Topic 8-11-S

EME 341 -MANAGEMENT FOR ENGINEERS
TOPIC 8: WAGES AND INDUSTRIAL RELATIONS

Wages polices and guidelines, Types of wages, Salaries structures and principles,
Trade unions, Employee discipline
3 components- link to organizational goals, well designed structures & effective HR processes.
These processes and activities are as follows:
• Communication policies and decision-making practices

• Delivery systems such as gain sharing plans, profit sharing plans, as well as administrative
policies.
Types of reward systems
Total rewards include:

• Financial compensation – such as salary or hourly rate, and variable elements, such as
incentive pay, stock options, and monetary bonuses.
• Employee benefits – these include health insurance, retirement programs, paid leave,
childcare subsidies, and relocation expenses.
• Non-financial rewards - such as recognition, flexible working arrangements, Leaves etc
Total Reward
Total reward is the combination of financial and non-financial rewards available to employees.
Total Remuneration
This is the value of cash payments (total earnings) and benefits received by employees.
Guiding principles for reward
Guiding principles define the approach an organization takes to dealing with the reward. They are the
basis for reward policies and provide guidelines for the actions contained in the reward strategy.
Elements to determine effective reward systems
HR strategy, direction of reward strategy, grade and pay structure, market analysis and trends, job
evaluation, pay ranges, employee benefits, other non- financial rewards, performance management &
appraisal, total remuneration
Prepared by Dr. Sedina 1

Factors affecting pay levels
Internal job value to the organization; External job value; value of persons (qualifications); affordability
of the company; trade unions; the government; the economy.
Theories of rewards
1. Efficiency wage theory- firms will pay more because they believe the higher the pay,
the better the performance
2. Human capital theory- knowledge and skills determine pay levels among employees
3. Agency theory- signing of individual contracts determine pay levels
Reward strategy -DRAWN IN CLASS
Non-financial incentives used by today’s organizations
These are the intrinsic benefits that employees obtain from employment in terms of career and
personal development. These include the following:
1 Learning and development
Investment by the employer in the career and work-related development of the
employee.
2 Work experience
3 Achievement, recognition, responsibility, autonomy and growth
This covers benefits that accrue from the level of engagement, commitment, and
corporate citizenship evident in a particular situation.
Total reward system
It considers all aspects of rewards both financial and non-financial
Elements- base pay, contingent pay, performance related pay, competence pay, contribution related
pay, employee benefits and non-financial rewards
Components- compensation, benefits and work experience
Benefits of total rewards
1. Increased flexibility
2. Recruitment and retention
3. Reduced costs to the organization
4. Adds value to the employees
5. Organizational profitability

REMUNERATION SYSTEMS
A remuneration system consists of methodologies that identify criteria of awarding compensation to

employees on a consistent basis.
Remuneration Types
1. Merit Pay
Merit pay is a pay increase based on goals or achievements set by the employer. It provides bonuses
for workers who perform their jobs effectively.
◆ Merit pay programs link performance-appraisal ratings to annual pay increases.

◆ A merit increase grid combines an employee’s performance rating with the employee’s position
in a pay range to
◆ determine the size and frequency of his or her pay increases.
2. Skill Based Pay
The payment of additional salary or hourly pay to employees for learning, and being able to
perform, additional tasks or skills. It is sometimes expanded to compensate employees for
demonstrating relevant competencies.
3. Pay for performance
In Pay for performance, an employee’s pay is gradually increased each time his/her team,
department, or company as a whole, meets certain production and quality benchmarks.
4. Competence related pay

Competencies are demonstrable personal characteristics such as knowledge, skills, and behaviors.
This is the determination of individual pay based on the competence demonstrated by employees.
5. Contribution related pay
It is payment based on the individual’s contribution towards a determined criteria such as
increased profitability, cost reduction, etc.
Advantages
Rewards people not only for what they do but how they do it.
Disadvantage
May be hard to measure contribution and it is difficult to manage well.
PAY RATES
Pay rate is the amount of money received per unit of time. There are two methods available:
Time rate method and piece rate method
1. Time rate method

Under this method, payment is made on the basis of time that may be an hour, a day, a week or a month.
Advantages of time rate method
• It is a convenient method and wages can be calculated easily.

• Employees can forecast their income and they are ensured to receive this income.
• This method eliminates the need to measure the performance of the workers
• This is more suitable for such jobs where work cannot be divided into smaller units e.g., the
work of a driver, a typist, or any other office worker.
Disadvantages
• This method discourages the more efficient workers because they receive the same amount
which is received by inefficient and lazy employees.
• This method requires close supervision of employees otherwise they do not show interest in
their work.
2. Piece rate method
Under this method, an employee is paid per unit of product, article or per job completed. It is used only
if the work can be divided into uniform pieces as is often possible for factory jobs.
Advantages
a) It provides an incentive to more efficient workers. They are paid according to work done so
they get more income.
b) It does not require close supervision of employees.
c) It provides the employers an easy way of determining labour cost per unit of product.
Disadvantages
a) The workers can produce inferior or poor-quality products in order to produce greater quantity
in short time.
b) This method cannot be applied to those jobs which are not easy to divide in small pieces.
c) This method does not ensure a stable monthly income for workers.
Factors determining pay rate
1. The firm’s capacity to pay.

2. Demand for the supply of labor
3. The existing market wage rate
4. The cost of living
5. Living wage
6. Job requirements
7. Productivity of labor
8. Managerial attitudes
9. Psychological and social factors, and
10. Trade unions bargaining power.
PAY STRUCTURES (ADJUSTMENT OF PAY STRUCTURES)

Meaning of Pay Structure
Pay structures provide a framework for managing base pay; pay progression and employee benefit
provision. It is a company’s system for assigning levels and pay ranges for all its jobs. It follows
from the company’s pay philosophy.
Principles of ideal pay structures
An ideal pay structure should:
4. Be appropriate to the characteristics of the organization and its employees.
5. Facilitate the management of differences (relativities) and the achievement of equity,
fairness and consistency in managing employee rewards.
6. Be capable of adapting to pressure arising from market rate changes and skill shortages.
7. Facilitate operational flexibility and continuous development of employees.
8. Provide scope as required for rewarding performance, increase in skill and competence.
9. Clarify reward and career opportunities.
10. Be contracted legally and clearly so that the basis upon which they operate can readily
be communicated to employees.
11. Enable the organization to exercise control over the implementation of pay policies and
budgets.
Procedure for establishing a pay structure

Step 1 – Salary survey
The employer must compare what the market is offering. This is done through formal and informal
Third, surveys also collect data on benefits like insurance, sick leave and vacation to provide a basis
for decisions regarding employee benefits.

Step 2 – Job evaluation
Job evaluation is aimed at determining a jobs relative worth. It is a formal systematic comparison
of jobs to determine the worth of on job relative to another and eventually results in a wage or salary
hierarchy.
Basic principle being jobs that require greater qualifications, more responsibilities, and more
complex job duties should be paid more highly than jobs with lesser requirements.
Step 3 - Group similar jobs into pay grades
Once the job evaluation has been performed, then the organization can turn to the task of assigning
pay rates to each job. The organization will group similar jobs in terms of other ranking or number
of points, for instance, into grades for pay purposes.
Step 4 – Price each pay grade – wage curves
This step assigns pay rates to pay grades. The wage curve shows the pay rates currently paid for
jobs in each pay grade relative to the points or rankings assigned to each job or grade by the job
evaluation. The purpose of the wage curve is to show the relationships between:
1). the value of the job as determined by one of the job evaluation methods and;
2.) the current average pay rates for their grades.
Step 5 – Fine tune pay rates (Adjustment of pay structures)
Fine tuning involves developing pay ranges and correcting out of line rates. Most employers do not
just pay one rate for all jobs in a particular pay grade. A wage structure depicts the range of pay
rates paid for each grade. The wages of underpaid employees should be raised to the minimum of
the rate range for their pay grade.
Types of graded pay structures
1 Narrow graded pay structures
These consist of a sequence of job grades into which jobs of broadly equivalent values are
slotted. A pay range is attached to each grade.
2 Broad banded pay structures
Pay is grouped in large bands higher than a conventionally graded structure. The band width
May be as much as 100% or even more and there may be only four or five bands in the
structure. The band boundaries are often but not always, defined by job evaluation
3 Individual job range structures
These simply define a separate pay range for each job. The relativities between jobs are
usually determined by point factor job evaluation, which may in effect convert points to
Shillings by the application of a formula.-skill
4 Job family structures
These consist of separate grades or pay structures for jobs which are related through the
activities carried out and the basic skills used, but are differentiated by the level of
responsibility, skill or competence required.
5 Spot rate structures
A spot or individual job rate structure allocates a specific rate for a specific job. Spot rates
can be fixed entirely by reference to market rates in a market driven structure. Alternatively,
job evaluation may be used to assess job worth. The rates may be negotiated with trade
unions.
Factors affecting a remuneration package for an individual employee
The pay rate of an individual reflects a number of considerations, of which performance is only
one. Other variables found to influence pay are:
1. The person's performance appraisal, pay history, present position in the range, and
experience;
2. The time since the last pay increase;
3. The amount of that increase;
4. Pay relationship within the work area and other parts of the organization;
5. labor-market conditions;
6. The financial condition of the company; and of course
7. The previous decisions regarding wage level and structure.
The interaction of these forces determines whether a person receives an increase, and if so the
amount of that increase.
TRADE UNIONS
EMERGENCE AND DEVELOPMENT OF TRADE UNIONS

A trade union - is an organization based on membership of employees in various trades, occupations and
professions, whose major focus is the representation of its members at the workplace and in the wider society.
It particularly seeks to advance its interest through the process of rule-making and collective bargaining.
DEVELOPMENT OF TRADE UNIONS IN KENYA
Before independence, labor policies and laws were oppressive towards the employment of African Workers.
Europeans were at the top followed by Asians, Arabs and Africans at the bottom. Employers determined
the working conditions unilaterally. The introduction of the “Kipande” system was used to discriminate
African workers and to control labor movement.
Africans worked in order to pay discriminatory tax such as the poll tax or hut tax As early as in 1920s,
strikes were reported in some areas but were more of political than industrial-based in nature. Officially,
trade unionism was registered in Kenya 1934. After 1943, way up to 1945, the trend of industrial relations
changed with the launch of international trade unionism (the global movement dealing with trade unions),
and the British trade union congress in particular played a crucial role in the Kenyan trade unionism. After
1945, the government took trade unions seriously and set up an office for the registration of trade unions to
regulate and control unionism. In 1946, a protective labor code was introduced. It improved the situation of

labor. In 1952, after the declaration of the state of emergency, the direction taken by trade unions changed.
The political leaders were detained and trade unions started playing the role of agitation for independence.
In reaction to this, the government took up the development of the staff association and workers committees
(e.g. statutory wage determination council). The committees formed can be seen as the basis for the current
tripartite bodies e.g. the labor advisory board - currently known as the National Labor Board
Before independence, Tom Joseph Mboya was the general secretary of Kenya Federation of Labor until
1957, and this was when (KNUT) was formed. Later after independence, Tom Mboya became the Minister
of Labor and his rationale of accepting to be the minister was for the “development purpose”. As a result,
other aspects of trade unions were forgotten. In 1962, Tom Mboya called the trade unions and employers
associations and formulated the industrial relations charter. This document became a social agreement
between the 3 social partners – the Government, Trade Union, and employers.
In 1965, there was a split in the Kenya Federation of Labor, which gave birth to 2 unions which were later
disbanded, and an umbrella body was formed in 1965 as the Central Organization Of Trade Unions – COTU.
ROLE OF TRADE UNIONS IN LABOR MANAGEMENT
Trade unions play an important role and are helpful in the following ways:
DISCUSSED IN CLASS
Importance to Employees
To the employer
To the economy/ government
CHALLENGES OF UNIONS
There are several reasons for this fall in membership, including:
• a dramatic fall in the number of jobs in manufacturing industries where union membership was
traditionally high
• larger numbers of unemployed people
• a fall in traditional full time employment and an increase in part time and temporary workers who are
less likely to join unions
• an increase in the proportion of the workforce employed by small companies where it is often difficult
for unions to organize
• Hostile legislation - the Conservative government has introduced laws which make it more difficult for
unions to operate and keep their members. These laws are explored in more detail under “How have
changes in the law over the last few years affected unions”.
Unions are responding in the following ways to mitigate the above challenges:
• Launching major recruitment drives and trying to attract new members in jobs
• putting education and training high up the bargaining agenda so that their members have the skills and
qualifications to improve their employment prospects
• forging a new deal at the workplace by working in partnership with employers on common issues
• mounting campaigns to defend the rights of working people
PROCEDURE FOR REGISTRATION OF TRADE UNIONS

