Engineering Management PDF

Engineering Management  Engineering Management Engineering Management is concerned with the design, installation, and improvement of integrated systems of people, material, information, equipment, and energy by drawing upon specialized knowledge and skills in the mathematical, physical, and socia...

Engineering Management  Engineering Management Engineering Management is concerned with the design, installation, and improvement of integrated systems of people, material, information, equipment, and energy by drawing upon specialized knowledge and skills in the mathematical, physical, and social sciences, together with the principles and methods of engineering analysis and design to specify, predict, and evaluate the results to be obtained from such systems. Scientific discipline, which designs, implements and/or develops models, processes, and systems by taking into account the engineering relationships between the management tasks of planning, organizing, leading and controlling and the human element in production, research, marketing, finance and other services.  Engineering Management  Engineering management is the fusion of business and engineering principles. By having knowledge of economics and management they can forecast or can predict the utility, advantages, disadvantages of the product. also get to know the scope of the product and its contribution in growth. Specialized form of management that is concerned with the application of engineering principles to business practice. Career that brings together the technological problem-solving savvy of engineering and the organizational, administrative, and planning abilities of management to oversee complex enterprises from conception to completion.  Engineering Management  Engineering Management Domain  Example areas of engineering management area are: Product development Manufacturing Construction Design engineering Industrial engineering Technology Production Successful engineering managers typically require training and experience in business and engineering to: Operating effectiveness and effi ciency is. Problem solving and operations improvement. Managers within the field of engineering are trained to understand Human resource management, finances, industrial psychology, quality control, operations research, and environmental management.  Engineering Management Engineering Management The profession in which a knowledge of A set of activities (including planning and the mathematical and natural decision making, organising, leading and science gained by study, experience, and practice control) directed at an organisation’s is applied with judgement to develop resources (human, financial, physical and ways to utilize, informational) with economically, the the aim of achieving materials and organisational goals forces of nature in an effi cient and for the benefit of effective manner. mankind  Engineering Management  Management is getting things through others, Management needs: Objective Resources, Methods, Organization setting, People Engineering Management  Function of Manager Planning Organizing Directing Controlling  Engineering Management  Planning Manager should have objective in mind Planning help manager to do the right things Well planning needs the following Defining objectives, Deciding what/when/how/who What is to be done, When it is to be done, How it is to be done, Who is to do it,  Engineering Management  Organizing Gathering and allocating resources, Coordinating the work of the organization, Deliberate creation a configuration that defines the followings: How authority is structured, How communication flows, How tasks are accomplished  Engineering Management  Directing Redirecting human behavior to achieve objectives Motivating others to produce, Influencing subordinates  Controlling Keeping things on track, Steering performance towards desired goal, Coordinating monitoring and adjusting performance  Managerial skills  Engineering Management  Contrast between American and Japanese organizations  Engineering Management  Difference Between Boss & Leader  Engineering Management  Course Outline:  Engineering Management Marketing & Strategy Organizational Model & Human Resource Cost Management & Productivity Project Management Quality Control Operations Researches Supply Chain Industrial safety  Engineering Management  Reference Book Cost Accounting (A Managerial Emphasis) Fourteenth Edition 2012, Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan, Principles of Marketing, Fourth European Edition 2005, PHILIP KOTLER , VERONICA WONG, JOHN SAUNDERS, GARY ARMSTRONG Handbook of Industrial Engineering (Technology and Operations Management), Third Edition 2001, Edited by: GAVRIEL SALVENDY Operations Research: An Introduction, Eighth Edition 2007, Hamdy A. Taha Guide to the Engineering Management (Body of Knowledge), 2010 Knowledge Engineering and Management, 2000 A Guide to the Project Management Body of Knowledge, Third Edition,2004 Organization and Systems Design, Theory of Deferred Action, Nandish V. Patel, 2006 Introduction to Operations Research, Seventh Edition, FREDERICK S. HILLIER, GERALD J. LIEBERMAN, 2001 Introduction to Statistical Quality Control, Montgomery. 5th Ed.,John Wiley & Sons. Marketing  Marketing Market: Collection of buyers and sellers, interaction, determine the prices of products Buyers: consumers purchase goods, companies purchase labor and inputs Sellers: consumers sell labor, resource owners sell inputs, firms sell goods Arbitrage: The practice of buying a product at a low price in one location and selling it for more in another location.  Product is anything that can be offered to someone to satisfy a need or want Market Price: Transactions between buyers and sellers are exchanges of goods for a certain price.  