavior at work. HUMAN RELATIONS. The Hawthorne Experiments began in 1924 and continued through the early 1930s. A variety of researchers participated in the studies, including Clair Turner, Fritz J. Roethlisberger, and Elton Mayo, whose respective books on the studies are perhaps the best known. One of the major conclusions of the Hawthorne studies was that workers' attitudes are associated with productivity. Another was that the workplace is a social system and informal group influence could exert a
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

powerful effect on individual behavior. A third was that the style of supervision is an important factor in increasing workers' job satisfaction. The studies also found that organizations should take steps to assist employees in adjusting to organizational life by fostering collaborative systems between labor and management. Such conclusions sparked increasing interest in the human element at work; today, the Hawthorne studies are generally credited as the impetus for the human relations school. According to the human relations school, the manager should possess skills for diagnosing the causes of human behavior at work, interpersonal communication, and motivating and leading workers. The focus became satisfying worker needs. If worker needs were satisfied, wisdom held, the workers would in turn be more productive. Thus, the human relations school focuses on issues of communication, leadership, motivation, and group behavior. The individuals who contributed to the school are too numerous to mention, but some of the best-known contributors include Mary Parker Follett, Chester Barnard, Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The human relations school of thought still influences management theory and practice, as contemporary management focuses much attention on human resource management, organizational behavior, and applied psychology in the workplace. 6. Compare public sector and private sector companies Private Sector Public Sector 1. Profit is the main motive. It benefits only Service to the country us the main motive. It owners benefits all. 2. It is owned and managed by an individual It is owned and managed by the Government. or a group of individuals 3. It has to face tough competition in the Generally it is a monopoly concern hence less market. competition. 4. Large amount of capital may not be Large amount of capital is available available 5. It leads to economic inequality. It leads to economic equality. The profits earned Concentration of wealth in the hands of a are utilized for public welfare. few. 6. Large scale business is not possible Large scale business is always possible as the because of limited resources. government has huge resources 7. Private sector dominates in the production Public sector dominates in the production of of consumer goods. producer goods. 7. List characteristics, advantages, and disadvantages of joint stock company and co-operative organizations.

Joint Stock Companies

The companies in India are governed by the Indian Companies Act, 1956. According to the Act a company means a company formed and registered under this act. It is an artificial person created by law, having a separate legal entity, with perpetual succession and a common seal. The capital of a company is divided into a number of shares of equal value. Members of the company holding one or more shares, are called the companys shareholders CHARACTERISTICS OF A JOINT STOCK COMPANY
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET
1.

2. 3. 4. 5. 6. 7.

Artificial legal Person: A company is an artificial person created by law and existing only in contemplation of law. A human being, who takes birth, grows, enters into relationships and dies, whereas a joint stock company also takes birth, grows, enters into relationship and dies. However, it is called an artificial person as its birth, existence and death are regulated by law. Separate Legal Entity: A company has a separate legal entity distinct from its members. It can own property and enter into contracts in its own name. It can sue and be sued in its own name. Perpetual Succession: A company enjoys a perpetual succession and its life is not affected by the death, insolvency, lunacy, etc. of its members or directors. Limited Liability: Liability of the members of a limited company is limited to the value of the shares subscribed by them or to the amount of guarantee given by them. Common Seal: A company has a common seal because being an artificial person it cannot sign for itself. Transferability of Shares: The shares of a public limited company are freely transferable. They can be purchased and sold through the Stock Exchange. Separation of Ownership and Management: The number of members of a public company is generally very large so all of them or most of them cannot take part in the day to day management of the company. The company is managed by Board of Directors who are elected by the members, hence the ownership of a company is seprated from its managements.

ADVANTAGES OF JOINT STOCK COMPANIES There are many advantages which the company form of business organization enjoys over other form of business organizations some of them are as follows: 1. Limited Liability: Shareholders of a company are liable only to the extent of the face value of shares held by them. 2. Large Financial Resources: Company form of ownership enables the collection of huge financial resources. The capital of a company is divided into shares of small denominations so that people with small means can also buy the shares of a company. 3. Continuity: A company enjoys uninterrupted business life. As a body corporate, it will continue to exist even if all of its members die or desert it. 4. Transferability of Shares: The shares of a pubic limited company can be freely transferred by the members without the consent of other members. 5. Diffused Risk: The risk of loss in a company is spread over a large number of members. 6. Social Benefits: The company organization helps to mobilize savings of the community and invest them in industry. LIMITATIONS OF JOINT STOCK COMPANIES 1. Difficulty of Formation: It is a very difficult and expensive to form a company. A number of documents have to be prepared and filed with the Registrar of companies. 2. Excessive Government Control: A company is subject to elaborate statutory regulations in its dayto-day operations. Periodical reports. Audit and Publications of accounts is obligatory. 3. Oligarchic Management: The management of a company is supposed to be democratic but in practice company becomes an Oligarchy (rule by few). 4. Delay in Decision: Too many levels of management create problems in taking decisions. A lot of time is wasted in calling and holding meetings and in passing resolutions. 5. Lack of Secrecy: Under the Companies Act, 1956 a company is required to disclose to the public a variety of information on its working. This results in lack of secrecy