Trade unions are registered under the Labor relations Laws of Kenya.
Registration of a trade union begins when any two persons apply for a certificate to promote the establishment
of a trade union wherein the name of the proposed trade union and any prescribed information are specified.
Application for registration of a trade union shall be made to the registrar of trade unions within six months of
the date of the certificate issue.
Requirements for registration

• Give name of union to the registrar which should not be similar to another
• Decision should have been made by at least 4 people in last meeting
• Should have an office and address
• Should have at least 50 members who have attended the meeting- the employees should be under a
specific sector
• The constitution should be in line with the law
• application to register which will be signed by 7 members
• The titles, names, ages addresses and occupations of the (office bearers) of the trade union as per
format given in Form
Other items for registration
• Photocopy of Minutes Book
• Photocopy of Membership Forms
• Photocopy of Membership Register
• Specimen of Cash Receipt
• Specimen of Cash Expenditure Voucher
• Photocopy of Cash Book
Two Copies of constitution incorporating all items as prescribed in the Trade Unions Act, • Photocopy of
Service/Employment Proof of all members of union
• Affidavit from General Secretary of Union
• Payment receipts (rent) from the owner for Union office.
• Duly paid Treasury Registration fee
Section 32 of Labour Relations Act, 2007, allows for an employee who is above 16 years to enjoy the rights of
membership of a trade union.
AMALGAMATION OF TRADE UNIONS
A union may join with another or more unions to carry out their functions under agreed terms
This may occur without dissolution or division of funds.
Reasons-
Class notes
Procedure
• Notice is issued to the registrar of trade unions within 14 days
• A secret ballot is carried out to determine amalgamation
• At least 50% of members from both parties should vote
• The members in favor of amalgamation should be at least 20%
• Notice of amalgamation should be signed by the representatives of each union
• New constitution is drafted to fit amalgamation and the articles of association
• Certificate is issued after registration and the unions removed ad independent unions
• All rights, assets are then devolved in the amalgamation
DISSOLUTION OF TRADE UNIONS
The trade union should give notice of dissolution which shall be submitted within 14 days before dissolution. It
shall be signed by authorized representatives and 7 members of the union. The registrar will then issue a
certificate of dissolution.
Voluntary dissolution of trade unions

A trade union is dissolved voluntarily by a resolution of the general meeting. The general meeting shall adopt a
resolution on the procedure for liquidation pursuant to the articles of association and law.
Dissolution by court judgment

A trade union is dissolved by a court judgment at the request of an interested person if:
1) The foundation or activities of the trade union are contrary to law
2) Or if the objectives of the trade union specified in the articles of association are not met
3) The number of members falls below the number provided for in subsection 7 (1) of this Act and the
management board does not initiate voluntary dissolution within six months;
4) A bankruptcy order is made with regard to the trade union
Distribution of assets
Upon liquidation of a trade union, the assets remaining after satisfaction of all claims of creditors and the deposit
of money shall be distributed pursuant to the articles of association.
If it is not possible to apply the procedure for the distribution of assets pursuant to the articles of association, the
remaining assets shall be transferred to the federation or central federation of trade union belongs.
If a trade union does not belong to a federation or central federation, the remaining assets shall be distributed
between the trade unions of a similar area of activity or profession.
Types of Trade Unions

There are a number of ways that unions can be classified
1. Craft Unions are the oldest type of union. Workers with common skills often joined together to form
unions. Examples are the Musicians Union or the National Union of Journalists.
2. Industrial Unions are formed by unions of a particular industry, such as coalminers, railway workers or gas
workers Examples are National Union of Mineworkers or the Banking, Insurance and Finance Union (BIFU)
Unions are made up of workers with a wide range of skills. Examples are the Allied Trade Union or the
Transport and General Workers Union (TGWU).
The Structure of Trade Unions
Trade unions are democratic organizations which are accountable to their members for their policies and
actions. Unions are normally modeled on the following structure:
Members - people who pay a subscription to belong to a union and represented by shop stewards. Each union
has a national office which offers the members support and campaigns for their improvements. At the top of
the organization there is usually a General Secretary and a National Executive Committee, elected by the
union's members.
The unions have regional offices or county offices staffed by full time union members. Branches - which
support union members in different organizations locally. There is usually a branch secretary who is elected by
local members
District and/or regional offices - these are usually staffed by full time union officials. These are people who
are paid to offer advice and support to union members locally
Trade Unions Financing

Each trade union member pays a subscription. The amount varies from union to union and is normally set at
different levels according to the amount people earn. It is usually between 200 and 600 month. Some unions
reduce the fees for unemployed members.
People pay their subscription fees in different ways. It may be collected by direct debit from your bank
account, deducted directly from your wages or paid in cash or by cheque to your union representative or full
time official.
STRUCTURES AND FUNCTIONS OF COTU

Historical Background

British Labour Policy in her colonies brought the enactment of 1937 Trade Unions' Ordinance which stipulated
conditions under which Africans could organize themselves into trade unions. Three unions were registered in
Kenya by the Registrar of Trade Unions: East African Standard Union, Ease African Standard Staff Union and
Labour Trade Union of East Africa.
In 1940, the 1937 Ordinance was amended and trade unions in Kenya rose from three to six. Kenya African
Union (KAU) started agitation for the return of African land, better wages and conditions and terms of service
in Industry. Makhan Singh organized an Asian Railway Trade Union in which he openly associated himself with
Africans despite the existence of racial discrimination. More trade unions came into being such as Nairobi
Taxmen Union and General Masikini (Poor People's) Union.
A number of unions registered among them were e.g. Transport and Allied Workers' Union, Domestic and Hotel
Workers' Union, Quarry Workers' Union, Night watchmen Workers' Union, East African Federation of Building
Construction Workers' Union and Tailors' Union.
This was followed by the formation of a National Trade Union called the Kenya federation of registered trade
unions in 1952 with Aggrey Minya as the Secretary General. It was not registered because it was a Federation
of already registered unions. It was affiliated to the International Confederation of Free Trade Unions (ICFTU)
in 1952 and was receiving advisory service from ICFTU.
After the break of Emergency in October 1952, several union leaders were arrested and detained for allegedly
being associated with MAU MAU. Tom Mboya became the General Secretary of Kenya Local Government
Workers Union and was later elected the General Secretary of the Kenya Federation of Registered Trade Unions
which gave way to the formation of KENYA FEDERATION OF LABOUR (KFL).
Formation of COTU (K) PERIOD - 1965

Prior to the formation of the Central Organization of Trade Unions COTU (K) in 1965
Ministerial Recommendations were made that: The Kenya Federation of Labour and the Kenya African
Congress be de-registered with immediate effect. The Central Organization of Trade Unions (Kenya) COTU
(K) and the check-off system be compulsory for all trade unions.
Since then, the membership of COTU (K) grew and membership is now thirty-one (31) affiliates with a
membership of over 1.5 million.
COTU (K)’s activities have been geared towards strengthening the affiliated unions; promoting worker
education; lobbying and advocating for appropriate employment and labour market policies, and legal regimes;
articulating workers’ views and representation at national, regional and international levels; and building
solidarity, alliances, partnership and networks with government, private sector, regional and international trade
union confederations and other labour support institutions.
Objectives of COTU
o Improve the economic and social conditions of all workers in all parts of Kenya.
o Assist in the complete organization of all workers in the trade union movement.
o Organize the structure and spheres of influence and amalgamation of trade unions
affiliated to COTU (K)
o Assist in settling disputes between members of trade unions and their employers or
between the trade unions and their members or employees of one union and employees
of another union, or between two or more trade unions.
o Encourage the principles of the development and maintenance of good relations
between employees and employers.
o Secure adequate and effective representation in bodies dealing with labour and
employment policies and legislation.
o Establish and maintain funds by means of membership fees, monthly contributions,
donations, subscriptions, levies and by borrowing on such security and such terms as
may from time to time be arranged by the Executive Board; and

o Set up appropriate committees to provide training, education and other facilities and
enterprise for the advancement of workers and the labour movement in general.
FEDERATION OF KENYA EMPLOYERS
The Federation of Kenya Employers (FKE) is Kenya's leading employers’ organization in advocacy,
industrial relations, employment laws and related value-add services through management, consultancy and
training. FKE has been representing employers' interest both locally and internationally since 1959.
Looking into the future, FKE is repositioning itself to continue championing employers’ interests and
strengthening partnerships with other stakeholders
FKE represents employers' interests in various forums, boards and institutions such as the Labour Advisory
Board, the National Social Security Fund (NSSF), the National Hospital Insurance Fund (NHIF), the African
Union Labour and Social Affairs Commission and Directorate of Industrial Training; among others.
The Federation runs programs and services across the country through branch networks, open courses and
clinics. In addition, FKE also provides regular updates on economic indicators to allow members to make
informed management decisions.
FUNCTIONS To act as a forum for Consultancy services- job analysis,

employers To promote and defend interest of organizational analysis, scheme of service,
employers To promote good management manpower plans, succession plans,
practices To collaborate with employers, Collective agreements
inter-governmental and other business Advice on labor issues
organizations To develop a sustainable Studies in labor markets, Handle executive
institutional capacity and competence selection assignments
Increase labor productivity Better labor relations between employer and
employee
Provide forum to exchange ideas

EMPLOYEE DISCIPLINE
Discipline means an orderly behavior to be followed by the individual, team members and groups
within an organization to achieve the ultimate objectives. It is true for every organization that in
order to maintain harmonious industrial relations strict need for following certain rules and
regulations or following a proper code of conduct arises.
Types
Below discussed are the two types of disciplines:
• Positive Discipline
• Negative Discipline
Positive Discipline
It is also known as constructive discipline or self-discipline. Under this aspect of discipline
employees support all the rules, regulation and procedure made by the management and follow
them.
It helps the employees to mold their behavior and develop it in a corrective and supportive manner.
It encourages self-discipline among the employees. It does not involve any kind of punishment
and penalties
Positive discipline takes place in situations like appreciating an employee, payment of adequate
remuneration, providing training etc.
Negative Discipline
This is also known as corrective discipline or punitive discipline. When the employees do not want
to follow the rules, regulations and procedures in the organization, they are forced to stay under
the rules and policies of the organization by the way of punishments.
Negative discipline helps in extracting only the standard performance from the employees.
Employees always feel demoralized with this type of discipline. Punishments, penalties,
demotions, warning and transfers are some of the ways of getting work done by the employees.
Causes of Indiscipline
Indiscipline at the workplace can take place because of various socio-economic and cultural factors
prevailing at the workplace. AS DISCUSSED IN CLASS
GRIEVANCE AND DISPUTE HANDLING