Goods: physical, tangible entities  Marketing  Core Market Concept  Marketing  Types of Markets: Perfectly competitive markets:  The large number of buyers and sellers  No individual buyer or seller can influence the price  Example: Most agricultural markets Noncompetitive Markets  Markets where individual producers can influence the price  Example: OPEC dominates with world oil market  Marketing  The Supply Curve Shows how much of a good producers are willing to sell at a given price This price-quantity relationship can be shown by the equation: Variables of Demand: Costs of Production  Labor  Capital  Raw Materials  Marketing  The Demand Curve Shows how much of a good consumers are willing to buy as the price per unit. This price-quantity relationship can be shown by the equation: Variables of Demand  Income  Consumer Tastes  Price of Related Goods  Substitutes  Complements  Marketing  The Market Mechanism Supply and demand interact to determine the market-clearing price. When not in equilibrium, the market will adjust to alleviate a shortage or surplus and return the market to equilibrium. Markets must be competitive for the mechanism to be effi cient.  Marketing  The Market Mechanism Characteristics of the equilibrium or market clearing price:  QD = QS  No shortage  No excess supply  No pressure on the price to change  Marketing  Surplus The market price is above equilibrium  There is excess supply  Producers lower prices Quantity demanded increases and supplied decreasesquantity  The market continues to adjust until the equilibriu price m reached. is  Marketing  Shortage The market price is below equilibrium:  There is a shortage  Producers raise prices  Quantity demanded decreases and quantity supplied increases  The market continues to adjust until the new equilibrium price is reached.  Marketing  Consumer Behavior The explanation of how consumers allocate income to the purchase of different goods and services.  Marketing  The Consumer Decision Process: Need recognition  The first stage of the buyer decision process in which the consumer recognises a problem or need Information search  The stage of the buyer decision process in which the consumer is aroused to search for more information; the consumer may simply have heightened attention or may go into active information search  Marketing  The Consumer Decision Process: Evaluation of alternatives The stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set Purchase decision The stage of the buyer decision process in which the consumer actually buys the product Post purchase behaviour The stage of the buyer decision process in which consumers take furtheraction after purchase based on their satisfaction or dissatisfaction The Cognitive Dissonance is the buyers discomfort caused by post purchase conflict  Marketing  Stages in Adoption Process Awareness  The consumer aware of the new product, but becomes lacks information about it Interest  The consumer seeks information about the new product Evaluation  The consumer considers whether trying the new product makes sense  Marketing  Stages in Adoption Process Trail The consumer tries the new product on a small scale to improve his or her estimate of its value Adoption  The consumer decides to make full and regular use of the new product  Marketing  Individual Differences in Innovativeness: Innovators: adventurous: they try new ideas at some risk Early Adopters guided by respect: they are opinion leaders in their community and adopt new ideas early but carefully Early Majority deliberate: although they are rarely leaders, they adopt new ideas before the average person  Marketing  Individual Differences in Innovativeness: Late Majority sceptical: they adopt an innovation only after most people have tried it. Laggards tradition-bound: they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself  Marketing  Difference between Market Segmentation, Targeting and Positioning  Marketing  Market Segmentation Process which involves subdividing the total market into groups or segments composed of people or organizations who share somewhat similar needs with regard to a given product, so as to be able to plan a marketing mix which will best satisfy those needs.  Marketing  Market Segmentation Segmentation Variables The characteristics of individuals, groups or organizations which are usedto subdivide the market into segments.  Geographic  Demographic  Psychographic  Behavioural  Marketing  Market Targeting Targeting is the second stage and is done once the markets have been segmented, Organizations with the help of various marketing plans and schemes target their products amongst the various segments.  Marketing  Market Positioning The whole set of decisions and activities aimed at creating and maintaining a certain concept of the company's product (with respect to competing products) in the minds of prospective buyers. When a company launches a new product, they try to position it so that it is seen has having the characteristics most desired by the target market  Marketing  New Product Development Process  Marketing  Product Life-Cycle The course of a product’s sales and profits over its lifetime. It involves five distinct stages: product development, introduction, growth, maturity and decline.  Marketing  Product Life-Cycle Strategy  Strategy A set of actions that managers take to increase their company’s performance relative to industry rivals. A strategy is implemented create a competitive advantage over other to companies A company is said to have a competitive advantage when its profitability is greater than the average profitability for all firms in the industry A competitive advantage is considered sustained when it is maintained for several years The essence of strategy lies in creating tomorrow’s competitive advantage faster than competitors mimic the ones you possess today.  Strategy  Stakeholders Individuals or groups with an interest, claim, or stake in the company and how well it performs Anyone in an exchange relationship with the company  Corporate Governance: Mechanisms to monitor managers making sure they pursue strategies in the interest of Stakeholders  Strategy  Internal Stakeholders Stockholders Employees Executives and managers Board members  External Stakeholders Customers and suppliers Creditors Governments General public  Strategy  The Mission Statement To establish the guiding principles for strategic decision making Includes 4 main elements:  The Mission  The Vision  Values  Goal of the Corporation The mission statement is a key indicator of how an organization views the claims of stakeholders  Strategy  The Mission Describes what the company does Can be product oriented: Focus on the product the company Can be customer oriented: Focus on satisfying customers’ needs  The Vision Tells what the company would like to achieve Intended to stretch a company by articulating its ambitions Meant to be an attainable goal that will motivate employees  Strategy  Values Tell how managers and employees should conduct themselves Establishes the basis of the organizational culture  Major Goals A goal is a precise and measurable future state that a company attempts to realize Good goal characteristics:  Precise and measurable  Address important issues  Challenging but realistic  Time period specified Most companies operate with goals of profitability and profit growth.  