Co-operative Societies
The term co-operation is derived from the Latin word co-operari, where the word co means with and operari means to work. Thus, co-operation means working together. It means those who want to
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

work together with some common economic objective can form a society which is termed as cooperative society. It is a voluntary association of persons who work together to promote their economic interest. It works on the principle of self-help as well as mutual help. Nobody joins a cooperative society to earn profit. People come forward as a group, pool their individual resources, utilize them in the best possible manner, and derive some common benefit out of it. Cooperation is a form of organization wherein persons voluntarily associate together as human beings, on a basis of equality, for the promotion of economic interests of themselves. CHARACTERISTICS OF CO-OPERATIVE SOCIETIES A co-operative society is a special type of business organization different from other forms of business organization you have learnt earlier. Let us discuss its characteristics. 1. Voluntary Association: A Cooperative Society is a voluntary association of persons. A member can join the society as and when he likes, continue for as long as he likes, and leave the society at will. 2. Open Membership: The membership of a Co-operative Society is open to all those who have a common interest. Membership is not restricted on the basis of caste, sex, colour or religion, but may be limited to the employees of a particular organisation. 3. Separate Legal Entity: A cooperative undertaking must seek registration under the Cooperative Societies Act, 1912, or under the relevant Cooperative Societies Act of the State Government. A cooperative society, has a separate legal existence, distinct from its members. 4. Source of Finance: The capital of a cooperative society is raised from among its members in the form of share capital. However, it can easily raise loans and secure grants from government after its registration. 5. Service Motive: The primary aim of a cooperative society is service to its members, though it may also in the process happen to earn reasonable profits for itself. 6. Voting Power: Each member has only one vote, irrespective of the number of shares held by him or her. TYPES OF CO-OPERATIVE SOCIETIES Co-operatives socities may be classified on the basis of the nature of services rendered by them. The following are the main types of cooperatives societies. 1. Consumers Co-operative Societies: These societies are formed to protect the interest of general consumers by making consumer goods available at a reasonable price. They purchase goods directly from the producers, this eliminate the middlemen in the process of distribution. Kendriya Bhandar, Apana Bazar and Super Bazar are examples of consumers co-operative societies. 2. Producers Co-operative Societies: These societies are formed to protect the interest of producers who are basically small in size, by making available items of their needs for production like raw materials, tools and equipments and machinery, etc. Handloom societies like APPCO, Bayanika, Haryana Handloom, etc., are examples of producers co-operative societies. 3. Marketing Cooperative Societies: These are cooperatives societies of small producers and manufactures who find it difficult to sell their products individually. These societies collect the products from the individual members and takes the responsibility of selling those products in the market. Gujarat Co-operative Milk Marketing Federation that sells AMUL milk products is an example of marketing co-operative society. 4. Credit Cooperative Societies: These societies are formed to provide financial support to the members. They accept deposits from members and grant them loans at reasonable rates of interest in times of need. Village Service Co-operative Society and Urban Cooperative Banks are examples of co-operative credit society. 5. Cooperative Group Housing Societies: These are residential societies which are formed to provide residential houses to members. They purchase land and construct houses or flats and allot the same to members
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