Grievance means any type of dissatisfaction or discontentment arising out of factors related to an
employee’s job which he thinks is unfair.
A grievance arises when an employee feels that something has happened or is happening to him which
he thinks is unfair, unjust or inequitable.
In an organization, a grievance may arise due to several factors as discussed in class
1. Grievance resulting from management policies:
• Wage rates
• Leave policy
• Overtime
• Lack of career planning
• Role conflicts
• Lack of regard for collective agreement
• Disparity between skill of worker and job responsibility
2. Grievance resulting from working conditions:
• Poor safety and bad physical conditions
• Unavailability of tools and proper machinery
• Negative approach to discipline
• Unrealistic targets
3. Grievance resulting from inter-personal factors:
• Poor relationships with team members
• Autocratic leadership style of superiors
• Poor relations with seniors
• Conflicts with peers and colleagues
It is necessary to distinguish a complaint from a grievance. A complaint is an indication of employee
dissatisfaction that has not been submitted in written. On the other hand, a grievance is a complaint
that has been put in writing and made formal.
NORMAL GRIEVANCE PROCEDURE STEPS:

STEP 1: In the first step the grievance is to be submitted to departmental representative, who is a
representative of management. He has to give his answer within 48 hours.
STEP 2: If the departmental representative fails to provide a solution, the aggrieved employee can
take his grievance to head of the department, who has to give his decision within 3 days.
STEP 3: If the aggrieved employee is not satisfied with the decision of departmental head, he can take
the grievance-to-Grievance Committee. The Grievance Committee makes its recommendations to the
manager within 7 days in the form of a report. The final decision of the management on the report of
Grievance Committee must be communicated to the aggrieved employee within three days of the
receipt of report. An appeal for revision of final decision can be made by the worker if he is not satisfied
with it. The management must communicate it to the worker within 7 days.
If the above fails the staff can consider mediation and arbitration as below:
Mediation
Mediation is completely voluntary and confidential. It involves help from an independent and impartial
person to reach a solution that is acceptable to everyone. Sometimes the mediator may come from
within your organization or your employer may want to consider bringing in an external mediator. The
employer pays for all costs. The mediator facilitates the meeting but does not offer solutions
Arbitration- this is when an organization engages a person who is trained in mediation and
negotiation or legal expert. The person meets with parties separately to establish facts then gives a
binding solution that is legal. The arbitrator holds more power than the mediator
The Industrial Court
Grievances can now be heard at this level from employees or trade union if the above mechanisms
fail.

GRIEVANCE PROCEDURE WHEN A UNION IS INVOLVED
1. Reporting of incidence- The employee usually files the grievance with a shop steward, grievance
representative, or union/management official. Grievances can be filed on behalf of the entire union or
on behalf of individual member/employee
2. Form filling- The grievance representative typically fills out a pre-defined grievance form and
submits it to the union for processing.
3. The meeting- The meeting steps are usually defined in the contract between union and management
and typically have timelines.
NB/ Not all complaints have to be contractual grievances and not all complaints have to turn into a
grievance case.
Often times, grievances are settled or resolved before they even reach the point of officially becoming
a grievance.
Topic 9: Term Paper & Group Work- DONE
TOPIC 10: PURCHASING AND STORES MANAGEMENT
Definitions, purchasing methods, Stores routine, Stores personnel, Economic order quantity,
Current trends in store management: Production planning and control: Types, Choice of production
methods, Activities, Production planning and control, documents, Production design and
development
PURCHASING METHODS
Purchasing by Requirement
This method refers to those goods which are purchased only when needed and in required quantity
OR as emergency goods. These goods are not kept in store. Purchasing department must be in
knowledge of the suppliers of such goods so that these are purchased without loss of time.
2. Market Purchasing
Market purchasing refers to buying goods for taking advantages of favorable market situations.
Purchases are not made to meet immediate needs but are acquired as per the future requirements.
This method will be useful if future needs are estimated accurately and purchases are made
whenever favorable market situations arise. The market situation is constantly studied for
forecasting price trends.

The advantages of this method are: lower purchase prices, more margin on finished products due
to lower material cost and saving in purchase expenses. This method suffers from some limitations:
losses in case of wrong judgment, fear of obsolescence, higher storing expenses due to more
purchases.
3. Speculative Purchasing
Speculative purchasing refers to purchases at lower prices with a view to sell them at higher prices
in future. The attention in this method is to earn profits out of price rises later on.
4. Purchasing for Specific Future Period

This method is used for the purchase of those goods which are regularly required. These goods are
needed in small quantity and chances of price fluctuations are negligible. The needs for specific
period are assessed and purchases made accordingly. The requirements for such purchases may be
assessed on the basis of past experience, period for which supplies are needed, carrying cost of
inventory etc.
5. Contract Purchasing
Under this method a specific quantity of materials is contracted to be purchased and delivery is
taken in future. Even though the goods are procured in future but the price and other terms and
conditions are fixed at the time of contract. This method may be useful when price rises in future
may be expected and material requirements for future may be accurately estimated.
6. Scheduled Purchasing:
Under this method the suppliers are supplied a probable time schedule for material requirements
so that they are in a position to arrange these in time. An accurate production schedule is prepared
for estimating future material needs. The suppliers are informed of probable needs and orders are
sent accordingly. The schedule provided by the purchaser to the vendor is not a contract. This is
only a gentleman’s agreement for terms and conditions of purchases. The main objectives of this
method are: minimum inventory, prompt service. low prices, quality goods etc.
7. Group Purchasing of Small Items:

This happens if small items with small costs need to be purchased. In such situations the buyer
places order with a vendor for all these items. The purchase price is agreed to be by adding some
percentage of profit in the dealer’s cost. This method will be used only when dealer’s records are
open to inspection for determining his cost. This type of purchasing reduces the cost of the buyer
by eliminating much clerical work.
8. Co-operative Purchasing:
Small industrial units may join to pool their requirements and then place bulk orders with dealers.
This will help them in availing rebates on large quantity purchases, cash discounts and savings in
transportation costs. After receiving the materials these are divided among the member units. Co-
operative purchasing helps small units in availing the benefits of bulk purchasing.
STORES ROUTINE
1. Bill of Materials 2. Purchase Requisition 3. Purchase Order 4. Material Inspection Note 5.
Goods Received Note (GRN) 5. Goods Received Note (GRN) 6. Stores Requisition Note 7.
Material Transfer Note 8. Material Return Note 9. Bin Card 10. Stores Ledger.
1. Bill of Materials:
Bill of Materials is a comprehensive list of materials, with specifications, material codes and
quantity of each material required for a particular job, process or production unit. It will also
include the details of substitute materials. It is a method of documenting materials required
for execution of the specified job work.
It is circulated to:
(a) Purchase Department,

(b) Stores Department,
(c) Cost Accounts Department, and
(d) Product Department.

Advantages:
• It acts as a guide in planning the execution of job

• It is a base for action to be initiated by the Stores Department
• The information mentioned in the bill of materials act as a standard with which any
deviation can be detected and remedial measures are taken if deviations take places.
• It is a good control measure on material cost.
• The material cost to be charged to a particular unit, job or process can easily be
determined beforehand.
• It helps in submission of tenders and quotations.
• It is a planning exercise for the proposed production or work.
• It serves as an advance intimation to stores department about the raw material
requirement.
2. Purchase Requisition:
This is an internal instruction to purchase goods or services. It states their quantity and
description and elicits a purchase order. The manager in-charge of Purchase Department
should obtain requisition from the Stores in- charge, departmental head or similar person
requiring goods before placing orders on suppliers.
The specimen of Purchase Requisition is given below:

3. Purchase Order:
If the Purchase Requisition received by the Purchasing Department is in order then it will call
for tenders or quotations from the suppliers of materials. It will send enquiries to prospective
suppliers giving details of requirement and requesting details of available materials, prices,
terms and delivery etc. Quotations will then be compared and will place order with those
suppliers who will provide the necessary goods at competitive prices.
The specimen of the Purchase Order is given below:

4. Material Inspection Note:
When materials are delivered, a supplier’s carrier will usually provide a document called
‘delivery note’ or ‘delivery advice’ to confirm the details of materials delivered. When
materials are unloaded, the warehouse staff check the material unloaded with the delivery
note. Then the warehouse staff prepares a Materials Receipt Note, a copy of which is given
to the supplier’s carrier as a proof of delivery.
A specimen of material inspection note is given below:
5. Goods Received Note (GRN):
Once the inspection is completed, GRN is prepared by the stores department, and copies of
GRN is sent to the purchasing department, costing department, accounts department and
production department, which initiated purchase requisition.
A specimen of goods received note is given below:

6. Stores Requisition Note:
When Production or other departments requires material from the stores it raises a requisition,
which is an order on the stores for the material required for execution of the work order. This
note is signed by the department in-charge of the concerned department. It is documents which
authorize the issue of a specified quantity of materials.
7. Material Transfer Note:
If materials are transferred from one department or job to another within the organization,
then material transfer note should be raised. It is a record of the transfer of materials between
stores, cost centers or cost units showing all data for making necessary accounting entries.
A specimen of ‘material transfer note’ is given below:
8. Material Return Note:
If materials received from the stores are not of suitable quality or if there is surplus material
remaining with the department, they are returned to stores with a note called ‘material return
note’ evidencing return of material from department to stores.

A copy of material return note is sent to the costing department for making necessary
adjustments in accounts.
9. Bin Card:
A ‘bin card’ indicates the level of each particular item of stock at any point of time. It is
attached to the concerned bin, rack or place where the raw material is stored. It records all the
receipts of a particular item of materials and its issues. It gives all the basic information
relating to physical movements. It is a record of receipts, issues and balance of the quantity
of an item of stock handled by a store.
A specimen bin card is shown below:
10. Stores Ledger:
Stores department will maintain a record called ‘stores ledger’ in which a separate folio is
kept for each individual item of stock. It records not only the quantity details of stock
movements but also record the rates and values of stock movements.

A specimen stores ledger account is given below:
STORES PERSONNEL
The Store Manager
▪ Recruiting employees for the store

▪ meeting the targets and earning profits.
▪ maintaining the overall image of the store.
i. Integrity and timely supply
ii. The store is kept clean
iii. Shelves and racks are properly stocked and products do not fall off the shelves.
iv. Mannequins are kept at the right place to attract the customers into the store and
rotated frequently.
v. The merchandise should be according to the season as well as the latest trends.
vi. The store is well lit, ventilated and offers a positive ambience to the customers.
vii. The signage displaying the name and logo of the store is installed at the right place
and viewable to all.
▪ Keeping a record of sales and restocking the store accordingly.
▪ Managing and training store staff.
▪ Planning promotional campaigns for new products or specials.
▪ Ensuring that the store is kept clean and organized.
▪ Mediating any confrontations between staff and clients, and de-escalating the situation.