Strategy  Industry A group of companies offering products or services that are close substitutes for each other. Analysis of Industry Goals of industry analysis:  To gain an understanding of the opportunities and threats confronting the firm  To use this understanding to identify strategies that will enable the company to outperform rivals  Strategy  SWOT Analysis SWOT analysis is a distillation of the findings of the internal and external audits which draw attention to the critical organisational strengths and weaknesses and opportunities and threats facing the company.  Strategy  SWOT Analysis Strengths: internal factors which make it possible to exploit external opportunities and defend against threats. Weaknesses: internal factors which may block an exploitation of external opportunities and render the company vulnerable to external threats Opportunities: external factors which, if well managed, can reinforce the position of the product in the market. Threats: external factors which, if managed poorly, can weaken the position of the product in the market.  Strategy  Porter’s Five Forces Model 1. Risk of entry by potential competitors  Function of the height of barriers of entry Economies of Scale Brand Loyalty Absolute cost advantage  Superior production operations and processes  Control of particular inputs  Access to cheaper funds to lower risk of existing cost Customer switching costs Government regulation  Strategy  Porter’s Five Forces Model 2. The intensity of rivalry among established companies  The competitive struggle for market share that depends on: The industry’s competitive structure Industry demand 3. Bargaining power of buyers  The ability of buyers to drive prices down or quality up.  Bargaining power of buyers is greatest when: buyers are large and few and suppliers fragmented buyers purchase in large quantities when economically feasible to have many suppliers  Strategy  Porter’s Five Forces Model 4. Bargaining power of suppliers  The ability of suppliers to raise the costs of the industry.  Suppliers are most powerful when: few substitutes and vital industry not important customer 5. Threat of Substitutes (Closeness of product substitutes)  Other products can satisfy the same customer need.  Strategy  Porter’s Five Forces Model  Strategy  Stages in the Industry Life Cycle An important determinant of the strength of the competitive forces in an industry is the changes that take place over time. The industry life cycle is a useful tool for analyzing the effects of industry evolution on competitive forces. Competition increases as the industry progresses through the cycle.  Strategy  Stages in the Industry Life Cycle There are five sequential stages:  Embryonic  Growth  Shakeout  Mature  Decline  Strategy  Stages in the Industry Life Cycle Embryonic:  The industry is just beginning to develop ,  Development is slow  Buyers are unfamiliar with product ,  High prices  Strategy  Stages in the Industry Life Cycle Growth:  Demand takes off  Many new customers  Prices fall with development and higher volume  Entry barriers are relatively low  Relatively low competition  Strategy  Stages in the Industry Life Cycle Shakeout:  Rate of growth slows  Demand approaches saturation levels  Few potential first-time buyers  Rivalries become intense  Strategy  Stages in the Industry Life Cycle Mature:  Market is totally saturated  Demand is limited to replacement demand  Growth is low or zero  Barriers increase  Threat of new entries decrease  Competition drives prices down  Strategy  Stages in the Industry Life Cycle Decline:  Falling demand = Excess capacity  Growth becomes negative due to  Technology substitution  Demographics  Strategy  Company Profitability Amount of Value that customers place on a good or service  Value creation is the heart of competitive advantage  The greater the value customers place on a product, the more the company can charge.  A product’s price is usually less than the value placed on it by the average customer.  Strategy  Company Profitability A company will look for ways to increase productivity of capital and labor through:  Economies of Scale  The increase in of production as the number of efficiency goods being produced increases. Spread fixed cost over large product volume  Greater  division of labor and specialization  Strategy  Value Creation  Two Basic Strategies for Creating Value:  Low Cost- Drive down cost structure  Differentiation  Strategy  Value Creation  A company that has high profitability = competitive advantage, when it creates more value for its customers than do rivals.  Strategy  Building Competitive Advantage: 4 Factors – building blocks of competitive advantage:  Efficiency  Innovation  Quality  Customer Responsiveness  Strategy  Effi ciency Efficiency = outputs/inputs 2 of the most important component of effi ciency are:  Employee Productivity: output per employee  Capital Productivity: Output per unit of investment capital High Productivity = greater effi ciency and low costs  Strategy  Innovation: The act of creating new products or processes Product Innovation- The development of products that are new to the world or have superior attributes to existing products. Process Innovation-The development of a new process for producing products and delivering them Competition can be seen as a process driven by innovation Innovations give a company something unique that their competitors lack : diving either differentiation or cost advantage  Strategy  Quality: Customers perceive attributes of a product to be better than rival’s attributes 1° type of quality: Excellence, when excellence is built into product offering, consumers have to pay more to own or consume the product:  Design  Style  Aesthetic appeal  Features and functions  Level of service that comes with the product  Strategy  Quality: 2° type of quality: Reliability ,  A product is reliable if it:  Consistently does the job it was designed for  Does the job well  Rarely breaks down  Less