The Advantages of Co-operative Society A Co-operative form of business organization has the following advantages: Easy Formation: Formation of a co-operative society is very easy compared to a joint stock company. Any ten adults can voluntarily form an association and get it registered with the Registrar of Co-operative Societies. Open Membership: Persons having common interest can form a co-operative society. Any competent person can become a member at any time he/she likes and can leave the society at will. Democratic Control: A co-operative society is controlled in a democratic manner. The members cast their vote to elect their representatives to form a committee that looks after the day-to-day administration. This committee is accountable to all the members of the society. Limited Liability: The liability of members of a co-operative society is limited to the extent of capital contributed by them. Unlike sole proprietors and partners the personal properties of members of the co-operative societies are free from any kind of risk because of business liabilities. Elimination of Middlemens Profit: Through co-operatives the members or consumers control their own supplies and thus, middlemens profit is eliminated. State Assistance: Both Central and State governments provide all kinds of help to the societies. Such help may be provided in the form of capital contribution, loans at low rates of interest, exemption in tax, subsidies in repayment of loans, etc. Stable Life: A co-operative society has a fairly stable life and it continues to exist for a long period of time. Its existence is not affected by the death, insolvency, lunacy or resignation of any of its members. Disadvantages of Cooperative Society Besides the above advantages, the co-operative form of business organisation also suffers from various limitations. Let us learn these limitations. Limited Capital: The amount of capital that a cooperative society can raise from its member is very limited because the membership is generally confined to a particular section of the society. Again due to low rate of return the members do not invest more capital. Governments assistance is often inadequate for most of the co-operative societies. Problems in Management: Generally it is seen that co-operative societies do not function efficiently due to lack of managerial talent. The members or their elected representatives are not experienced enough to manage the society. Again, because of limited capital they are not able to get the benefits of professional management. Lack of Motivation: Every co-operative society is formed to render service to its members rather than to earn profit. This does not provide enough motivation to the members to put in their best effort and manage the society efficiently. Lack of Co-operation: The co-operative societies are formed with the idea of mutual cooperation. But it is often seen that there is a lot of friction between the members because of personality differences, ego clash, etc. The selfish attitude of members may sometimes bring an end to the society. Dependence on Government: The inadequacy of capital and various other limitations make cooperative societies dependent on the government for support and patronage in terms of grants, loans subsidies, etc. Due to this, the government sometimes directly interferes in the management of the society and also audits their annual accounts. 8. List the types of ownership of industries and explain the salient features, advantages, disadvantages and application of proprietorship and partnership firms.
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

Types of ownership industries a. Proprietorship b. Partnerships c. Joint Stock Companies d. Co-operative Societies Proprietorship Meaning: A proprietorship or one mans business is a form of business organization owned and managed by a single person. He is entitled to receive all the profits and bears all risk of ownership. Features: The important features of sole proprietorship are: 1. The business is owned and controlled by only one person. 2. The risk is borne by a single person and hence he derives the total benefit. 3. The liability of the owner of the business is unlimited. It means that his personal assets are also liable to be attached for the payment of the liabilities of the business. 4. The business firm has no separate legal entity apart from that of the proprietor, and so the business lacks perpetuity. 5. To set up sole proprietorship, no legal formalities are necessary, but there may be legal restrictions on the setting up of particular type of business. 6. The proprietor has complete freedom of action and he himself takes decisions relating to his firm. 7. The proprietor may take the help of members of his Family in running the business. Advantages 1. Ease of formation: As no legal formalities are required to be observed. 2. Motivation: As all profits belong to the owner, he will take personal interest in the business. 3. Freedom of Action: There is none to interfere with his authority. This freedom promotes initiative and self-reliance. 4. Quick Decision: No need for consultation or discussion with anybody. 5. Flexibility: Can adapt to changing needs with comparative ease. 6. Personal Touch: comes into close contact with customers as he himself manages the business. This helps him to earn goodwill. 7. Business Secrecy: Maintaining business secrets is very important in todays competitive world. 8. Social Utility: Encourages independent living and prevents concentration of economic power. Disadvantages 1. Limited resources: one mans ability to gather capital will always be limited. 2. Limited Managerial Ability 3. Unlimited Liability: Will be discouraged to expand his business even when there are good prospects for earning more than what he has been doing for fear of losing his personal property. 4. Lack of Continuity: uncertain future is another handicap of this type of business. If the sole proprietor dies, his business may come to an end. 5. No Economies of Large Scale: As the scale of operations are small, the owner cannot secure the economies and large scale buying and selling. This may raise the cost of production. Application of Proprietorship
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Industrial Management (06ME81) Questions and Answers