STORES MANAGEMENT AND ECONOMIC ORDER QUANTITY
1.0 The Need to Hold Stock
Why do organizations need to hold stock?
1. To provide a buffer between supply and demand.
2. Reduce buying costs. It is essential to balance these elements of administration and stock-
holding, and for this the economic order quantity (EOQ) is used.
3. To take advantage of quantity discounts.
4. To allow for price fluctuations/speculation.
5. To help the production and distribution operations run more smoothly. Here, stock is held
to ‘decouple’ the two different activities.
6. To keep down production costs.
7. To account for seasonal fluctuations.
8. To cater for emergencies.
2.0 Inventory Costs
The following costs are used for inventory management decisions:
Item cost is the price paid for a purchased item, which consists of the cost of the item and any
other direct costs associated in getting the item into the plant. These could include such things as
transportation, custom duties, and insurance. The inclusive cost is often called the landed price.
For an item manufactured in-house, the cost includes direct material, direct labour, and factory
overhead.
Carrying costs include all expenses incurred by the firm because of the volume of inventory
carried. As inventory volume increases, so do these costs. They can be broken down into three
categories:
Capital costs - Money invested in inventory is not available for other uses and as such represents
a lost opportunity cost.
Storage costs - Storing inventory requires space, workers, and equipment. As inventory increases,
so do these costs.
Risk cost- The risks in carrying inventory are: Obsolescence; Damage; Pilferage & theft;
Deterioration
What does it cost to carry inventory? 20–30% in manufacturing industries. This is realistic in many
cases but not with all products. For example, the possibility of obsolescence with fad or fashion
items is high, and the cost of carrying such items is greater.
Working example
The Nadan Company currently maintains an average inventory of $1,040,000. The company estimates
its capital cost at 12 percent, its storage costs at 5 percent, and its risk costs at 8 percent.
Calculate the annual holding costs for the Nadan Company.
• Solution:
Annual holding cost per unit of inventory equals 25 percent (capital cost _ storage costs _ risk
costs).
Annual cost of holding inventory = $1,040,000 x 0.25 = $260,000
Ordering costs – These are those costs associated with placing an order either with the factory or
a supplier. These costs include order preparation, follow-up, expediting, receiving, authorizing
payment, and the accounting cost of receiving and paying the invoice. The cost of placing an order
does not depend upon the quantity ordered. Whether a lot of 10 or 100 is ordered, the costs
associated with placing the order are essentially the same. However, the annual cost of ordering
depends upon the number of orders placed in a year.

Stockout Costs- If demand during the lead time exceeds forecast, we can expect a stockout. A
stock-out can potentially be expensive because of back-order costs, lost sales, and possibly lost
customers. Stockouts can be reduced by carrying extra inventory to protect against those times
when the demand during lead time is greater than forecast.
Capacity-Associated Costs- When output levels must be changed, there may be costs for
overtime, hiring, training, extra shifts, and layoffs. These capacity-associated costs can be avoided
by levelling production, that is, by producing items in slack periods for sale in peak periods.
However, this builds inventory in the slack periods.
3.0 Inventory Control
In the ideal scenario, demand and supply would be synchronized and materials would flow to the
point of use at a rate exactly matching the speed of consumption. In that case then there would be
no need to hold stock. But in the real world, this is not the case and therefore organizations need
to hold some level of material stock. However, there is potentially, a large cost associated with
holding inventory and hence the need for inventory control.
3.1 Push Vs Pull Inventory Management Systems
There are several approaches that could be used in the management of materials in a
manufacturing/production organization. The approaches/systems can be divided into two main
categories:
a) Push systems
b) Pull systems

A ‘push’ system of manufacturing is one where goods are produced against the expectation of
demand. In other words, goods are not produced specifically to order but are produced against a
forecast demand. These forecasts are usually based on historical sales information. The difficulty
arises when either there is a higher level of demand than expected and sales are lost, or there is a
lower level of demand. A Manufacturing Requirement Planning system (MRP) is a push system.
A ‘pull’ system of manufacturing is one where goods are only produced against known customer
orders. This is because only actual orders from customers are being produced on the production
line. Therefore, customer orders are ‘pulling’ all the materials through the process from the
material suppliers and culminating in the delivery to the final customer. Just-in-time is a ‘pull’
system.
3.2 Inventory Control Systems
There are several inventory control systems that can be put to use depending on the organization
and its nature of operations. Such systems include:
3.2.1 Materials Requirements Planning (MRP)
This system was pioneered by Joseph Orlicky and it begins with a knowledge of how much end
product is desired, and when it is needed. The information is broken down into the timing and
quantity details for each component part or sub-assembly. The concept of the system is that
production control and inventory management are integrated. It is most suited to a large
manufacturing organization which produces some components in-house, buys other components
from suppliers and ultimately assembles them all into a fairly complicated product e.g. a motor

vehicle or television set. True MRP systems generally depend on the use of computers, in view of
the large amounts of data which must be stored, retrieved and manipulated.
The main features of an MRP are as follows:
a) The Master Production Schedule – it is a statement of what final products need to be made,
and when. It drives the entire MRP system. It is based on sales forecasts or customer orders,
production capacity and the prioritization of work.
b) The Bill of Materials (BOM) – this is a list showing all the raw materials or components
and their quantities required to make the final product
c) The Inventory Status File – keeps records of what raw materials is in store, and allows the
gross requirements to be adjusted to net requirements by taking into account the current
raw material position, the goal being to avoid carrying excess raw materials/inventory.
d) The MRP Program – takes into account the total requirements for end products specified
in the MPS, and ‘explodes’ this information into individual requirements for the component
parts.
e) Reports – will be generated by the MRP system and will present information in a format
useful to those operating the system. The reports will provide information such as how
much should be ordered and when.
The working of MRP is discussed below:
f) Stage 1: Exploding and offsetting requirements - Exploding is the process of multiplying
the requirements by the usage quantity and recording the appropriate requirements
throughout the product tree. Offsetting is the process of placing the exploded requirements
in their proper periods based on lead time. For example, if 50 units of item A are required
in week 5, the order to assemble must be released in week 4 assuming there is a one-week
lead time.
g) Stage 2: Gross and net requirements computations - Often inventory is available and must
be included when calculating quantities to be produced. If, for instance, there are 20 items
As in stock, only 30 need to be made.
h) Stage 3: Releasing orders - Releasing an order means that authorization is given to
purchasing to buy the necessary material (for material bought from outside the
organization) or to manufacturing to make the component (for components manufactured
in-house).
i) Capacity Requirements Planning - the MRP priority plan must be checked against available
capacity. At the MRP planning level, the process is called capacity requirements planning
(CRP). If the capacity is available, the plan can proceed. If not, either capacity has to be
made available or the priority plans changed.
3.2.2 Manufacturing Resource Planning (MRP II)
Manufacturing Resource Planning (MRP II) is an advancement of the MRP system and is capable
of taking into account more than just material resources of MRP. The other resources; human,
financial and capital equipment are incorporated in MRP II. MRP II is an expanded system of
MRP that includes two new capabilities:
• Financial interface – provides the ability to convert operating production plans into
financial terms, so that the data can be used for financial planning and control purposes of
a more general management nature.

• Marketing interface – provides a simulation capability that makes it possible for
management to do more extensive alternative planning work in developing the marketing
and business plans.
3.2.3 Just In Time
JIT aims to meet demand instantaneously, with perfect quality and no waste. This approach was
first developed in Japan by Toyota, the automobile manufacturer, in the 1970s. In its early days it
was known as the ‘Toyota manufacturing system’ or ‘Toyoterism’.
One of the central ideas of this system is the elimination of waste (‘muda’ in Japanese) from the
manufacturing process. In this context, ‘waste’ does not refer simply to reworking or scrapping
sub-standard products. Waste within the just-in-time environment means waste in all its
manifestations. It seeks to reduce what is known as ‘the seven wastes’:
a) overproduction;
b) waiting;
c) transporting;
d) inappropriate processing;
e) unnecessary inventory;
f) unnecessary motions;
g) defects.
Successful implementation of JIT calls for total quality management to avoid defective materials
given the absence of any ‘cushion’ inventory in the system. It also calls for strategic supplier
relationships.

3.2.4 Distribution Resource Planning (DRP)
Distribution resource planning (DRP) is a method used in business administration for planning
orders within a supply chain by distributors. DRP enables the user to set certain inventory control
parameters (like a safety stock) and calculate the time-phased inventory requirements. This process
is also commonly referred to as Distribution Requirements Planning.
DRP uses several variables:
• The on-hand inventory at the end of a period.
• The backordered demand at the end of a period.
• The required quantity of product needed at the beginning of a period.
• The quantity of product available at the beginning of a period.
• The recommended order quantity at the beginning of a period.
3.2.5 Electronic Point of Sale (EPOS)
For maximum efficiency, companies need to keep the minimum amount of stock, but also ensure
products can always be available and delivered to the customer quickly. Electronic point of sale
helps users to process most popular (fast moving) products from warehouse to point of sale in the
shortest time. Thus, replenishment/re-stocking of products can be coordinated in real time to
ensure that stock-outs in the retail store are minimized. It reduces errors by being pre-programmed
with the selling price and avoids staff having to add up purchase prices mentally. It is common in
supermarkets.

3.2.6 Economic Order Quantity
Order quantity is the volume of the stock for which order is placed. World class companies use
economic order quantity (EOQ) technique when placing orders. Basically, EOQ is the optimal
ordering quantity for an item of stock that minimises cost. EOQ applies only when demand for a
product is constant over the year. At the EOQ the ordering costs and stockholding costs are
approximately equal/balanced.
Cost
Storage cost
Cost of ordering
EOQ Quantity ordered
The following formula may be used to get the EOQ in terms of stock keeping units:
EOQ = 2PD
UF
Where:

P = Cost of placing an order
D = Annual demand in units
U = Cost of a unit of inventory
F = Annual stockholding cost as a fraction of unit cost
UF = Cost of holding stock per unit per year
Working example 1
A company decides to establish an EOQ for an item. The annual demand is 400,000 units, each
costing Kshs.8, ordering costs are Kshs.32 per order, and inventory-carrying costs are 20%.
Calculate the following:
a. The EOQ in units.
b. Number of orders per year.
c. Cost of ordering, cost of carrying inventory, and total cost.
Answer. a. 4000 units
b. Number of orders per year =100
c. Annual cost of ordering = Kshs.3200
Annual cost of carrying = Kshs.3200
Annual total cost = Kshs.6400
Working example 2
A company wishes to establish an EOQ for an item for which the annual demand is Kshs 800,000,
the ordering cost is Kshs 32, and the cost of carrying inventory is 20%. Calculate the following:
a. The EOQ in shillings.
b. Number of orders per year.
c. Cost of ordering, cost of carrying inventory, and total cost.
d. Compare your answers to those in working example 1

Answer. a. Kshs.16000
b. Number of orders per year = 50
c. Annual cost of ordering = Kshs 1600
Annual cost of carrying = Kshs 1600
Annual total cost = Kshs 3200
3.2.7 ABC Analysis:
ABC analysis shows that the high value inventory is normally represented by relative few items
and vice versa. While the percentage varies between organisations setup, the following
presentation shows a proportion of how inventory is segmented:
Category (Usage) Approximate % of inventory Approximate % of
usage value
A-High value 10% 60%
B-Moderate value 30% 30%
C-Low value 60% 10%
Category A: These are items which are small in number and high in value. They are essential to
the operation of the production such that the absence of such materials can result to breakdown of
production.
Category B: They are medium in number and have medium usage value.
Category C: They are high in number and low in usage value. The absence of such items in the
short-term cannot affect the performance of the company.