time is spent of defective products and fixing mistakes  Reliability increases the value a consumer gets from the product and increases the price that the company can charge  Strategy  Customer Responsiveness Superior customer responsiveness implies being better than competitors at identifying and satisfying customers’ needs, thus; If a customer’s need is satisfied better by a certain product, the customer will attribute more value to the product. therefore:  More value createsa differentiation and ultimately a competitive advantage  Strategy  Strategic Change The movement of a company away from its present state toward some desired future state to increase its competitive advantage and profitability. Reengineering: Focus not on company’s functional activities but on the business processes underlying the value creation process Restructuring: Process by which managers simplify organizational structures by eliminating divisions, departments or levels in the hierarchy and downsize by terminating employees, thereby lowering operating costs.  Strategy  Change Process Determining the need for change  Identify a gap between desired and actual performance Determining the obstacles to change  Change is frequently (always) resisted by people and groups inside an organization  Identify your obstacles Manage and evaluate Change  Strategy  Course Outline:  Engineering Management  Marketing & Strategy Organizational Model & Human Resource Cost Management & Productivity Project Management Quality Control Operations Researches Supply Chain Industrial safety Organizational Model  Organizational Model  Organization Any collection of persons, materials, procedures, ideas or facts so managed & ordered that in each case the combination of parts makes a meaningful whole that at achieving organization objectives. In other words the process of organization implies the arrangement of human & nonhuman resources to make a meaningful whole that accomplishes organizational objectives. Every employee must be informed of what is expected of him (responsibility) & what is within his power (authorities), This is usually found in the "job description".  Organizational Model  Organization Managers decide how to  Divide the overall task into successively smaller jobs  Decide the bases by which to group the jobs  The appropriate size of the group reporting to each superior  Distribute authority among the jobs After deciding on the major operating units & departments the required resources must be acquired & fitted in the right place.  Organizational Model  Organizational Charts Formal relationship between people in various positions in the organization. They shown who supervises whom & how various jobs & departments are linked together to make achieve coordinated system. Main channels of communication (downward, upward , horizontal, and diagonal)  Organizational Model  Organizational Charts  Organizational Model  Organization Structure Organization structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors. Organization structure identifies the grouping together of individuals into departments and of departments into the total organization. Organization structure includes the design of systems to ensure effective communication, coordination, and integration of effort across departments  Organizational Model  Elements Organization Structure Division of Labor Departmentalization Span of Control Delegation of Authority  Organizational Model  Division of Labor It is the process of dividing work into relatively specialized jobs to achieve advantages of specialization. Subdivision of work into separate jobs assigned to different people Division of Labor Occurs in Three Different Ways: 1. Personal specialties  e.g., accountants, software engineers, graphic designers, scientists 2. Natural sequence of work  e.g., dividing work in a manufacturing plant into fabricating and assembly (horizontal specialization)  Organizational Model  Division of Labor 3. Vertical plane  e.g., hierarchy of authority from lowest-level manager to highest-level manager  Coordination Coordination means assembling & synchronizing work efforts so that they function harmoniously to attain organizational objectives.  Organizational Model  Departmentalization Departmentalization is the (horizontal) differentiation of the organization in departments. Departments are organizational units that share a common supervisor and common resources, are jointly responsible for performance, and tend to identify and collaborate with one another. The process of grouping activities into units for purposes of administration. It can be grouping by services, location, or by geographic area.  Organizational Model  Departmentalization  Organizational Model  Span of Control Number of individuals who report to a specific manager. Number of people directly reporting to the next level.  Organizational Model  Span of Control  Organizational Model  Delegation of Authority Process of distributing authority downward in an organization. Managers decide how much authority should be delegated to each job and to each jobholder Three Forms of Authority:  Line authority flows up and down the chain of command  Staff authority is based on expertise that usually involves counseling and advising line managers Committee and team authority is granted to committees or work teams involved in a firm’s daily operations  Organizational Model  Centralization and Decentralization Refers to the level at which most or the operating decisions will be made. The greater the number of decisions made lower down the management Hierarchy the greater the degree of decentralization. Generally speaking, it is advisable that decisions concerning day- today matters should be pushed down the organization structure and not be handled by top management.  Organizational Model  Advantages of Decentralization Quick action regarding specific problems. Facilitates adaptation of decisions according to local needs. Relieves top management from involvement in routine decisions thus saving time and energy. Increases flexibility of action as junior staff are allowed to make Prompt decisions without having to wait for approval from to management. Effective in developing the junior staff to hold top management Positions.  