by Yogeesha H.C. AP/Mech, NCET

From the discussion of the advantages and disadvantages of sole proprietorship above, it is clear that this form of business organization is most suited where: 1. The amount of capital is small 2. The nature of business is simple in character requiring quick decisions to be taken 3. Direct contact with the customer is essential and 4. The size of demand is not very large. These types of conditions are satisfied by various types of small business such as retail shops, legal or medical or accounting profession, tailoring, and service like dry cleaning or vehicle repair etc. hence sole proprietor form of organization is mostly suitable for these lines of businesses. This form of organization also suits those individuals who have a strong drive for independent thinking and highly venturous some in their attitude. Partnership Form of Organization
Generally when a proprietor finds its difficult to handle the problems of expansion, he thinks of taking a partner. In other words, once a business grows beyond the capacity of a sole proprietorship and or a Joint Hindu Family, it becomes unarguably necessary to form partnership. It means that partnership grows out of the limitations of oneman business in terms of limited financial resources, limited managerial ability and unlimited risk.Partnership represents the second stage in the evolution of ownership forms. In simple words, a Partnership is an association of two or more individuals who agree to carry on business together for the purpose of earning and sharing of profits. However a formal definition is provided by the Partnership Act of 1932. Section 4 of the Partnership Act, 1932 defines Partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all Features of Partnership 1. Simple procedure of formation: the formation of partnership does not involve any complicated legal formalities. By an oral or written agreement, a Partnership can be created. Even the registration of the agreement is not compulsory. 2. Capital: The capital of a partnership is contributed by the partners but it is not necessary that all the partners should contribute equally. Some may become partners without contributing any capital. This happens when such partners have special skills, abilities or experience. The partnership firm can also raise additional funds by borrowing from banks and others. 3. Control: The control is exercised jointly by all the partners. No major decision can be taken without consent of all the partners. However, in some firms, there may partners known as sleeping or dormant partners who do not take an active part in the conduct of the business. 4. Management: Every partner has a right to take part in the management of the firm. But generally, the partnership Deed may provide that one or more than one partner will look after the management of the affairs of the firm. Sometimes the deed may provide for the division of responsibilities among the different partners depending upon their specialization. 5. Duration of partnership: The duration of the partnership may be fixed or may not be fixed by the partners. In case duration is fixed, it is called as partnership for a fixed term. When the fixed period is over, the partnership comes to an end. 6. Unlimited Liability: The liability of each partner in respect of the firm is unlimited. It is also joint and several and, therefore any one of the partner can be asked to clear the firms debts in case the assets of the firm are inadequate for it. 7. No separate legal entity: The partnership firm has no independent legal existence apart from that of the persons who constitute it. Partnership is dissolved when any partner dies or retires. Thus it lacks continuity. 8. Restriction on transfer of share: A partner cannot transfer his share to an outsider without the consent of all the other partners. Advantages Page No 12

Industrial Management (06ME81) Questions and Answers

1. 2. 3. 4. 5. 6. 7.

8. 9. 10.

by Yogeesha H.C. AP/Mech, NCET ease of formation: partnership can be easily formed without expense and legal formalities. Even the registration of the firm is not compulsory. large resources: when compared to sole-proprietorship, the partnership will have larger resources. Hence, the scale of operations can be increased if conditions warrant it. better organization of business; as the talent, experience, managerial ability and power of judgment of two or more persons are combined in partnership, there is scope for a better organsation of business. greater interest in business: as the partners are the owners of the business and as profit from the business depends on the efficiency with which they manage, they take as much interest as possible in business. prompt decisions: as partners meet very often, they take decisions regarding business policies very promptly. This helps the firm in taking advantage of changing business conditions. balance judgement: as partners possesses different types of talent necessary for handling the problems of the firm, the decisions taken jointly by the partners are likely to be balanced. flexibility: partnership is free from legal restriction for changing the scope of its business. The line of business can be changed at any time with the mutual consent of the partners. No legal formalities are involved in it. diffusion of risk; the losses of the firm will be shared by all the partners. Hence, the share of loss in the case of each partner will be less than that sustained in sole proprietorship. protection to minority interest: important matters like change in the nature of business, unanimity among partners is necessary hence, the minority interest is protected. 10. influence of unlimited liability: the principle of unlimited liability helps in two ways. First, the partners will be careful in their business dealings because of the fear of their personal properties becoming liable under the principle of unlimited liability. Secondly, it helps the firm in raising loans for the business as the financers are assured of the realization of loans advanced by them.

Disadvantages. 1. great risk; as the liability is joint and several, any one of the partners can be made to pay all the debts of the firm. This affects his share capital in the business and his personal properties. 2. lack of harmony: some frictions, misunderstanding and lack of harmony among the partners may arise at any time which may ultimately lead to the dissolution. 3. limited resources: because of the legal celing on the maximum number of partners, there is limit to the amount of capital that can be raised. 4. tendency to play safe: because of the principle of unlimited liability, the partners tend to play safe and pursue unduly conservative policies. 5. no legal entity: the partnership has no independent existence apart from that of the persons constituting it, i.e it is not a legal entity. 6. instability: the death, retirement or insolvency of a partner leads to the dissolution of the partnership. Further even any one partner if dissatisfied with the business,can bring about the dissolution of partnership. Hence partnership lacks continuity 7. 7. lack of public confidence: no legal regulations are followed at the time of the formation of partnership and also there is no publicity given to its affairs. Because of these reasons, a partnership may not enjoy public confidence. Applications: The advantages and drawbacks of partnership stated above indicate that the partnership form tends to be useful for relatively small business, such as retail trade, mercantile houses of moderate size, professional services or small scale industries and agency business. But when compared to sole proprietorship partnership is suitable for a business bigger in size and operations.