CURRENT TRENDS IN STORE MANAGEMENT
1. Cloud Technology for Hybrid Work

2. Internet of Things for Complete Connectivity
3. Artificial Intelligence/Machine Learning for Improvement
4. Data Analytics for Predictive Picking
5. Warehouse Automation for Labor Reduction
6. AVGs and AMRs for Better Automation
Automatic guided vehicles (AVGs) and autonomous mobile robots (AMRs).
Both AVGs and AMRs are essential for greater automation.
7. Multi-Warehousing for Distribution

Storing supplies allows for a more geographically streamlined supply chain management, and
storing products makes faster delivery possible.
Cloud technology is essential for multi-warehousing, so this management option will become
increasingly viable as cloud-based inventory management software cost comes down and
capabilities expand.
8. Third-Party Logistics for Affordability

Making the most of some inventory management methods requires specialized software,
equipment, and warehouse designs. Not all small- and medium-sized businesses (SMBs) have the
resources to afford these.
For SMBs, outsourcing to a third-party logistics (3PL) provider eliminates the need for costly
capital investments. A 3PL specialist will have the necessary resources, while charging an
ongoing fee that’s more manageable on finite budgets.
9. Smart Inventory Forecasting for Improved Purchasing

As AI and data analytics provide more insights into sourcing and sales, businesses get information
that enables better purchasing decisions. Smart inventory forecasting will improve inventory
levels, as businesses can forecast how much inventory they will need due to changing conditions.

10. Personalization and customization- products are manufactured based on customer
preferences
11. Safety Stock for Fluctuations

Safety stock or “buffer stock” protects against changes in production and/or sales.
12. Sustainable and Resilient Supply Chains for Greater Dependability

Technological changes allow for greater communication across inventory management networks.
Decentralizing methods such as multi-warehousing reduce dependency on a particular region.
13. Omnichannel Customer Service for Better Communication
Omnichannel customer service ensures customers have the most current information concerning
their orders.
14. Investing in Inventory Managers for Improving

Continuous improvement and training managers, Courses, certifications, seminars and on-the-job
training are all ways that managers can learn practical steps in inventory management processes
that will have positive results.
PRODUCTION PLANNING AND CONTROL
1.0 Steps in Production Planning and Control
Planning
Routing
Scheduling
Dispatching
1.1 Planning
For detailed planning of operations, the relevant information may be obtained from several sources
in the enterprise. Information about quantity and quality of products to be manufactured may be
obtained from customers’ orders and the sales budget, and information about production facilities
may be obtained from the management and the engineering department. Thus, the planning
function formulates production plans, and translates them into requirements for men, machinery
and materials.

1.2 Routing
This involves the determination of the path (i.e. route) of movement of raw materials through
various, stages, machines and operations in the factory..
Various procedural steps of Routing in production management are as follows:
1. The finished product is analyzed from the manufacturing standpoint in order to decide how
many components can be made in the plant and how many others will be purchased
(Make/Buy decision) from outside through vendors, by subcontracting, etc.
2. A parts list and a bill of materials is prepared showing name of the part, quantity, material
specifications, amount of materials required, etc. The necessary materials thus can be
procured.
3. From production standards, machine capacities, machine characteristics and the operations
which must be performed at each stage of manufacture are established and listed in proper
sequence on an operation and route sheet.
4. The next step is to determine the lot size or the number of components to be manufactured
in one lot or batch. In the case of an order from a particular customer, it is generally equal
to a number within 10% of the order quantity. In other cases, the principle of economic
batch quantity can be applied to determine the batch size.
5. Standard scrap factors (single or cumulative) and the places (i.e., after a particular
operation or assembly) where scrap is very likely to occur are identified. The actual scrap
in each batch can be recorded on the control chart. Causes for points out of control limits
are explored and corrected. The variables like workers, machinery and schedules may also
be adjusted to minimize scrap.
6. The cost of the component is analyzed and estimated through the information obtained in
steps (1) to (5) above. The cost consists of material and labor charges, and other specific
and general indirect expenses.
1.2.3 Techniques of Routing

The various routing techniques are:
1. Route card: This card always accompanies with the job throughout all operations. This
indicates the material used during manufacturing and their progress from one operation to
another. In addition to this the details of scrap and good work produced are also recorded
2. Work sheet: It contains
• Specifications to be followed while manufacturing.

• Instructions regarding routing of every part with identification number of
machines.

3. Route sheet: It deals with specific production order. One sheet is required for each part or
component of the order. This includes the following:
1. Number and other identification of order.

2. Symbol and identification of part.
3. Number of pieces to be made.
4. Number of pieces in each lot if put through in lots.
a. Operation data which includes:

i. List of operation on the part.
ii. Department in which operations are to be performed.
iii. Machine to be used for each operation.
iv. Fixed sequence of operation, if any.
4. Move order: Though this is document needed for production control, it is never used for
routing system. Move order is prepared for each operation as per operation sheet. On this the
quantity passed forward, scrapped and to be rectified are recorded. It is returned to planning
office when the operation is completed.
1.3 Scheduling
Scheduling is planning the time element of production
Schedules are of two types: Master schedule and detailed schedule. Activities, if recorded on plant-
wise basis, would be preparing master schedule, while mere detailed schedules are employed to
plan the manufacturing and assembly operations required for each product.
TYPES OF SCHEDULING
1. First Come First Served

2. Shortest Processing Time
One favored method of scheduling to get products produced quickly is the shortest processing
time approach, which prioritizes jobs that take the least amount of time to complete.
3. Earliest Due Date
Earliest due date scheduling is based on ordering your production jobs based on deadlines.
Working first on the product with the earliest due date can be especially effective with machines

that have single jobs and when deadlines are spaced out. If your business specializes in one
product with varying shipping deadlines, this could be the best schedule for you.
4. Slack Time Remaining
Slack time is determined through a mathematical equation. Subtract the time it takes to make the
product from the time it is due. The item with the smallest slack time remaining is scheduled
first. For example, if you have an item that takes five days to make and is due in six days, you
would process that before an item that takes one day to make but is due in four days. This may
not be the fastest method, but it can be the most effective for meeting deadlines.
5. Critical Ratio
Scheduling products using critical ratio is similar to using slack time remaining. The difference
is that instead of subtracting processing time from time remaining, you divide it. This gives you a
percentage of time remaining until your product is due instead of an integer. Using division
versus subtraction is mostly a personal preference. The production results should be similar to
those using the slack time remaining method.
6. Forward operations scheduling

a. Classified on the basis of the time.
b. All the activities are scheduled from the date of the planned order release.
c. First task of the job is scheduled.
d. Its subsequent task is scheduled on the scheduled completion of the first task.
e. Like this, accordingly all the tasks of the job are scheduled.
7. Backward operations scheduling

a. Classified on the basis of the time
b. Activities are scheduled from the date or the planned receipt date.
c. The last activity is scheduled first.
d. Time of the start of the last task is considered as the time for the start of the previous
activity.
Methods used for the operations scheduling

1. Johnson’s two machine algorithm
a. Very effective when the operations sequencing has two machines and the processing time
depends on the sequence in which the jobs are loaded.
b. Also used when the company involves a backlog of the orders.

c. Is a very simple process.
2. Index method
a. Used for the purpose of the loading and also for allocating the different jobs to the different
machines.
b. Generally orders are assigned on the basis of the “first come first assigned” method.
c. But does not provide optimum loading.
3. Critical path analysis
a. Helps in the determination of the scheduling of the activities of the projects.
b. Reveals inter – relationships between the different activities of the project.
c. Reflects the uncertainty in the durations estimated for the various activities.
4. Critical ratio scheduling
a. Helps in the establishment and the maintenance of the priorities among the jobs in a factory.
b. Concept of “critical ratios” is used widely.
1.4 Dispatching
Dispatching is the part of production control that translates the paper – work into actual production.
It is the group that coordinates and translates planning into actual production. Dispatching function
proceeds in accordance with the details worked out under routing and scheduling functions. As
such, dispatching sees to it that the material is moved to the correct work place, that tools are ready
at the correct place for the particular operations, that the work is moving according to routing
instructions. Dispatching carries out the physical work as suggested by scheduling. Thus,
dispatching implies the issuance or work orders. These work orders represent authority to produce.
These orders contain the following information:
• The name of the product;

• The name of the part to be produced, sub-assembly or final assembly;
• The order number;
• The quantity to be produced;
• Descriptions and numbers of the operations required and their sequence,
• The departments involved in each operation
• The tools required for particular operation; and
• Machines involved in each operation and starting dates for the operations.
Dispatch Procedure
The product is broken into different components and components into operations.
1. Store Issue Order: Authorize stores (department) to deliver required raw material.

2. Tool Order: Authorize tool store to release the necessary tools. The tools can be collected by
the tool room attendant.
3. Job Order: Instruct the worker to proceed with the operation.
4. Time Ticket: It records the beginning and ending time of the operations and forms the basis for
worker’s pay.
5. Inspection Order: Notify the inspectors to carried out necessarily inspections and report the
quality of the component.
6. Move Order: Authorize the movement of materials and components from one facility (machine)
to another for further operations.
1.5 Expediting
Expedition or follow-up is the last stage in the process of production control. This function is
designed to keep track of the work effort. The aim is to ensure that what is intended and planned
is being implemented. “Expediting consists in reporting production data and investigating
variances from predetermined time schedules. The main idea behind expedition is to see that
promise is backed up by performance”. It includes the following functions:
• Check-up to ensure that all materials, tools, component parts, and accessories are available at
all work centers in specified quantities for starting and carrying out manufacturing
operations.
• Check-up on the status of work-in-progress and completed work at various work stations.
• Preparation of progress records and keeping the control boards up-to-date.
• Reporting to manufacturing management on all significant deviations so that corrective action
may be taken. It also includes reporting to production planning department so that future plans
may be adjusted.
2.0 INTRODUCTION TO INDUSTRIAL CONTROL SYSTEMS
Industrial process control system consists of four basic elements:
1. A measurement to know the status of the condition of a process

2. A controller to take action by considering the set value and measured value
3. An output signal to manipulate the process that results from the controller
4. The process itself that reacts to the signal (Input or output)
2.1 Basic Control Strategies Used in Industrial Control System (SELF STUDY)
How well the process parameters are controlled depends on the control strategy implemented for
that process. Basic control strategies used in most of the industries are
• ON – OFF Control
• Open-Loop Control
3.0 PRODUCTIVITY
3.1 Factors Influencing Productivity

Factors influencing productivity can be classified broadly into two categories:
• controllable (or internal) factors and

• un-controllable (or external) factors.
3.2 Controllable for internal factors
a. Product factor: In terms of productivity means the extent to which the product
meets output requirements product is judged by its usefulness. The cost benefit
factor of a product can be enhanced by increasing the benefit at the same cost or
by reducing cost for the same benefit.
b. Plant and equipment: These play a prominent role in enhancing the productivity.
The increased availability of the plant through proper maintenance and reduction
of idle time increases the productivity. Productivity can be increased by paying
proper attention to utilization, age, modernization, cost, investments etc.
c. Technology: Innovative and latest technology improves productivity to a greater
extent. Automation and information technology helps to achieve improvements in
material handling, storage, communication system and quality control. The
various aspects of technology factors to be considered are:
▪ Size and capacity of the plant,

▪ Timely supply and quality of inputs,
▪ Production planning and control,
▪ Repairs and maintenance,
▪ Waste reduction, and
▪ Efficient material handling system.
d. Material and energy:

Efforts to reduce materials and energy consumption brings about considerable
improvement in productivity.
1. Selection of quality material and right material.