Organizational Model  Advantages of Centralization Uniformity of policy and action. Enables maximum use of the skills and knowledge of centralized Staff. Fosters better control of the organizations activities. Enables the use of not highly skilled subordinates since every little detail is set by the top management. Unity of Command – The classical principle of command suggested that each individual in the Organization should be directly responsible to, and receive orders from, Only ONE supervisor and through this ultimately answerable to the head Of the organization.  Organizational Model  Dimensions of Structure Formalization – the extent to which expectations regarding the means and ends of work are specified, written, and enforced Centralization – the location of decision-making authority in the hierarchy Complexity – the direct outgrowth of dividing work and creating departments  Organizational Model  Mechanistic vs. Organic Structures  Organizational Model  Mechanistic vs. Organic Structures  Organizational Model  Mechanistic vs. Organic Structures  Organizational Model  Functional Organizational Structure Organizes employees around skills or other resources (marketing, production) Create subordinate goals.  Organizational Model  Functional Organizational Structure Benefits  Supports professional identity and career paths  Permits greater specialization  Easier supervision --similar issues  Creates an economy of scale --common pool of talent Limitations  More emphasis on subunit than organizational goals; failure to develop broad understanding of the business  Higher dysfunctional conflict because emphasized differences across subunits  Poorer coordination -- requires more controls  Organizational Model  Divisional Organizational Structures Organizes employees around outputs, clients, or geographic areas  Organizational Model  Divisional Organizational Structures Benefits  Building block structure -- accommodates growth  Better coordination in diverse markets Limitations  Duplication and ineffi cient use of resources  Specializations are dispersed, creating silos of knowledge  Organizational Model  The Matrix Organizational Structures Employees are temporarily assigned to a specific project team and have a permanent functional unit  Organizational Model  The Matrix Organizational Structures Attempts to maximize the strengths and minimize the weaknesses of both the functional and product bases Superimpose a horizontal structure of authority, influence, and communication on the vertical structure Facilitates the utilization of highly specialized staff and equipment  Organizational Model  Hybrid Organizational Structures Parts are combined to maintain balance of power and effectiveness across functional, product, geographic and client focused units.  Organizational Model  Organizational Culture A system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Reflects employees’ views about “the way things are done” The culture specific to each firm affects how employees feel and act and the type of employee hired and retained by the company  Organizational Model  Characteristics of Organization Culture It is distinctive It is based on certain Norms It promotes Stable values It leads to common behavioral aspects It shapes philosophy and rules Its strength varies Human Resource Management  Human Resource Management  Human Resource The science and the practice that deals with the nature of the employment relationship and all of the decisions, actions and issues that relate to this relationship. The process of attracting, developing and maintaining a talented and energetic workforce to support organizational mission, objectives and strategies It involves an organization’s acquisition, development and utilization of employees, well as the employee relationship to an organization and its performance.  Human Resource Management  Human Resource The resource that lies within employees and how they are organized is critical to strategic success and competitive advantage. The overall purpose of HRM is to ensure that the organization is able to achieve success through people. Managers must find ways to get the highest level of contribution from their workers. And they will not be able to do that unless they are aware of the many ways that their under-standing of diversity relates to how well, or how poorly, people contribute  Human Resource Management  HRM Includes: Equal Employment Opportunity Health and Safety Industrial Relations Recruitment / Selection Induction / Orientation Training and Professional Development Performance Appraisal and Management Quality of Work Life  Human Resource Management  Principles of HRM Strategic integration Treat all labour management processes in a strategic fashion by integrating them with the broader business. Organisational flexibility  Highly skilled knowledge workers with full time jobs. Commitment  Through changing the organisation’s culture. Quality Quality work, quality workers, quality products and services.  Human Resource Management  HRM Activities Job analysis defines a job in terms of specific tasks and responsibilities and identifies the abilities, skills and qualifications needed to perform it successfully. Human resource planning or employment planning is the process by which an organisation attempts to ensure that it has the right number of qualified people in the right jobs at the right time. Employee recruitment is the process of seeking and attracting a pool of applicants from which qualified candidates for job vacancies within an organisation can be selected.  Human Resource Management  HRM Activities Employee selection involves choosing from the available candidates the individual predicted to be most likely to perform successfully in the job. Performance appraisal is concerned with determining how well employees are doing their jobs, communicating that information to the employees and establishing a plan for performance improvement. Training and development activities help employees learn how to perform their jobs, improve their performance and prepare themselves for more senior positions.  Human Resource Management  HRM Activities Career planning and development activities benefit both employees (by identifying employee career goals, possible future job opportunities and personal improvement requirements) and the organisation (by ensuring that qualified employees are available when needed). Employee motivation is vital to the success of any organisation. Highly motivated employees tend to be more productive and have lower rates of absenteeism and turnover.  