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by Yogeesha H.C. AP/Mech, NCET

Unit 2 Quality Philosophy 1. Define the term quality and explain how it is improved. Quality is an attribute of a product or service
that fulfills or exceeds the human expectations. These expectations are based on the intended use and selling / service price. It is somewhat of an intangible based on perception. That is why quality is a relative term and each person has his or her own definition. As per ISO 9000:2000: Quality means The degree to which a set of inherent characteristics fulfills requirements. Here, Degree quality such as poor, good, and excellent Inherent Permanent attribute Requirement need based or expectation. According to the oxford dictionary for the business world, quality is defined as the degree of excellence. Quality means a totality of characteristics of an entity that bear on its ability to satisfy stated and implied needs. In some references, Quality is referred to as "fitness for use", "fitness for purpose", "customer satisfaction", or "conformance to the requirements." The father of Total Quality Management, Dr. William Edward Deming defined Quality should be aimed at the needs of the customer, present and future (continuous Improvement).

Quality Improvement: Quality improvement means finding ways to do better than the standard and breaking through to unprecedented levels of performance. According Juran, Proper planning and Control of quality leads to quality improvement. Quality improvement can be implemented in the following ways, Define quality attributes on the basis of customer needs Define how to measure each attribute Set quality standards Establish proper tests for each standard Find and correct the cause for poor quality Continue to make improvement 2. List different methods of quality control and explain any one of them. Different methods of quality control are Pareto diagram Process flow diagram Cause and effect diagram Check sheets Histograms Scatter diagrams Control charts a. Cause and Effect Diagram The most useful tool for identifying the causes of problems is a cause-and-effect diagram, also known as a fishbone or Ishikawa diagram, named after the Japanese quality expert who popularized the concept. A cause-and-effect diagram is simply a graphical representation of an outline that presents a chain of causes and effects. A team typically uses a cause-and-effect diagram to identify and isolate causes of a problem. The technique was developed by the late Dr. Kaoru Ishikawa, a noted Japanese quality expert. An example is shown in figure below. At the end of the horizontal line is the problem to be addressed. Each branch pointing into the main stem represents a possible cause. Branches printing to the causes are contributors to these causes. The diagram is used to identify the most likely causes of a problem so that further data collection and analysis can be carried out.
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by Yogeesha H.C. AP/Mech, NCET
b. IDENTIFYING CAUSES Identifying

causes is a critical step in the process. It involves the pairing off of causes and effects. Effects are the problems that have already been identified. Say that one such problem has been targeted for solving. A fishbone diagram has six spines and represents the six major groupings of causes: manpower (personnel), method, materials, machines (equipment), measurement, and environment All causes of
work-place problems fall into one of these major groupings, using the diagram, team members brainstorm causes under each grouping. For example, under the machine grouping, a cause might be insufficient maintenance. Under the manpower grouping, a cause might be insufficient training.

Cause-and-effect diagrams are usually constructed in a brainstorming setting so that everyone can contribute their ideas. Usually, small groups drawn from operations or management work with an experienced facilitator. The facilitator guides the discussion to focus attention on the problem and its causes, on facts, not opinions. This method requires significant interaction among group members. The facilitator must listen carefully to the participants and capture the important ideas.

b. Pareto Diagram The Pareto chart is a very useful tool wherever one needs to separate the important from the trivial. The chart, first promoted by Dr. Joseph Juran, is named after Italian economist/sociologist Vilfredo Pareto(1848-1923). He had the insight to recognize that in the real world a minority of causes lead to the majority of problems. This is known as the Pareto principle. Pick a category, and the Pareto principle will usually hold. For example, in a factory you will find that of all the kinds of problems you can name, only about 20% of them will
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produce 80% of the product defects: 80% of the cost associated with the defects will be assignable to only about 20% of the total number of defect types occurring. Examining the elements of this cost will reveal that once again 80% of the total defect costs will spring from only about 20% of the cost elements. Charts have shown that approximately 20% of the pros on the tennis tour reap 80% of the prize money and that 80% of the money supporting churches in the United States comes from 20% of the church membership. Pareto analysis is a technique for prioritizing types or sources of problems. Pareto analysis separates the vital few from the trivial many and provides help in selecting directions for improvement. The Pareto chart below labels a company's customers A. B. C, D, E. and All Others. The bars represent the percentage of the company's sales going to the respective customers. Seventy-five percent of this company's sales are the result of just two customers. If one adds customer C, 90% of its sales are accounted for, all the other customers together account for only 10% of the company's sales. Bear in mind that Other" may include a very large number of small customers. Which customers are the ones who should be kept happy? Obviously, A, B, and perhaps C are the most critical. This would suggest that customers A, B, and Care the company's core market and all the other customers represent a marginal business. Decisions on where to allocate resources should be made accordingly.

3.

Define TQM and explain how it can be achieved. Total Quality Management is a management approach that tries to achieve and sustain long term organizational success by encouraging employee feedback and participation, satisfying customer needs and expectations, respecting societal values and beliefs, and obeying governmental statutes and regulations. Total Quality Management (TQM) is an enhancement to the traditional way of doing business. It is a proven technique to guarantee survival in world-class competition. Only by changing the actions of management will the culture and actions of an entire organization be transformed. TQM is for the most part common sense. Analyzing these words. Quality management is all activity of the overall management function that determine the quality policy, objectives and responsibilities within the quality system TQM is a philosophy advocating four basic principles (i) intense focus on customer satisfaction, (ii) accurate measurement of activities, (iii) continuous improvement of products and processes, and (iv) empowerment of people. TQM is a management philosophy that builds a customer driven, learning organization dedicated to total customer satisfaction through continuous improvement in the effectiveness and efficiency of the organization and its processes.
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TOTAL Everyone and everything that we do QUALITY Giving the customer what they expect all the time MANAGEMENT The way we act and operate our policies and procedures, and our training and instruction to all of our employees.
4.

How TQM can be achieved TQM can be achieved by the following concepts. 1. A committed and involved management to provide long-term top-to-bottom organizational support. Agreement must participate in the quality program. A quality council must be established to develop a clear vision, set longterm goals, and direct the program. Quality goals are included in the business plan. An annual quality improvement program is established and involves input from the entire work force. Managers participate on quality improvement teams and also act as coaches to other teams. TQM is a continual activity that must be entrenched in the cultureit is not just a one-shot program. TQM must be communicated to all people. 2. An unwavering focus on the customer, both internally and externally. The key to an effective TQM program is its focus on the customer. An excellent place to start is by satisfying internal customers. We must listen to the voice of the customer and emphasize design quality and defect prevention. Do it right the first time and every time, for customer satisfaction is the most important consideration. 3. Effective involvement and utilization of the entire work force. TQM is an organization-wide challenge that is everyones responsibility. All personnel must be trained in TQM, statistical process control (SPC), and other appropriate quality improvement skills so they can effectively participate on project teams. Including internal customers and, for that matter, internal suppliers on project teams is an excellent approach. Those affected by the plan must be involved in its development and implementation. They understand the process better than anyone lese. Changing behavior is the goal. People must come to work not only to do their jobs, but also to think about how to improve their jobs. People must be empowered at the lowest possible level to perform processes in an optimum manner. 4. Continuous improvement of the business and production process. There must be a continual striving to improve all business and production processes. Quality improvement projects, such as on-time delivery, order entry efficiency, billing error rate, customer satisfaction, cycle time, scrap reduction, and supplier management, are good places to begin. Technical techniques such as SPC, benchmarking, quality function development, ISO 9000, and designed experiments are excellent for problem solving. 5. Treating suppliers as partners. On the average 40% of the sales dollar is purchased product or service; therefore, the supplier quality must be outstanding. A partnering relationship rather than an adversarial one must be developed. Both parties have as much to gain or lose based on the success or failure of the product or service. The focus should be on quality and life-cycle costs rather than price. Suppliers should be few in number so that true partnering can occur. 6. Establish performance measures for the processes. Performance measures such as uptime, percent nonconforming, absenteeism, and customer satisfaction should be determined for each functional area. These measures should be posted for everyone to see. Quantitative data are necessary to measure the continuous quality improvement activity. Explain the principle of TQM

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by Yogeesha H.C. AP/Mech, NCET

The principles of Total Quality Management seek to satisfy the external customer as well as the companys internal customers with quality goods and services; to satisfy the external and internal suppliers; and to continuously improve processes by working smarter and using special quality methods. TQM requires that the principles of quality management should be applied in every branch and at every level in the organization with an emphasis on integration into business practices and a balance between technical, managerial and people issues. It is a company-wide approach to quality, with improvements undertaken on a continuous basis by everyone in the organization. As seen above, the principles are universal in nature and therefore are applicable in any organization. Be Customer focused: Whatever you do for quality improvement, remember that ONLY customers determine the level of quality. Whatever you do to foster quality improvement, training employees, integrating quality into processes management, ONLY customers determine whether your efforts were worthwhile. Insure Total Employee Involvement: You must remove fear from work place, then empower employee... you provide the proper environment. Process Centered: Fundamental part of TQM is to focus on process thinking. Integrated system: All employees must know the business mission and vision. An integrated business system may be modeled by MBNQA or ISO 9000 Strategic and systematic approach: Strategic plan must integrate quality as core component. Continual Improvement: Using analytical, quality tools, and creative thinking to become more efficient and effective. Fact Based Decision Making: Decision making must be ONLY on data, not personal or situational thinking. Communication: Communication strategy, method and timeliness must be well defined. 5. Define standardization. List different techniques used for standardization. Standardization is the process of developing and implementing technical standards. There are typically four different techniques for standardization a. Simplification or variety control b. Codification c. Value engineering d. Statistical process control 6. Write a note on codification system 7. Discuss quality costs. A quality cost is considered to be any cost that the company would not have incurred if the quality of the product or service were perfect. Every time work is redone, the cost of quality increases. Obvious examples include: The reworking of a manufactured item. The retesting of an assembly. The rebuilding of a tool. The correction of a bank statement. The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant.
In short, any cost that would not have been expended if quality were perfect contributes to the cost of quality. The Cost of Quality is a measure of what an organization is spending for its overall quality. It can be viewed as the difference between the actual cost of making and selling products and services and the

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by Yogeesha H.C. AP/Mech, NCET cost if there were no failures of the products and services during manufacture or use.

Four types of quality costs:1. Prevention Costs: These are the costs of activities aimed at preventing defects occurring during the development, production, storage and transport of a product. They relate to quality before a single unit of product is made. They usually represent up-front costs that should minimize overall costs by performing the task properly and hopefully at the first attempt. Prevention costs are all costs incurred in the process of preventing poor quality from occurring. They include quality planning costs, such as the costs of developing and implementing a quality plan. Also included are the costs of product and process design, from collecting customer information to designing processes that achieve conformance to specifications. Employee training in quality measurement is included as part of this cost, as well as the costs of maintaining records of information and data related to quality. Examples are the costs of: New product review Quality planning Supplier capability surveys Process capability evaluations Quality improvement team meetings Quality improvement projects Quality education and training 2. APPRAISAL COSTS: Appraisal costs are incurred in the process of uncovering defects. They include the cost of quality inspections, product testing, and performing audits to make sure that quality standards are being met. Also included in this category are the costs of worker time spent measuring quality and the cost of equipment used for quality appraisal. These are the costs of inspecting and testing to ensure that the products, parts and raw materials conform to quality requirements. These are generally the easiest type of quality costs to measure and include: These include the costs of: Incoming and source inspection/test of purchased material In-process and final inspection/test Product, process or service audits Calibration of measuring and test equipment
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Associated supplies and materials Examples include -Incoming inspection and test: -In-process inspection and test: -In-process evaluation of conformance to requirements. -Final inspection and test: -Evaluation of conformance to requirements for product acceptance. -Document review -Examination of paperwork to be sent to customer. -Balancing -Examination of various accounts to assure internal consistency. -Product quality audits -Performing quality audits on in-process or finished products. -Maintaining accuracy of test equipment: -Keeping measuring instruments and equipment in calibration. -Inspection and test materials and services -Materials and supplies in inspection and test work (e.g., x-ray film) and services (e.g., electric power) where significant. -Evaluation of stock inventory -Testing products in field storage or in stock to evaluate degradation.
FAILURE COSTS The costs resulting from products or services not conforming to requirements or customer/user needs. Failure costs are divided into internal and external failure categories.