2. Control of wastage and scrap.
3. Effective stock control.
4. Development of sources of supply.
5. Optimum energy utilization and energy savings.
6. Human factors:
Productivity is basically dependent upon human competence and skill. Ability to work
effectively is governed by various factors such as education, training, experience aptitude
etc., of the employees. Motivation of employees will influence productivity.

7. Work methods: Improving the ways in which the work is done (methods) improves
productivity, work study and industrial engineering techniques and training are the areas
which improve the work methods, which in term enhance the productivity.
8. Management style: This influence the organizational design, communication in organization,
policy and procedures. A flexible and dynamic management style is a better approach to
achieve higher productivity.
3.3 Uncontrollable (or) external factors
Structural adjustments: Structural adjustments include both economic and social changes.
Economic changes that influence significantly are:
. Shift in employment from agriculture to manufacturing industry,
1. Import of technology
2. Industrial competitiveness
Social changes such as women’s participation in the labor force, education, cultural values,
attitudes are some of the factors that play a significant role in the improvement of productivity.
Natural resources: Manpower, land and raw materials are vital to the productivity improvement.
Government and infrastructure: Government policies and program are significant to productivity
practices of government agencies, transport and communication power, fiscal policies (interest
rates, taxes) influence productivity to the greater extent.
Total Productivity Measure (TPM)

It is based on all the inputs. The model can be applied to any manufacturing organization or
service company.
Total productivity =
Total tangible output
Total trangible input
Total tangible output = Value of finished goods produced + Value of partialunits produced +
Dividents from securities + Interest+ Other income
Total tangible input = Value of (human + material + capital + energy+ other inputs) used. The
word tangible here refers to measurable.
The output of the firm as well as the inputs must be expressed in a common measurement unit.
The best way is to express them in rupee value.
3.4 Partial Productivity Measures (PPM)

Depending upon the individual input partial productivity measures are expressed as:
Partial productivity = Total output/Individual input

Labor productivity = Total output/Labour input(in terms of man hours)
Capital productivity =Total output/Capital input
Material productivity =Total output/Material input
Energy productivity =Total output/Energy input
One of the major disadvantages of partial productivity measures is that there is an over emphasis
on one input factor to the extent that other input are underestimated or even ignored.
3.5 Productivity Improvement Techniques
1. Technology based
Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), and Computer Integrated
Manufacturing Systems (CIMS): CAD refers to design of products, processes or systems with the
help of computers. The impact of CAD on human productivity is significant for the advantages of
CAD are:
a) Speed of evaluation of alternative designs

b) Minimization of risk of functioning, and
c) Error reduction.
CAM is very much useful to design and control the manufacturing. It helps to achieve the
effectiveness in production system by line balancing.
a) Production Planning and Control

b) Capacity Requirements Planning (CRP), Manufacturing Resources
Planning (MRP II) and Materials Requirement Planning (MRP)
c) Automated Inspection.
2.Computer integrated manufacturing:

Computer integrated manufacturing is characterized by automatic line balancing, machine
loading (scheduling and sequencing), automatic inventory control and inspection.
1. Robotics
2. Laser technology
3. Modern maintenance techniques
4. Energy technology
5. Flexible Manufacturing System (FMS)
ILLUSTRATION 1:
A company produces 160 kg of plastic moulded parts of acceptable quality by consuming 200 kg
of raw materials for a particular period. For the next period, the output is doubled (320 kg) by
consuming 420 kg of raw material and for a third period, the output is increased to 400 kg by
consuming 400 kg of raw material.
SOLUTION:
During the first year, production is 160 kg
Productivity = Output/Input=160/200=0.8 0r 80%
For the second year, production is increased by 100%
Productivity = Output/Input=320/420 =0.76 or 76%↓
For the third period, production is increased by 150%
Productivity =Output/Input=400/400 =1.0 i.e., 100%↑
From the above illustration it is clear that, for second period, though production has doubled,
productivity has decreased from 80% to 76% for period third, production is increased by 150%
and correspondingly productivity increased from 80% to 100%.
4.0 PRODUCTION DESIGN AND DEVELOPMENT
4.1 PRODUCT DESIGN

Product design deals with conversion of ideas into reality. Every business organization have to
design, develop and introduce new products as a survival and growth strategy. Developing the new
products and launching them in the market is the biggest challenge faced by the organizations. The entire
process of need identification to physical manufactures of product involves three functions— Design and
Marketing, Product, Development, and manufacturing.
Product Development translates the needs of customers given by marketing into technical specifications
and designing the various features into the product to these specifications. Manufacturing has the
responsibility of selecting the processes by which the product can be manufactured. Product design and
development provides link between marketing, customer needs and expectations and the activities required
to manufacture the product.
4.2 Elements
They include: standardization, simplification and specialization.
Standardization is the process of defining and applying the “conditions” necessary to ensure
that a given range of requirements can normally be met with a minimum of variety and in a reproducible
and economic manner on the basis of the best current technique.

Simplification is the process of reducing the number of types of products within a definite range.
Specialization is the process whereby particular firms concentrate on the manufacture of a
limited number of products or types of products.
A good product design should include all of the manufacturing related

functions:
􀁺 Material procurement,
􀁺 Material handling,
􀁺 Product conversion (e.g., machining processes),
􀁺 Changeovers and set-ups, and
􀁺 Quality control procedures.
All of these, if not handled properly, could lead to increased lead times. A good product design
takes the facts or realities of these operations into consideration, incorporates them into the design
and thereby facilitated these operations.

TOPIC 11: CAPACITY PLANNING
Capacity planning, Standardization; Quality control: Definition, Types of inspection, Quality
control, Concepts, Quality standards certification
Plant maintenance and maintenance tasks
Matching the capacity of a business with customer demand can be a challenge. Having too much
capacity is just as problematic as not having enough capacity. The ﬁrst leads to excess cost from
having idle facilities, workers, and equipment. The second leads to lost sales as the company
cannot satisfy customer demands. Capacity planning is the process of establishing the output rate
that can be achieved by a facility.
Reasons for capacity planning:
• To determine if sufficient demand exists

• To determine long-term capacity needs
• To determine midterm fluctuations in demand so that short-sighted decisions are not
made that hurt company in long-run
• To determine short-term fluctuations in demand for production planning, workforce
scheduling, and materials planning
2.0 Basic Concepts in Capacity Planning
i. Capacity output – This is the rate of output that can be achieved from a process. It is the
product or productive resources available per unit of time. Capacity can be measured either
at input or output side of the production system. e.g. raw material usage per hour or
products produced per hour.
Operation Input capacity measure Output capacity measure
Bus company Number of seats available Number of passengers
transported per day
school Number of students enrolled Number of students
per year graduating per year
hospital Number of beds available Number of patients
discharged per day
Movie theater Number of seats available Actual number of tickets sold
i. Design capacity –This is the output for which the system was designed and refers to the
rate of output of goods and services under full scale operating conditions.
ii. System capacity –in reality it is difficult to attain the design capacity sometimes due to the
mismatch between required and available resources. Instead you are only able to attain the
system capacity. System capacity is the maximum output that workers and equipment are
capable of producing as an integrated system and is normally less than design capacity.
iii. Actual output – as a result of short range factors such as actual demand, equipment
breakdown, absenteeism of workers or low productivity of workers, the actual output from
a system is often less than the system capacity. When you compare the actual output to
system’s capacity, we get system efficiency.
system efficiency = actual output/system capacity X100
iv. maximum capacity –this is the maximum output that could be achieved when productive
resources are used to the maximum
v. Capacity utilization rate – this is the extent to which the firm uses its capacity. it is a
measure of how close the firm is to the design capacity. It is computed by comparing the
utilized capacity against the design capacity and expressed as a percentage
Capacity utilization rate =capacity used/design capacity X100

vii. Experience curve/Learning curve – as a firm produces more products it gains experience in the
production methods which results in a reduction of the production cost.
viii. Economies of scale – this is derived from the concept that as volume of production increases,
the average cost per unit of output decreases thus as a firm gets larger and its volume of production
increases, the average production cost per output decreases.
ix. Capacity flexibility – this is the ability of the firm to rapidly increase and decrease production
level or shift production from one product or service to another.
Capacity cushions –this is the amount of capacity in excess of demand.
WORKING EXAMPLE
A manufacturing firm has line production process consisting of 4 work stations M,N,O and P with
individual capacities of 450, 380, 350 and 400 units per day respectively. The actual output is 300
units per day.
a) What is the system capacity? -

b) System efficiency?
System efficiency = actual output/system capacity x 100
3.0 Factors Affecting Capacity Planning
The factors can be classified in to two broad categories namely:
i. internal factors
ii. external factors

External factors are those factors from the environment such as government regulations, trade
union agreements, capacity of suppliers etc. The firm may have very little or no influence on such
factors and can only plan taking them into account.
Internal factors are to do with the design process or product, the quality of personnel and the job
they do, and other internal dynamics of the firm. Factors such as plant layout, process flow,
reliability of machinery and equipment, materials management and quality control systems are all
part of the internal actors. The firm is able to influence the internal factors.
4.0 Methods used in capacity planning (SELF READING)

• Informal (intuitive)
• Formal: Quantitative&Qualitative
Choosing a forecasting method:
• Availability of representative data

• Time and money limitations
• Accuracy needed
5.0 Methods of Adjusting Capacity
i. Overtime – this refers to making changes on the productive hours worked by production
employees. When demand is higher than normal capacity, then the employees are asked to
work overtime. Such a firm may also have the option of introducing a new production shift
to meet the temporary demand.
ii. Varying the size of the workforce – an organization can take the option of hiring additional
staff or where demand is low it can fire some employees. However the organization must
adhere to the existing labor laws. To deal with this legal challenge firms seek the services
of intermediary HR companies that hire staff and then the firm can outsource the staff from
the HR Company.
iii. use of part time staff – who are not permanent employees of the organization
iv. Subcontracting
v. Stocking of products – the organization has the option of manufacturing more products
during the time when the demand is low and putting this in a warehouse so that they can
be used when demand is higher than normal.
6.0 CONTROL TOOLS
6.1 Pareto Chart
A Pareto Chart is a graph that indicates the frequency of defects, as well as their cumulative
impact. Pareto Charts are useful to find the defects to prioritize in order to observe the greatest
overall improvement.
A Pareto Chart is a combination of a bar graph and a line graph. Notice the presence of both bars
and a line on the Pareto Chart below.
Each bar usually represents a type of defect or problem. The height of the bar represents any
important unit of measure — often the frequency of occurrence or cost.
3) The bars are presented in descending order (from tallest to shortest). Therefore, you can see
which defects are more frequent at a glance.
4) The line represents the cumulative percentage of defects.
.
Type of Defect Frequency of Defect % of Total Cumulative %
Button Defect 23 39.0 39.0
Pocket Defect 16 27.1 66.1
Collar Defect 10 16.9 83.1
Cuff Defect 7 11.9 11.9
Sleeve Defect 3 5.1 16.9
Total 59
For Collar Defects, the % of Total is simply (10/59)*100.

