Engineering Management

Introduction

Engineering Economics Management of Work The Management of The Management of Contemporary

• Demand and Revenue Analysis
• Demand Forecasting
• Production Analysis
• Cost and Supply Analysis
• Price and Output Determination
• Investment Analysis
• Plant Location and Economic
Optimization
• Business Organisation – Types
and Designing
• Firms
• Functions of Management
Engineers
• HRM
• Motivation – Individuals and
Work Groups
• Leadership
• Managerial Communication
• Personal Management
• Time and Stores management
Engineering
• Financial Management
• Product Development and its
Techniques
• Controlling
• Operation Management and JIT
Management Issues
• Managing World Economic
Change
• Global Environment and
Multinational Strategies
• Economic Cycles
• Organisational Development
• Managerial Ethics and Social
Responsibilities
Engineering Economics

 Definition - “It is the integration of economic theory with engineering practice for the
purpose of facilitating decision-making and forward planning by management”
 Scope of Engineering Economics
 Market analysis
 Cost and production analysis
 Pricing decisions and policies
 Profit management
 Capital management
Importance and application of economics

 To relate the accounting terms to business (Effective decision making and forward
planning)
 To determine certain of economic relations such as measurement of demand with respect
to price elasticity, income elasticity etc. (Forecasting future demands)
 Predicting economic qualities in numerical terms and their probabilities
 The economic qualities are used to prepare business policies ad alternate course of action
for different situation of business environment
 The organisation must have proper alternatives to adjust to the changes caused by external
forces (Government policies, national income, taxation policies, foreign trade)
Technical and Economical Efficiency

 Technical Efficiency can be improved

 Increase in output keeping same input
 Decrease in input keeping same output
 Increase in output proportionately more than increase in input
 Decrease in input proportionately more than decrease in output

 Economic efficiency of an economic system which has the ability to distribute its
resources t its demand in the best desirable way.
Demand and Revenue Analysis

 Demand Analysis – seeks to search out and measure the factors that determine sales – two
managerial purpose
 Fore casting Sales/Demand
 Manipulating demand
 Forecasting demand/sales – foundation for company’s operation such as purchase
commitments, production schedules, inventory planning, cash budgets, capital
expenditure programs etc.
 Manipulating demand –By using the sales forecasting data, the future demand is
manipulated and sale of the product is increased by adapting suitable sales policies and
strategies at different course of time
Factors influencing demand

 Price of the product  Availability of credit

 Buyers income  Season of the year
 Price of substitutes  Expected future trend in prices
 Advertising and sales promotion  Changes in customer’s taste
 Population  Need and performances
Price and Demand

 Relation of price to sales is “Law of Demand”

– higher the price, lower the demand and Vice
–versa – price quantity relationship
 Exception
 Article of distinction-Diamonds
 Expectation of raise or fall in price in future-
Shares
 Customer ignorant about quality-Fashion wears
 Special types of goods
Price and Demand

 Elasticity of Demand – is the % in sales that  Factors affecting price elasticity

accompanies a 1% increase in any demand determinant
 Availability of substitute
 Price
 Income
 Nature of commodity
 Promotional activities  Level of income of the customer
 Types of price elasticity  Habitual necessities
 Perfectly elastic demand  Priority of the item in customer budget
 Perfectly inelastic demand
 Time period in construction
 Demand with unity elasticity
 Urgency of demand
 Relatively elastic demand
 Relatively inelastic demand
Income and Demand

 Consumption function – relation between total expenditure to total income

 Product consumption function – total income to total sales of particular product (product
group)
 Differences in regional income – the purchasing power of the customers in different
region of the country will be varying
 Income expectations and demand level
Price of related Goods and Demand

 Demand for certain products are affected by changes in prices of related goods
 Substitutes – commodities are substitutes when one can be replaced by another
 Complements – commodities are complements when a change in the demand for one commodity
leads to change in the demand for other commodity
Advertising and Demand

 Advertising promotes trade and creates

demand
Demand Forecasting

 A forecast helps a firm to assess the probable demand for its product and plan its
production accordingly
Types of Forecasting
 Short Term Forecasting – it covers a period of one month to one year, it depends on the
nature of the business and demand fluctuates from one month to another
 Long Term Forecasting – it covers a period of 5,10 and even 20 years. After 12 months
the future is assumed uncertain
Demand Forecasting

Methods of Forecasting

Economic
Indicators
Trend Projection

Collective
Opinion or Sales
Force Polling

Survey of
Buyer’s
Intentions or
Opinion
Survey
Production Analysis

 Production is defined as an organised activity

of transforming raw material into finished
products
 Methods of Production
 Job order Production
 Mass Production
 Batch Production
Job Order (Unit Production)

 Characteristics  Advantages
 Meets Individual requirement  Meets individual requirement
 Orders nor repeated  Less investment
 Adopts general purpose machines  Less risk
 Can take-up different type of work  Flexibility
 Production of exclusive goods  No managerial problems
 Disadvantages
 No scope for economical economy
 Labour cost is more
Mass Production
 Characteristics
 Large scale
 Continuous production
 Requires planned layout
 Product is produced economically
 Same sequence of flow
 Mechanical material handling
 Advantages
 Minimum wastage
 Quality discounts
 Cost is reduced – labour and unit product
 Increased production
 Disadvantages
 Demand reduce – leads to risk
 Cannot satisfy individual tastes
 Reduced flexibility
Batch Production

 Characteristics  Advantages
 Adopted for medium scale  Moderate capital
 Requires more machine  Lesser risk
 Mixture of kinds of machines  Commercial
 Variety of products  Disadvantages
 More cost
 Not economical completely