Human Resource Management  Human Resource Development A set of systematic and planned activities designed by an organization to provide its members with the necessary skills to meet current and future job demands.  Human Resource Management  Training and Development Training improving the knowledge, skills and attitudes of employees for the short-term, particular to a specific job or task Development preparing for future responsibilities, while increasing the capacity to perform at a current job  Human Resource Management  The Tangible vs. Intangible Assets The tangible assets of the firm are visible and quantified, can be easily duplicated, depreciate with use Ex: manufacturing plant, equipment, buildings and other physical infrastructure The intangible assets are invisible, difficult to quantify, must be developed over time, appreciate with purposeful use Ex: technological know-how, customer loyalty, branding, business processes  Human Resource Management  Firm Capital  Human Capital  Knowledge, skills, abilities of individuals  Social Capital  Relationships in social networks  Structural, cognitive, relational dimensions  Intellectual capital  Knowledge and knowing capability of social collectivities  Procedural/declarative; tacit/explicit; individual/social  Human Resource Management  Human Capital The Human Capital of an organization consists of the people who work for it and on whom the success of the business depends. Human Capital represents the human factor in the organization: the combined intelligence, skills and expertise that give the organization the distinctive character The human elements are those that are capable of learning, changing, innovating.  Human Resource Management  Knowledge Economy The Knowledge Economy encompasses all jobs, companies and industries in which the knowledge and capabilities of people, rather than the capabilities of machines or technologies, determine competitive advantage.  Knowledge Workers Knowledge workers have high degrees of expertise, educations or experience and the primary purpose of their jobs involves the creation, distribution of application of knowledge.  Human Resource Management  Challenges for HR Competing in the Global Economy  New technologies  Need for more skilled and educated workers  Cultural sensitivity required  Team involvement  Problem solving  Better communications skills  Human Resource Management  Challenges for HR Need for Learning  Organizations change  Technologies change  Products change  Processes change  PEOPLE must change!!  Human Resource Management  Reward and Recognition System Management By valuating and recognizing people, you harness the power of motivation, which is the single most powerful strategy used to promote performance and positive behaviors  Human Resource Management  Reward and Recognition System Management A reward is given by an “organization” to value something it already has or it ascribes a value to a particular job / event A recognition is just an expression of feeling. It happens when a person is impacted by another person and he / she expresses it openly  Human Resource Management  Human Resource Analysis To identify the size, skills and structure surrounding current employees To identify future human resource needs of the organization Obtain some basic information on the people Explore in detail the role and contribution of the human resources management function in the development of strategy  Human Resource Management  Coaching and Mentoring Mentoring Concerned with supporting practitioners whilst they make a significant career transition  Mentoring in intended to be supportive of the individual and occurs ‘at need’. Coaching  Used to support the process of reviewing established or emerging practices. It is focused on innovation, change or specific skills.  Conceived as a more structured learning process aimed at explicit professional development in an agreed area of performance.  Human Resource Management  Competencies A collection of characteristics (i.e. skills, knowledge and self-concept, traits, behavior, motivation, etc.), that enables someone to successfully complete a given task  Human Resource Management  Course Outline:  Engineering Management  Marketing & Strategy  Organizational Model & Human Resource Cost Management & Productivity Project Management Quality Control Operations Researches Supply Chain Industrial safety Cost Management  Cost Management  Cost Terminology Cost – sacrificed resource to achieve a specific objective Actual Cost – a cost that has occurred Budgeted Cost – a predicted cost Cost Object – anything of interest for which a cost is desired  Cost Management  Cost Terminology Direct Costs: can be conveniently and economically traced (tracked) to a cost object  Parts, Assembly line wages Indirect Costs: cannot be conveniently or economically traced (tracked) to a cost object.  Electricity, Rent, Property taxes  Cost Management  Cost Terminology Variable Costs: changes in total in proportion to changes in the related level of activity or volume Fixed Costs: remain unchanged in total regardless of changes in the related level of activity or volume  Cost Management  Types of Inventories Direct Materials: resources in stock and available for use Work-in-Process (or progress): products but not yet started completed. Often abbreviated as WIP Finished Goods: products completed and ready for sale  Cost Management  Types of Product Costs Direct Materials Direct Labor Indirect Manufacturing – factory costs that are not traceable to the product. Also known as Manufacturing Overhead costs or Factory Overhead costs  Cost Management  Cost-Volume-Profit (CVP) Analysis Changes in production/sales volume are the sole cause for cost and revenue changes Total costs consist of fixed costs and variable costs Revenue and costs behave and can be graphed as a linear function (a straight line) Selling price, variable cost per unit, and fixed costs are all known and constant  Cost Management  Cost-Volume-Profit (CVP) Analysis Basic Formulae  Cost Management  Contribution Margin Contribution Margin equals sales less variable costs  CM = S – VC Contribution Margin per unit equals unit selling price less variable cost per unit  CMu = SP – VCu Contribution Margin also equals margin per unit contribution multiplied by the number of units sold  CM = CMu. Q  Cost Management  Contribution Margin Contribution Margin Ratio (percentage) equals contribution margin per unit divided by selling price  CMR = CMu ÷ SP A horizontal presentation of the Contribution Margin Income Statement: Operating Income (OI) = Sales – VC – FC  OI= (SP x Q) – (VCu x Q) – FC  OI= Q (SP – VCu) – FC  OI = Q (CMu) – FC  Cost Management  Breakeven Point Recall the last equation in an earlier slide:  Q (CMu) – FC = OI A simple manipulation of this formula, and setting OI to zero will result in the Breakeven Point (quantity):  BEQ = FC ÷ CMu At this point, a firm has no profit or loss at a given sales level  Cost Management  Breakeven Point If per-unit values are not available, the Breakeven Point may be restated in its alternate format:  BE Sales = FC ÷ CMR With a simple adjustment, the Breakeven Point formula can be modified to become a Profit Planning tool  Q = (FC + OI)/CMu  Cost Management  CVP, Graphically:  Cost Management  CVP and Income Taxes From time to time it is necessary to move back and forth between pre- tax profit (OI) and after-tax profit (NI), depending on the facts presented After-tax profit can be calculated by:  NI = OI x (1-Tax Rate) NI can substitute into the profit planning equation through this form:  OI = NI / (1-Tax Rate)  Cost Management  Operating Leverage: Operating Leverage (OL) is the effect that fixed costs have on changes in operating income as changes occur in units sold, expressed as changes in contribution margin  OL = Contribution Margin / Operating Income  Cost Management  Effects of Sales-Mix on CVP: The formulae presented to this point have assumed a single product is produced and sold, A more realistic scenario involves multiple products sold, in different volumes, with different costs For simplicity’s sake, only two products will be presented, but this could easily be extended to even more products, A weighted-average CM must be calculated (in this case, for two products)  Cost Management  Example: Fill in the blanks of the following  Example:  Cost Management  Example: Company produces two different software product Quality Control  Quality Control  Quality Quality of a product or service refers to the degree to which the product or service is able to satisfy (stated or implied) needs. Quality is the degree to which a product/service conforms to its requirements. Every product posses a number of characteristics that are critical to quality (for the user/consumer):  Length of mechanical components  Duty of batteries  Thickness of the coat of paint Amount of material in a tube of toothpaste  Quality Control  Quality Most organizations find it diffi cult (and expensive) to provide the customer with products that have quality characteristics, which are always identical from unit to unit. Charts are a major component of quality control. They help to visualize calculations and relationships between the processes and the measurements of their quality.  Quality Control  Variability Two products cannot be ever identical (e.g. the diameter of a screw). If the variation is large, the customer may perceive the unit to be undesirable and unacceptable. Beyond this, if the variation is large, these units cannot be interchangeable (e.g. problems in the assembly process). Most common sources of variability:  Differences in materials.  Differences in the performance of the manufacturing equipment.  Differences in the way operators perform their tasks.  Quality Control  Variability Example the diameter (D) of a work piece manufactured hole cannot be identical in all the products.  Quality Control  Specifications Quality characteristics are evaluated relative to specifications, a value of a measurement that corresponds to the desired value is called the Nominal (or target) Value; These values are usually bounded by a range of values that we believe will be suffi ciently close to the target so as to not impact the function or performance of the product if the quality characteristic is in that range.  Quality Control  Specifications Specification Limit  USL (Upper Specification Limit): the largest allowable value;  LSL (Lower Specification Limit): the smallest allowable value.  Quality Control  Natural Variability Process tendency towards producing (in normal conditions) products with quality characteristics different from target values. It is an internal characteristic of the process.  Quality Control  Statistical Process Control Methods make it possible to control quality characteristics during production (on-line), in order to maintain the process under-control and to detect and correct possible abnormalities.  Quality Control  Specification and Natural Tolerance Limits Natural Tolerance (NT) range is a measure of the natural variability of the process. The process variability is usually measured by the standard deviation (σ). (σ), an index of the natural dispersion of the process. Specification range (S) is determined “externally” (usually set by product designers).  Quality Control  Specification and Natural Tolerance Limits For every product quality characteristic (e.g. geometrical dimensions) we define the specification limits (USL, LSL).  Quality Control  Specification and Natural Tolerance Limits A process operating with only chance causes of variation (not other assignable causes) generally show a random pattern (also defined as white noise).  Typically it follows a Normal Distribution.  Quality Control  Specification and Natural Tolerance Limits Example: non random pattern (RUN), due to the presence of assignable causes (e.g. thermal expansion, tool wear…)  Quality Control  Specification and Natural Tolerance Limits Example: non random pattern, due to the presence of two points related to assignable causes (e.g. failures in the process).  Quality Control  Specification and Natural Tolerance Limits It is customary to define the upper and lower natural tolerance limits, say UNTL and LNTL, as 3σ above and below the process mean. To calculate the natural tolerance NT ≡ 6σ, we should know the standard deviation (σ) of the population.  σ can be estimated by using the sample standard deviations (s) or the sample ranges (R), related to several samples extracted from the population.  