The Cumulative % corresponds to the sum of all percentages previous to and including Collar
Defects. In this case, this would be the sum of the percentages of Button Defects, Pocket Defects
and Collar Defects (39% + 27.1% + 16.9%).
The last cumulative percentage will always be 100%.
Cumulative percentages indicate what percentage of all defects can be removed if the most
important types of defects are solved.
In the example above, solving just the two most important types of defects — Button Defects and
Pocket Defects – will remove 66% of all defects.
In any Pareto Chart, for as long as the cumulative percentage line is steep, the types of defects
have a significant cumulative effect. Therefore, it is worth finding the cause of these types of
defects, and solving them. When the cumulative percentage line starts to flatten, the types of
defects do not deserve as much attention, since solving them will not influence the outcome as
much.
6.2 Check Sheets

The check sheet is a simple document that is used for collecting data in real-time and at the
location where the data is generated. The document is typically a blank form that is designed for
the quick, easy, and efficient recording of the desired information, which can be either quantitative
or qualitative. When the information is quantitative, the checksheet is sometimes called a tally
sheet.
6.3 Cause and Effect Diagram
Most cause-and-effect diagrams examine a similar set of possible causes for any issue analyzed.
In the manufacturing industry, these are referred to as the 6Ms:
• Methods- well-written and appropriate training guidelines
• Machines- maintenance issues with the tools used or the number of tools available
• Materials
• Measurements
• Mother Nature/Environment
• Manpower/People
• Surroundings
• Suppliers
• Systems
• Skill
• Safety

•
6.4 Correlation /Scatter Diagram Method
The degree of association is measured by a correlation coefficient, denoted by r. It is sometimes

called Pearson's correlation coefficient after its originator and is a measure of linear association.
If a curved line is needed to express the relationship, other and more complicated measures of
the correlation must be used.
The correlation coefficient is measured on a scale that varies from + 1 through 0 to - 1. Complete
correlation between two variables is expressed by either + 1 or -1. When one variable increases
as the other increases the correlation is positive; when one decreases as the other increases it is
negative. Complete absence of correlation is represented by 0.

The formula for the correlation (r) is
where n is the number of pairs of data;
are the sample means of all the x-values and all the y-values, respectively; and sx and sy are the
sample standard deviations of all the x- and y-values, respectively.
You can use the following steps to calculate the correlation, r, from a data set:
1. Find the mean of all the x-values
2. Find the standard deviation of all the x-values (call it sx) and the standard deviation of all
the y-values (call it sy).
For example, to find sx, you would use the following equation:
3. For each of the n pairs (x, y) in the data set, take
4. Add up the n results from Step 3.

5. Divide the sum by sx ∗ sy.
6. Divide the result by n – 1, where n is the number of (x, y) pairs. (It’s the same as
multiplying by 1 over n – 1.)
This gives you the correlation, r.
For example, suppose you have the data set (3, 2), (3, 3), and (6, 4). You calculate the correlation
coefficient r via the following steps. (Note that for this data the x-values are 3, 3, 6, and the y-
values are 2, 3, 4.)

1. Calculating the mean of the x and y values, you get
2. The standard deviations are sx = 1.73 and sy = 1.00.

3. The n = 3 differences found in Step 2 multiplied together are: (3 – 4)(2 – 3) = (– 1)( – 1)
= +1; (3 – 4)(3 – 3) = (– 1)(0) = 0; (6 – 4)(4 – 3) = (2)(1) = +2.
4. Adding the n = 3 Step 3 results, you get 1 + 0 + 2 = 3.
5. Dividing by sx ∗ sy gives you 3 / (1.73 ∗ 1.00) = 3 / 1.73 = 1.73. (It’s just a coincidence
that the result from Step 5 is also 1.73.)
6. Now divide the Step 5 result by 3 – 1 (which is 2), and you get the correlation r = 0.87.
6.5 A Histogram
A histogram is used to summarize discrete or continuous data. However, a histogram, unlike a

vertical bar graph, shows no gaps between the bars.
The general purpose of a histogram is to present an easily understood summary about certain
data; it can be almost any type of data. The written data is transposed onto a chart that has
vertical blocks; the number of blocks depends on the categories of data collected. For example,
if you are measuring the frequency of something that occurs in a week you would have seven
sections along the horizontal line. The vertical line has numbers indicating how many times the
event occurred.
It is used for the following:
• Statistical Purpose
• Trends
• Data Distribution
• Weaknesses
A normal distribution: In a normal distribution, points on one side of the average are as likely
to occur as on the other side of the average.

Example of a Histogram
Jeff is the branch manager at a local bank. Recently, Jeff’s been receiving customer feedback
saying that the wait times for a client to be served by a customer service representative are too
long. Jeff decides to observe and write down the time spent by each customer on waiting. Here
are his findings from observing and writing down the wait times spent by 20 customers:
The corresponding histogram with 5-second bins (5-second intervals) would look as follows:

6.6 Bar Chart
A bar chart is used to graphically summarize and display the differences between groups of data.
A bar chart can be constructed by segmenting the range of the data into groups (also called
segments, bins or classes). For example, if your data ranges from machine to machine, you could
have a group of data from machine 1, a second group of data from machine 2, a third group of
data from machine 3, and so on.
6.7 Flow Charts
A flowchart is a “formalized graphic representation” that illustrates a workflow or process or a

solution to a given problem. The modern flowchart is essentially a business tool that outlines
multiple steps in a linear progression. Each step progresses towards a fixed objective. Boxes
represent each stage in a flowchart with arrows connecting each successive stage. Flow charts can
be used to represent a logic sequence, a manufacturing process, or an organizational chart.
Businesses can create a flow chart to address business problems and explore possible solutions. A
flowchart template can help analysts and business organizations to cast various processes in a
diagrammatic manner. We will explore the different types of flowcharts and their uses in the
paragraphs below.
Flowcharts may be assigned specialized names in keeping with their use in different industries.
Some of these flowcharts include the process flowchart, the process map, the functional flowchart,
business process mapping, business process modeling and notation (BPMN), and process flow
diagrams (PFD). Other forms of flowcharts include data flow diagrams (DFDs) and unified
modeling language (UML) activity diagrams.
Different types of flowcharts are used to document and analyze business and industrial processes.
Circle
Circles represents data in most flowchart diagrams.
Lines with Arrows
6.8 Graphs
Graphs are a common method to visually illustrate relationships in the data. The purpose of a graph
is to present data that are too numerous or complicated to be described adequately in the text and
in less space.
Examples: Line graph, bar graph, histogram, pie chart, box plot,
6.9 Control Charts
The control chart is a graph used to study how a process changes over time. Data are plotted in
time order. A control chart always has a central line for the average, an upper line for the upper
control limit, and a lower line for the lower control limit. These lines are determined from historical
data. By comparing current data to these lines, you can draw conclusions about whether the process
variation is consistent (in control) or is unpredictable (out of control, affected by special causes of
variation). This versatile data collection and analysis tool can be used by a variety of industries
and is considered one of the seven basic quality tools.
Control charts for variable data are used in pairs. The top chart monitors the average, or the
centering of the distribution of data from the process. The bottom chart monitors the range, or the
width of the distribution. If your data were shots in target practice, the average is where the shots
are clustering, and the range is how tightly they are clustered. Control charts for attribute data are
used singly. SELF READING- Types of control charts
7.0 SUPPLIER CERTIFICATION AND QUALITY STANDARDS
Quality Standards and types- Done
7.1 What are ISO 9000 Standards?

ISO 9000 Standards define the required elements of an effective quality management system. It
was adopted by the United States as the ANSI/ASQC Q90 series.
It was later revised 2000 so that it can take wider applicability.
7.2 ISO 9000 Series
ISO stands for International Organization for Standardization. It is an international body, which
consists of representatives from more than 90 countries. The national standard bodies of these
countries are the members of this organization. Bureau of Indian Standards (BIS) are the Indian
representative to ISO, ISO and International Electro Technical Commission (IEC)) operate jointly
as a single system. These are non-governmental organizations, which exist to provide common
standards on international trade of goods and services.
ISO 9000 standards expect firms to have a quality manual that meets ISO guidelines, documents,
quality procedures and job instructions, and verification of compliance by third-party auditors.
ISO 9000 series has five international standards on quality managements. They are:
1. ISO 9000 — Quality management and Quality assurance standards
2. ISO 9001 — Quality systems: Quality in design
3. ISO 9002 — Quality systems: Production and Installation
4. ISO 9003 — Quality systems: Final inspection and test
5. ISO 9004 — Quality management and systems
7.3 ISO 9001:2015 is an international standard dedicated to Quality Management Systems (QMS).
It outlines a framework for improving quality and a vocabulary of understanding for any
organization looking to provide products and services that consistently meet the requirements and
expectations of customers and other relevant interested parties in the most efficient manner
possible. The QMS is the aggregate of all the processes, resources, assets, and cultural values that
support the goal of customer satisfaction and organizational efficiency. First published in 1987,
the latest iteration (ISO 9001:2015) replaces ISO 9001:2008. ISO 9001:2015
It's a flexible standard that allows each organization to define for itself what its objectives and
adherence to the standard ought to be. ISO 9001:2015 defines the guiding principles that can be
used to create efficiencies by aligning and streamlining processes throughout the organization, in
an effort to bring down costs, create new opportunities, meet regulatory requirements, and help
organizations expand into new markets in which clients demand ISO 9001 certification (the last of
which is increasingly crucial for businesses working in or with the public sector or serving as
suppliers in automotive or private OEM (Original Equipment Manufacturer) scenarios).
ISO does not perform certifications to ISO 9001:2015. Instead, organizations engage an
independent certification body to audit their QMS implementation against the ISO requirements.

Organizations of any size can certify to this standard, including smaller ones with no dedicated
Quality resources.
7.4 Benefits of ISO 9000 Series

ISO 9000 series provides several tangible and intangible benefits which are listed below:
1. This gives competitive advantage in the global market.
2. Consistency in quality, since ISO helps in detecting non-conformity early which makes it
possible to take corrective action.
3. Documentation of quality procedures adds clarity to quality system.
4. ISO 9000 ensures adequate and regular quality training for all members of the organization.
5. ISO helps the customers to have cost effective purchase procedure.
6. The customers while making purchases from companies with ISO certificate need not spend
much on inspection and testing. This will reduce the quality cost and lead-time.
7. This will help in increasing productivity.
8. This will aid to improved morale and involvement of workers.
9. The level of job satisfaction would be more.
7.5 Steps in ISO 9000 Registration

1. Selection of appropriate standard from ISO 9001, ISO 9002 and ISO 9003 using the guidelines
given in ISO 9000.
2. Preparation of quality manual to cover all the elements in the selected model.
3. Preparation of procedures and shop floor instructions which are used at the time of implementing
the system. Also document these items.
4. Self-auditing to check compliance of the selected model.
5. Selection of a registrar and making application to obtain certificate for the selected model.
A registrar is an independent body with knowledge and experience to evaluate any one of the three
models of the company’s quality system (ISO 9002). The registrar, on successful verification and
assessment will register the company. Before selecting a registrar, one should know the following:
1. Accreditors of the registrar.
2. Background and credibility of the registrar.
3. Cost of registration through the proposed registrar.
4. Expected harmony between the company and the potential registrar while working towards
implementing ISO model in the company.
7.6 APPLICATION ISO 9000: ISO 14000 SERIES