3.INTERNAL FAILURE COSTS: Internal failure costs are associated with discovering poor product quality before the product reaches the customer site. One type of internal failure cost is rework, which is the cost of correcting the defective item. Sometimes the item is so defective that it cannot be corrected and must be thrown away. This is called scrap, and its costs include all the material, labor, and machine cost spent in producing the defective product. Other types of internal failure costs include the cost of machine downtime due to failures in the process and the costs of discounting defective items for salvage value. Failure costs are incurred when a product fails to conform to its design specifications. Failure costs can be either internal or external. Internal failure costs result from identification of defects before they are shipped to customers. These costs include scrap, rejected products, reworking of defective units, and downtime caused by quality problem. The more effective a company's appraisal activities the greater the chance of catching defects internally and the greater the level of internal failure costs. This is the price that is paid to avoid incurring external failure costs, which can be devastating. The costs of deficiencies discovered before delivery. We associate deficiencies or nonconformities with the failure to meet explicit requirements or implicit needs of external or internal customers. Internal failure costs come from deficiencies discovered before delivery. These include all the costs associated with the failure (nonconformities) to meet the needs of your external and internal customers. This failure cost is one of the 4 key components of Examples of Internal Failure Costs : Scrap: The labor, material, and (usually) overhead that created the defective product. The item cannot be economically repaired. The titles are numerousscrap, spoilage, defectives, etc. Rework: The cost to correct the defective material or errors in service products. Lost or missing information: The cost to retrieve this expected information. Failure analysis: The cost analyzing nonconforming goods or services to determine the root causes. Supplier scrap and rework: Scrap and rework costs due to nonconforming product received from suppliers. This includes the costs to the buyer of resolving the supplier quality problems.
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by Yogeesha H.C. AP/Mech, NCET 100% sorting inspection: The cost of completing 100% inspection to sort defective units from good units. Retest: The cost to retest products after rework or other revision. Changing processes: The cost of modifying the manufacturing or service processes to correct the deficiencies. Redesign of hardware: The cost to change designs of hardware to correct the issues. Redesign of software: The internal cost to changing software designs. Scrapping of obsolete product: The cost of disposing scrap. Scrap in support operations: Costs from defective items in indirect operations. Rework in internal support operations: Costs from correcting defective items in indirect operations. Downgrading: The cost difference between the normal selling price and the reduced price due to quality reasons. Variability of product characteristics: Rework losses that occur with conforming product (e.g.,overfill of packages due to variability of filling and measuring equipment). Unplanned downtime of equipment: Loss of capacity of equipment due to failures. Inventory shrinkage: Loss costs due to the difference between actual and recorded inventory quantity. Non-value-added activities: Cost due to redundant operations, sorting inspections, and other non-value added activities. A value-added activity increases the usefulness of a product to the customer; a nonvalue-added activity does not.

4. EXTERNAL FAILURE COSTS: External failure costs are associated with quality problems that occur at the customer site. These costs can be particularly damaging because customer faith and loyalty can be difficult to regain. They include everything from customer complaints, product returns, and repairs, to warranty claims, recalls, and even litigation costs resulting from product liability issues. A final component of this cost is lost sales and lost customers. For example, manufacturers of lunch meats and hot dogs whose products have been recalled due to bacterial contamination have had to struggle to regain consumer con?dence. Other examples include auto manufacturers whose products have been recalled due to major malfunctions such as problematic braking systems and airlines that have experienced a crash with many fatalities. External failure can sometimes put a company out of business almost overnight. Failure costs occurring after delivery or shipment of the product -- and during or after furnishing of a service -- to the customer. When a defective product is delivered to customer, external failure cost is the result. External failure costs include warranty, repairs and replacements, product recalls, liability arising from legal actions against a company, and lost sales arising from a reputation for poor quality. Such costs can decimate profits.
8.

What is Value Engineering? Explain how it helps in reducing the cost and improving the quality. Value engineering (VE) is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvement. Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships.
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by Yogeesha H.C. AP/Mech, NCET

Value Engineering is a tool that will improve your ability to manage projects, solve problems, innovate, and communicate. A VE program in your organization will provide your staff with a definitive tool to improve value in any product, project or process. Cost savings, risk reduction, schedule improvements, improved designs and better collaboration have been the outcomes of some VE studies. Value Engineering helps organization in : Lowering O & M costs Improving quality management Improving resource efficiecy Simplifying procedures Minimizing paperwork Lowering staff costs Increasing procedural efficiency Optimizing construction expenditures Developing value attitudes in staff Competing more sucessfully in marketplace 9. Explain the methodology of Value Engineering Value engineering is often done by systematically following a multi-stage job plan. Larry Miles' original system was a six-step procedure which he called the "value analysis job plan." Others have varied the job plan to fit their constraints. Depending on the application, there may be four, five, six, or more stages. One modern version has the following eight steps: Preparation Information Analysis Creation Evaluation Development Presentation Follow-up Four basic steps in the job plan are: a. Information gathering - This asks what the requirements are for the object. Function analysis, an important technique in value engineering, is usually done in this initial stage. It tries to determine what functions or performance characteristics are important. It asks questions like; What does the object do? What must it do? What should it do? What could it do? What must it not do? Alternative generation (creation) - In this stage value engineers ask; What are the various alternative ways of meeting requirements? What else will perform the desired function? Evaluation - In this stage all the alternatives are assessed by evaluating how well they meet the required functions and how great will the cost savings be. Presentation - In the final stage, the best alternative will be chosen and presented to the client for final decision. VE follows a structured thought process to evaluate options as follows. Gather information 1.What is being done now? Who is doing it? What could it do? What must it not do? b. Measure 1.How will the alternatives be measured? What are the alternate ways of meeting requirements? What else can perform the desired function? c. Analyze 1.What must be done? What does it cost? d. Generate What else will do the job?
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e.

Evaluate 1.Which Ideas are the best? 2. Develop and expand ideas What are the impacts? What is the cost? What is the performance? 3.Present ideas Sell alternatives

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