Quality Control  Specification and Natural Tolerance Limits Normal Distribution: Exponential Distribution:  Quality Control  Specification and Natural Tolerance Limits Example: m samples are extracted from the population; each sample is made of n observations. Standard deviation of the population (σ) can be estimated using (sj) or (Rj).  Quality Control  Assembled Components: Linear Function Example: Dimensional quality of 3 components characteristics assembled together, What is the NT of the product ? The average value of product I is given by the sum of A, B and C average values → I = 1.000+0.500+2.000 = 3.500 cm  Quality Control  Assembled Components: Linear Function If the different quality characteristics (A, B, C) are statistically independent (the occurrence of one event occurs does not affect the outcome of the occurrence of the other event) and normally distributed, then we can use the following formula: As a consequence, considering that NTi = ±3·σi:  Quality Control  Assembled Components: Linear Function Example: Assuming that a chain is made of 100 chain rings, the chain average length is given by:  Quality Control  Assembled Components: Linear Function  σ, chain can be correctly calculated by applying the following formula (probabilistic method):  The lengths of the parts can be assumed independent. When the process is operating in regular conditions, the length of one part is not influenced by the length of the previous, consequently:  Let notice that – in this case – the global variability (σ chain) is much lower than in the previous one. This is due to a sort of compensation among the variations in the parts assembled together  Quality Control  Assembled Components: Linear Function In a more general case: If X and Y are not statistically independent, all the previous equations are not valid. Additional terms should be introduced (Covariance).  Quality Control  Assembled Components: Linear Function Example: A shaft is to be assembled into a bearing. The internal diameter of the bearing is a normal random variable – say x1 – with mean (µ1=1.500) inches and standard deviation (σ1=0.002) inches. The external diameter of the shaft – say x2 – is normally distributed with mean (µ2=1.480) inches and standard deviation (σ2=0.004) inches. When the two parts are assembled, interference will occur if the shaft diameter is larger than the bearing diameter – that is, if:  Quality Control  Assembled Components: Linear Function  The distribution of y is normal, with mean:  Variance  Therefore, the probability of interference is:  Quality Control  Assembled Components: Non Linear Function So far, we have been considering linear functions only (among the assembled component and the parts). In some problems, the dimension of interest may be a nonlinear function of the part dimensions (x1, x2, … , xn)  Quality Control  Assembled Components: Non Linear Function For non linear functions, Considering a first order Taylor series (truncated) development of the previous function, in the neighborhood of the mean values of the parts:  Quality Control  Assembled Components: Non Linear Function From statistics, we can apply the following (approximate) formulas: Let notice that the previous formulas can be applied assuming:  Normal Distribution of the quality characteristics,  Statistical independence of the quality characteristics(we intuitively mean that knowing something about the value of one of them does not yield any information about the value of the others  Quality Control  Assembled Components: Non Linear Function Example: Evaluate µV and NTV of V?  Supposing the distributions of R and I to be normal, we can calculate:  Quality Control  Assembled Components: Non Linear Function  To calculate NTV, we need:  Quality Control  Control Charts: Control charts are practical tools to monitor the evolution of production processes. In any production process a certain amount of natural variability will always exist (this is the cumulative effect of small and unavoidable causes). A process that is operating in the presence of chance causes of variation only is said to be in statistical control. Control charts are not designed to provide any information about the process conformity with specification limits.  Quality Control  Control Charts: A process that is operating in the presence of assignable causes (sources of variability that are not part of the chance causes) is said to be out of control, Three main sources of assignable causes:  Improperly adjusted or controlled machines (or failures);  Operator errors;  Defective raw materials. In other terms, a process is out of control when it does not follow a random pattern and the reason of this can be univocally associated to one of the previous causes.  Quality Control  Control Charts: Control Chart Contains:  A center line (CL)  An upper control limit (UCL)  A lower control limit (LCL)  Quality Control  Control Charts: Basic Criteria:  A point that plots within the control limits indicates that the process is in control → no action is necessary  A point that plots outside the control limits is evidence that the process is out of control  Furthermore, in the presence of chance causes of variation only, plotted points should exhibit a random pattern  Quality Control  Control Charts: Model of Control Chart  Let w be sample statistic with mean µw, and the standard deviation of w is σw: Where L is the distance of the control limits from the center line, in general we use L=3  Quality Control  Control Charts: There are Two Main Types of control charts:  For Variables (quality characteristics measured on a numerical scale; e.g. geometrical dimensions, weights, …)  X (mean) control charts  R (range) control charts  S2 (sample variance) control charts  S (sample standard deviation) control charts  Xi (control charts for individual measurements)  Quality Control  Control Charts: There are Two Main Types of control charts:  For Attributes (quality assuming only 2 characteristics states: defective/non-defective, conforming/non-conforming)  control charts for nonconforming (defective):  p (percentage of defective units)  np (number of defective units)  control charts for noncomformities (defects):  u (number of defects per unit)  c (number of defects per sample)  Quality Control  Control Charts: Control charts make it possible to identify when the process is out of control (abnormal conditions) not out of specifications. These conditions are not correlated  A process can be out of control, but within specification limits (typically if NT