Some of the standards in the ISO 14000 series are:
_ ISO 14001—Specification of Environmental Management Systems
_ ISO 14004—Guideline Standard
_ ISO 14010 through ISO 14015—Environmental Auditing and Related Activities
_ ISO 14020 through ISO 14024—Environmental Labeling
_ ISO 14031 through ISO 14032—Environmental Performance Evaluation
_ ISO 14040 through ISO 14043—Life Cycle Assessment
_ ISO 14050—Terms and Definitions

Although the ISO 14000 standards are similar to the ISO 9000 standards, the nature of the
environmental standards creates a need for people who are technical environment professionals in
addition to those required to maintain the documentation necessary for certification.
7.8 The Benefits of ISO 14000 Certification
1. Adhering to the standard may result in better conformance to environmental regulations,
greater
2. Marketability
3. better use of resources
4. higher quality goods and services
5. increased levels of safety
6. Improved image and increased profits.
7. It assists a company in conforming to environmental regulations.
8. It increases a wider market coverage for goods and services
9. Reducing the amount of potentially dangerous substances in an end product may result in
less use of dangerous chemicals in a plant.
7.9 The elements of the standards

• Management responsibility Inspection and Testing
• Inspection, Measuring and Test Equipment
• Inspection and Test Status
• Control of Non-conforming product
• Corrective Action
• Quality Records
• Internal Quality Audits
• Training
• Servicing
• Statistical Techniques
• Resource management
• Quality System
• Contract Review
• Document Control
Design control
• Purchasing- Purchaser-Supplied Product
• Product Identification and Traceability
• Process Control
ISO 9001:2015 and its complementary management standards are based on the following seven
Quality principles.
Principle Description
Customer focus means exceeding customer expectations and providing
satisfaction and value with every customer interaction. It requires an organization
Customer Focus
to link every business objective to customer needs and to recognize that customers
are those that have both direct and indirect relationships with an organization.
Principle Description
Leadership must commit to ensuring the availability of all resources for Quality
projects and to providing positive role models through active participation,
Leadership
proactive communication of vision and strategy, and an organization-wide
engagement with a Culture of Quality.
Engagement of Organizations must engage and empower competent and motivated workers while
People encouraging everyone to contribute and collaborate.
A process approach recognizes that processes must be part of a unified and
consistent system that produces predictable results, illuminates elements that
Process Approach
require improvement, and addresses all risks that have an impact on process
outcomes.
An ongoing dedication to improvement reacts to changes in external and internal
Improvement conditions to create new opportunities by focusing on root-cause determination
and preventative and corrective actions.
Making decisions based on statistical evidence provides greater objectivity,
Evidence-Based
effectiveness, and effciency to an organization and makes it easier to review results
Decision Making
for ongoing improvement.
Organizations must account for and manage relationships with all vendors,
Relationship
partners, and suppliers to understand the constraints, opportunities, and risks for
Management
each.
ISO 9001:2015 contains a subset of tactical elements that complement the strategic principles
provided above. These five elements, which represent a significant advance on ISO 9001:2008,
are:
The Plan-Do-Check-Act cycle
• Risk-based thinking
• Leadership participation
• Unified structure, and
• Clarified documentation requirements.
Stage Description
The organization
• determines the objectives of the QMS and maps all processes that will be within its
Plan
scope
• provides all resources necessary for meeting customer requirements and all internal
and external interests, and
Stage Description
• identifies and addresses all risks and opportunities.
The organization implements the QMS according to the parameters determined during the
Do
planning stage.
Check The organization measures the processes and outputs against the objectives and requirements
The organization implements remedies to correct any deviations or ineffciencies and to
Act
improve overall performance of the QMS.
1. Unified High-Level Structure: ISO has been developing a unified structure for
Management System Standards (MSS) since the early 1990s. The ISO Technical
Management Board created a technical advisory group to develop these requirements and
in 2011 published them as Annex SL in the ISO/IEC directives.
All ISO standards dedicated to management system requirements, including ISO 9001:2015, ISO
14001:2015 and ISO 45001:2018, will now have the following identical elements: Sequence of
clause titles, Text, and Terms and definitions
2. Documentation: It is up to each organization to determine its approach to maintenance,

retention, and disposition of all documentation.
8.0 PLANT MANTAINANCE AND MAINTAINCE TASKS
Plant maintenance is an execution process of repairing or servicing the asset to avoid breakdown
Plant maintenance can be scheduled and unscheduled. It depends on the importance & priority of the asset.
When priority is high then asset maintenance is done proactively. However, there are several factors
included in proactive maintenance such as asset utilization, performance, how old assets are, and so on.
Plant maintenance can lead to increased downtime as asset maintenance is a long process and they are not
in working condition. That is why maintenance must be planned in a way so that machine downtime can
be minimized. For example, maintenance can be performed on holidays and on the night shift.
8.1 Objectives of Plant Maintenance
1. To minimize equipment maintenance & decrease downtime.
2. Ensure asset breakdown does not occur.

3. Utilize assets to their fullest potential & capacity.
4. To keep assets well maintained and optimize asset performance.
5. Minimize the total maintenance cost including using spare inventory.
6. Optimize asset life by providing maintenance.
These are the objectives of plant maintenance.
8.2 Various Types of Plant Maintenance
1. Preventive Maintenance
Preventive maintenance is one of the most important proactive & plant maintenance types. Preventive
maintenance can be applied end two ways first is usage-based and the second is calendar-based preventive
maintenance.
In this strategy when an asset covers a particular distance, the maintenance is scheduled, for example, if the
vehicle has covered 1000 (This distance is also set as per requirement) kilometers the organization will
provide maintenance to that asset.
On the other hand, in time-based preventive maintenance is asset work or not it will be given after a
particular time of 15 days, 30 days 3 months as per the organization's requirements.
2. Predictive Maintenance
Predictive maintenance also enables organizations to schedule maintenance in advance. In a predictive

maintenance strategy, the organization predicts when asset failure can occur, and right before it can occur
maintenance is provided to that asset.
For this purpose, asset monitoring, asset analytics & performance are analyzed regularly so that anticipation
can be made. This is one of the most used plant maintenance types as no plant manager wants unexpected
asset failure.
3. Condition Monitoring Maintenance
Condition monitoring maintenance can be a very effective maintenance strategy. Because it is proactive,
and the asset is utilized to its full capacity and potential right before asset failure maintenance is performed.
In this way, asset uptime increases and downtime decreases. For this purpose, sensors and artificial
intelligence are used so that predictions can be made without compromising accuracy.
Types of condition-based maintenance monitoring techniques

• Vibration analysis.
• Infrared.
• Ultrasonic.
• Acoustic.
• Oil analysis.
• Electrical.
• Operational performance.
Motor vehicles come with a manufacturer-recommended interval for oil replacements. These
intervals are based on manufacturers’ analysis, years of performance data, and experience.
However, this interval is based on an average or best guess rather than the actual condition of the
oil in any specific vehicle. The idea behind condition-based maintenance is to replace the oil
only when a replacement is needed and not on a predetermined schedule.
4. Corrective Maintenance
Corrective maintenance is mostly reactive, but it can be proactive as well. When a high-priority asset
suddenly stops working then corrective maintenance is used.
In this technique, the machine is brought back into running condition, but the root cause is not identified.
Mostly corrective maintenance is used on those assets which are run to failure.
Corrective maintenance include:
• Emergency repairs — Urgent repairs that must be done immediately to prevent a

breakdown. ...
• Service outages — Restoring services that are down, such as fixing a broken telephone
line.
• Repairs — Repairing things that are broken, such as a burst water pipe.
• Quality assurance
• Performance - Correcting poor quality, such as an AC unit that makes a lot of noise.

5. Emergency Maintenance
Emergency maintenance is maintenance in which asset failure has occurred, and it needs to be brought back
into running condition as soon as possible. Emergency maintenance is utilized on those assets which are
highly reliable but are not working.
This maintenance is reactive in nature as asset failure has occurred. Emergency maintenance is very costly.
6. Predetermined
Refers to preventive measures performed according to calendar schedule or operating time, e.g.
the replacement of oil, belts, clutch discs and other wear parts. The term also includes scheduled
overhauls where machinery and components are taken apart for inspection.
An excellent example of predetermined maintenance is when machinery maintenance is

scheduled at time intervals based on the manufacture's recommendations. For example, oil
changes will be every fourth month. Transmission service will occur at X number of hours of run
time.
8.3 Maintenance Tasks
Lubricating, cleaning, or adjusting machinery. Inspecting equipment to ensure proper operation

and safety. Replacing parts that show deterioration. Checking, testing, and maintaining safety
equipment, such as safety barriers, fire extinguishers, or alarm systems.
• Lubricating, cleaning, or adjusting machinery.

• Inspecting equipment to ensure proper operation and safety.
• Replacing parts that show deterioration.
• Checking, testing, and maintaining safety equipment, such as safety barriers, fire
extinguishers, or alarm systems.

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EME 341 -MANAGEMENT FOR ENGINEERS

TOPIC 8: WAGES AND INDUSTRIAL RELATIONS

These processes and activities are as follows:

• Communication policies and decision-making practices

Total rewards include:

Guiding principles for reward

Elements to determine effective reward systems

Prepared by Dr. Sedina 1

Reward strategy -DRAWN IN CLASS

Non-financial incentives used by today’s organizations

Total reward system

It considers all aspects of rewards both financial and non-financial

Components- compensation, benefits and work experience

Benefits of total rewards

Prepared by Dr. Sedina 2

A remuneration system consists of methodologies that identify criteria of awarding compensation to

◆ Merit pay programs link performance-appraisal ratings to annual pay increases.

3. Pay for performance

4. Competence related pay

1. Time rate method

• It is a convenient method and wages can be calculated easily.

2. Piece rate method

Factors determining pay rate

1. The firm’s capacity to pay.

PAY STRUCTURES (ADJUSTMENT OF PAY STRUCTURES)

Procedure for establishing a pay structure

Prepared by Dr. Sedina 5

EMERGENCE AND DEVELOPMENT OF TRADE UNIONS

Prepared by Dr. Sedina 7

PROCEDURE FOR REGISTRATION OF TRADE UNIONS

Prepared by Dr. Sedina 8

Voluntary dissolution of trade unions

Dissolution by court judgment

Types of Trade Unions

Trade Unions Financing

STRUCTURES AND FUNCTIONS OF COTU

Prepared by Dr. Sedina 10

Formation of COTU (K) PERIOD - 1965

Prepared by Dr. Sedina 11

FUNCTIONS To act as a forum for Consultancy services- job analysis,

Prepared by Dr. Sedina 12

Below discussed are the two types of disciplines:

GRIEVANCE AND DISPUTE HANDLING

NORMAL GRIEVANCE PROCEDURE STEPS:

Prepared by Dr. Sedina 14

Topic 9: Term Paper & Group Work- DONE

TOPIC 10: PURCHASING AND STORES MANAGEMENT

Prepared by Dr. Sedina 15

4. Purchasing for Specific Future Period

7. Group Purchasing of Small Items:

Prepared by Dr. Sedina 16

(a) Purchase Department,

Prepared by Dr. Sedina 17

• It acts as a guide in planning the execution of job

The specimen of Purchase Requisition is given below:

Prepared by Dr. Sedina 18

The specimen of the Purchase Order is given below:

Prepared by Dr. Sedina 19

A specimen of material inspection note is given below:

5. Goods Received Note (GRN):

A specimen of goods received note is given below:

Prepared by Dr. Sedina 20

7. Material Transfer Note: