Industrial Management

1

@ Ashek Mahmud Khan; Dept. of CSE (JUST); 01725-402592

01725-402592

2


Industrial management (Lecture:01)

Administration: Consists of deciding determination of the goals and policies of the

enterprise. Concerned mainly with decision making, policy making and making necessary

adjustments.

Three main elements of administrations are:

- The formulation of goals,

- The choice of ways and means, and

-The direction of the people in some group purpose

Characteristics of Administration:

-Makes policies and decides the goals/targets to be achieved.

-Directly not concerned with the implementation of policies.

-Functions are legislative and largely determinative.

-Doesn’t need technical ability.

-Not productive in character.

-Coordinates finance production and distribution.

-Frames the organization structure and exercises control over the enterprise.

-Is the master of industry which relates to top-level management?

Administrator: -Organizes his own work and that of his subordinates,

-Delegates responsibility and authority, and

-Measures, evaluates and controls position activities

Management: Management is concerned with the carrying out the operations designed to

accomplish ( ) the aims.

Characteristics of Management:

-It is goal oriented.

-Works as a catalyst to produce goods using labor, materials and capital.

-It is a distinct process comprising of functions such as planning, organizing, staffing,

directing and controlling.

Ashek Mahmud Khan

Dept. of CSE (JUST)

01725-402592

3


-Represents a system of authority ( )- a hierarchy of command and control. Managers at

different levels possesses varying degrees of authority.

-It is a unifying force which integrates human and other resources.

-Harmonies the individuals goal with the organizational goals to minimize conflicts in the

organization.

-It is a multi-disciplinary subject which takes help from engineering, psychology, sociology,

anthropology, operations research etc.

-Universal in character which is applicable in the fields of business, industry, education,

government, army, hospitals etc.

Importance of Management:

It is management which guides and controls the activities of man-power for the optimum

utilization of company resources such as men, materials, money, machines, methods etc.

-Creates a vital, dynamic and life giving force to the enterprise.

-Coordinates activities of different departments and establish team spirit.

-Provides new ideas and vision to the organization.

-Tackles business problems and provides a tool for the best way of doing things.

-Can meet the challenge of change.

-Provides stability to the enterprise by changing and modifying the resources in accordance

with the changing environment of the society

-Helps personality development thereby raising efficiency and productivity.

Q. 2012-1(a): Define scientific management with its characteristics.

Scientific management: Scientific management is the result of applying scientific

knowledge and the scientific methods to the various aspects of management and the

problems that arise from them.

The main characteristics of scientific management are as follows:

(i) Systematic Approach: Scientific management is a systematic approach to management

and its use ensures that all activities are completed in a systematic and scientific manner.

(ii) Brings Complete Mental Change: Scientific management brings about a complete

mental change both in the owners as well as the employees of the organization.

(iii) Discards Traditional Management: The approach of scientific management

completely discards traditional management.

4


(iv) Requires Strict Observance of Rules: Scientific management requires very strict

observance of rules,

(v) Improves the Efficiency of Workers: The main aim of scientific management is to

increase the efficiency of workers.

(vi) Useful for Large Organizations: Since the scientific management system is quite

expensive to implement, it is useful only for larger organizations.

Q-2. What are the basic approaches of scientific management?

(i) Analyses work scientifically.

(ii) Provide specific guidelines for works performance.

(iii) Develop one best way of doing a job.

(iv) Select workers best suited to perform the specific tasks.

(v) Train the develop each workman in the most efficient method for doing the job.

Q. 2012-1(c): Compare and contrast between management and administration.

Topics Administration Management

Definition Administration is Concerned mainly

with decision making, policy

making and making necessary

adjustments.

Management is concerned with the

carrying out the operations

designed to accomplish the aims.

Nature of work It is concerned about the

determination of objectives and

major policies of an organization

It puts into action the policies and

plans laid down by the

administration.

Type of function It is a determinative function It is an executive function.

Level of authority It is a top-level activity. It is a middle level activity.

Main function Planning and organizing Motivation and controlling

Abilities Handles the business aspects such

as finance

Handles and employees

Q.7: Organization: Organization means the determination and assignment of duties to

individuals and also the establishment and the maintenance of authority relationships among

the grouped activities.”

Importance of Organization:

-Facilitates administration.

-Facilitates growth and diversification.

-Stimulates creative thinking.

5


-Optimum use of resources.

-A sound organisation leads to specialization.

-A sound organisation minimizes corruption and inefficiencies.

-A sound organisation facilitates training and managerial development of personnel.

Characteristics of Organisation:

-organisation is a group of people, small or large.

-the group works under an executive leadership.

-organisation is a tool of management.

-it leads to division of work and responsibilities.

-it defines and fixes the duties and responsibilities of employees.

-it establishes a relationship between authority and responsibility.

-organisation is a step towards the achievement of established goals.

Elements of Organisation: By elements, we mean the main parts or components of an

organisation. The main components are:

-well defined objectives.

-well organised and coordinated group of people.

-proper division of work and labor.

-clear and well defined policies and procedures.

-proper division of authority and responsibility.

-an effective system of communication.

Organizational Theories: Organization theory refers to the study of the phenomena of

organizational functioning and performance and of the behavior of Groups and individuals

working in them. There are three types of organizational theory-

Classical

Neo classical

Modern Classical

Classical theory:

Criticism:

All the above treated organization as a closed system.

Did not study the influence of environment on organization. This approach is known

as structural theory.

It focuses on structure, processes and principles of organization

Neoclassical theory:

6


They considered good human relations as good management.

The work on this subject was pioneered by Elton Mayo and his associates.

These theories are also known as human relations theories.

Elton mayo understood men as perfectly as Taylor understood machines.

The essence of this revolution was focus on the organization as a social system.

Criticism:

Lacks unified approach.

Suffers from incompleteness, a short sighted perspective, and lack of integration

among many facets of the human behavior.

It is a trifling body of empirical and descriptive information.

Difference among Classical, Neoclassical and Modern Classical organization theory:

Topics Classical Neoclassical Modern Classical

Focus functions and

economic demand of

workers

Emotion and human

qualities of workers

Goals and achievement.

Structure Impersonal and

mechanistic

Social system Production process.

Application Autocratic

management and strict

rules

Democratic process Mechanistic and organic

system of organization.

Emphasize Discipline and

rationality

Personal security

and social demand

Solved different problems

by changing structure.

Work goal

of worker

Maximum

remuneration and

reward

Attainment of

organizational goal

Organizational control

and co-ordination.

Concept

about men

Economic being Social being Social being.

Relation Formal Informal Both formal & informal

Nature Mechanistic Organist Both mechanistic &

organist.

Principles of Organization:

-Considerations of objectives.

-Relationship of basic components of the organization.

7


-Responsibility and authority.

-Span of control.

-Dividing and gathering work.

-Effective delegation.

-Communication.

-Line and stuff relationship.

-Balance, stability and flexibility.

Responsibility: Responsibility means accountability. It may be considered as the obligation

of a subordinate to his boss to do a work

Authority: Authority is the power or right to give orders, make decisions, and enforce

obedience.

Characteristics of Authority:

-authority is given by the Institution (or organization) and, is, therefore, legal.

- authority is not endless or unlimited.

- authority should invariably be in writing, though in small organizations it may be verbal.

- authority must be commensurate with responsibility.

- authority must hold the legitimate command to punish the disobedient and to reward the

obedient.

-authority may be centralized or decentralized.

-authority is given to the position and not to the position holder.

Difference between responsibility and authority:

Topics Authority Responsibility

Web definitions Authority is the power or right to

give orders, make decisions, and

enforce obedience.

Responsibility is the state or fact of

having a duty to deal with something,

or of having control over someone.

Basically It is power. It is a duty.

Main functions Here, orders and commands play

a vital role.

Here, duties and obedience play a

vital role.

Time duration It stays for a longer period as

compared to responsibility.

It gets completed with the completion

of the task so it has a shorter period

Direction Flow It flows downwards. It flows upwards.

Delegation It can be delegated to others. It can be delegated to others.

8


Q. 2013-1(a): What do you understand by span of control?

Span of control: Span of control is simply the number of staff that report to a manager.

Some companies also have an ideal span of control, which is the number of reports they feel

a manager can effectively manage.

Q.8 /Q. 2012-3(a): How can the span of control be determined?

Some key factors to review when determining the appropriate span of control within an

organization include the following:

1. Organizational size.

2. Workforce skill level.

3. Organizational culture.

4. Manager's responsibilities.

Organizational Structure:

-No organisation can work without people.

-Organisation structure is concerned with the establishment of positions (persons) and the

relationships between positions.

- It simply means the systematic arrangement of the people working for the organisation in

order to achieve pre-decided goals.

Organisation Chart:

-Organisation chart is the result of organisation design.

-Organisation chart portrays graphically the structural relationship among the different

functions(departments) and the positions(persons) in the enterprise who are responsible for

those functions.

-It shows- how the dynamic activities of a concern are coordinated into a working unit.

-It is also known as organization tree.

-the lines of command, i.e., Authority and Responsibility.

9


-relationships between different managers.

-kinds of managerial relationship which exists.

Advantages:

-tells quickly as who is responsible for a particular function.

-pinpoints the weakness of the organisation.

-provides the details of the organisation.

-serve as a training device and as guide in planning for expansion.

-useful in showing the nature of organisation, and charges, if any, in the existing staff

and the new-comer.

Limitations:

-needs frequent updating.

-shows a static picture of the dynamic business.

-induces certain structural rigidity and may encourage red tape.

-very difficult to portray human relationships on an organization chart.

Lecture: 02

Q-4: What is training? Objectives, needs or Aims for training.

Training: Training prepares an individual so that he can accomplish his industrial task

efficiently and effectively.

Objectives, needs or Aims for training:

(i) To improve the performance of each employee to the height attainable level and to

develop his potential.

(ii) To increase productivity by conceptual skill, imagination and judgment of employees.

10


(iii) To reduce scrap rate.

(iv) To reduce accident rate.

(v) To minimize absences.

(vi) To minimize over time.

(vii) To reduce labor turn over.

(viii) To boost employee morale.

(ix) To promote team work.

Types :

Workers or Operators Training

Induction and orientation

By skilled and old workers

On the job training

Apprentice training

Vestibule training

Foreman or Supervisor Training

Induction

Lectures

Written Material

Conferences

Training within industry

Executive Training and Development

Management induction

On the job experience, coaching and understudy

Conferences

Meetings

Special projects.

Committee assignments

Selective reading

11


Special courses and classes

Q.6: Job Evaluation: Job evaluation is a systematic process of evaluating different jobs of

an organization. Determines jobs worth and attaches a value to it which decides wage rates

and salary.

Objectives :

-decides the relative values of different jobs in an organization.

-helps to formulate an appropriate and uniform wage structure.

-clarifies the responsibility and authority connected with each job.

-provides a basis for recruitment, selection, training, promotion, and transfer.

-improves employer-employee relationships.

-adds to job satisfaction.

-minimizes labor turnover.

-describes and evaluates new jobs.

Methods: Commonly used methods are-(i) Ranking Method. (ii) Classification and Grading.

Method. (iii) Factor Comparison Method. (iv) Point Method.

Job Evaluation:

Methods: Commonly used methods are

Ranking method: Different jobs, depending upon their requirements, responsibilities

involved and their importance to the organization, are ranked from top to bottom

Advantages:

-simple and fast

-easily mastered and administered.

-suitable for small organization

-doesn’t involve expenses

Limitations:

-no commonly accepted base for deciding the ranks

-not very accurate

-not useful for large organization

-least used method

12


Classification and grading method:

-jobs are classified in groups of equal skill, difficulty, responsibility, importance and other

requirements

Advantages:

-resembles ranking method

-simple

-easily mastered and administrated

-more accurate than ranking method

Limitations:

-not useful for large organization

-job classification process is time consuming

-doesn’t involve detailed job analysis

-sometimes difficult to correlate the grade of the job

Factor Comparison Method:

Advantages:

-finds the wages for a job from existing wage rates

-finds wages by direct comparison

-uses readymade job comparison scale and thus calculates wages speedily

Limitations:

-complicated method

-selection of unfairly paid jobs as key jobs can introduce error

-difficult to divide each factor

-depends upon subjective judgment

Point Method :

-based on dividing the jobs into a number of factors which in turn subdivided into

grades or degrees.

-each degree is awarded as a point

-totaling all points indicates the importance of a job

Advantages:

13


-more accurate and reliable

-more precise

-understandable without much difficulty

-widely used

Limitations:

-analysis of factors and grades involves a large amount of work and experiences

-points allocated to each factor base on more or less arbitrary grounds

Merit Rating: Systematic and orderly approach to assess the relative worth of an employee

working in an organisation in terms of his job performances, integrity, leadership,

intelligence, behavior etc.

Advantages:

-develops the ability of a rater

-meritorious employees are encouraged

-employee employer relationships improve

-involves less calculations as compared to other incentive schemes

Limitations:

-entails Halo effect i.e., constantly rating an employee as low, average or high

-correct result couldn’t obtain

-rater may play safe and provide average grade to an employer

-rater can’t rate correctly as he hasn’t close contact with an employee

-doesn’t reward employees immediately for their performance

Q. 11: What is Plant layout and Layout Planning? Objectives of plant layout.

What are the types of layout describe.

Plant layout: Plant layout is a floor plan of the physical facilities which are used in

production

Layout Planning: -the generation of several possible plans of physical facilities and select

the one which minimizes the distance between the departments.

Objectives of Plant layout:

Minimizes investment in equipment

14


Minimizes overall production time

Utilizes existing space most effectively

Provide for employee convenience, safety and comfort

Minimizes materials handling cost

Facilitates the manufacturing process

Facilitate the organizational structure

Classification:

Process Layout:

-similar machines and services are located together.

-used when production volume is low and production varieties are high

Product Layout:

-machines and services are located according to the processing sequence of the product.

-selected when production volume is high and products varieties are low.

Group Layout:

-combination of both product and process layout

Fixed Position Layout:

-static layout in which physical facilities, types of machines and men are brought to the

product. Example : ship building industry

Lecture: 03 (Wage system and Incentives)

Q.10: Define Wages, Nominal Wages, Real Wages and Fair Wages………………….!!

Wages -payment made by the employer for the efforts put in by the worker in production

-payments made for the services rendered by services

Nominal Wages:

-the amount of money paid to a worker in cash for the efforts put in by a worker in industry

and no other advantage to the worker is made.

-also known as money wage

Real Wages:

-the amount of necessaries, comforts, luxuries and cash payment which a worker can get in

return for his efforts and work

15


Fair Wages:

-wage which must be fair for the work of a worker and should provide him with other

necessities of life in addition to food for his family.

-it depends on

production capacity of workers

rates in surrounding area

the level of national income and its distribution

the place of the industry in the economy of the country

Factors influencing Wages:

the condition of demand and supply

respective bargaining capacity of employers and employees

cost of living

economic capacity of the industry

level of wage rates ruling in each industrial area for same grade of workers

workers skill and training

economic outlook of the employer

nature of the task involved

the regularity in service

extra earning of the job

Characteristics of satisfactory wage system:

It should be of benefit to both employer and employees

It should guarantee a minimum wage to the workers

It should provide a proper incentive to workers to produce more

The system of wage payment should be permanent and consistent

The system should be simple and comprehensive

Output and not the time should be the basis of payment

Workers interest should be linked with the interest of the firm

Halsey Premium Plan:

16


-devised by F. A. Halsey

-standards are established from various records

-guarantees to a worker a certain base rate and in addition a certain percentage of the time he

saved on the job.

-The formula is

E = HA + ((S-A)/2 ×H)

Where, E = Earning in Rs.

H = Hourly rate in Rs.

A = Actual time spent on the job.

S = Standard time required for completion of the job

Advantages:

-simple in designing and easy to introduce

-guarantees fixed time wage to slow workers and at the same time permits extra pay to

efficient workers.

-encouragement to employer for optimum equipment and method improvement through

production cost saving.

Limitations:

-if the standards are not properly assessed then the system may be utter failure

-depends upon part performance instead of making new standards.

-motivating incentive less than piece work

-failure to fully protect employer against in accurate rate setting and allowance for time rate

manipulation by workers during job assessment.

Problem-1: ABC Ltd. Company is operating 50-50 Halsey premium system of wage

payment. Compute the total wages of the worker, per hour working in the factory based on

the following information

Time rate = Rs. 6 per hour

Time allowed = 100 hours

Time Taken = 75 hours

Time saved = 25 hours

Substituting the value in the formula we get,

17


E = HA + ((S-A)/2 ×H)

E = 6×75 + ((100-75)/2×6) = 450 + 75 = 525

So, Rs. 525 for 75 hours or actual rate per hour is 525/75 = Rs. 7 per hour.

Rowan Premium Plan:

-devised by James Rowan which is widely used in Great Britain

-modified application of Halsey Plan

-it adopts a standard time for the performance of each job, guaranteed fixed time wages and

allows a premium for the completion of jobs before the standard time.

-The formula is

E = HA + ((S-A)/S ×H A)

Where, E = Earning in Rs.

H = Hourly rate in Rs.

A = Actual time spent on the job.

S = Standard time required for completion of the job

Advantages:

-employer protection against inaccurate setting

-encouragement to slow workers and trainees

-employer partial benefit of increased output

-encouragement to employer for working facilities, improvement, enabled by reduced labor

cost.

Limitations:

-bonus sharing system is unpopular

-rate fixing policy is too liberal

-administration is more complex

-minimal incentive value at high production level

-production overhead cost higher than in Halsey system

Problem-2: XYZ Ltd. Is engaged in the production of hardware items. It distributes the

wages based on Rowan System. Compute the earning of a worker based on the following

information

18


Time rate = Rs. 6 per hour

Time allowed = 10 hours

Time Taken = 8 hours

Substituting the value in the formula we get,

E = HA +(( (S-A)/S) ×HA )

E = 6×8 + (((10-8)/10)×6×8) = 48 + 9.6 = 57.6

So, Rs. 57.6 for 8 hours or actual rate per hour is 57.6/8 = Rs. 7.2 per hour.

Q.12: Define Production Planning and Control. State the function of Production

Planning and Control.

Production Planning and Control:

-products are manufactured by the transformation of raw material through which production

is achieved.

-planning looks ahead, anticipates possible difficulties and decides in advance as to how the

production, best, be carried out.

-control phase makes sure that the programmed production is constantly maintained.

Functions:

Forecasting: Estimation of type, quantity and quality of future work.

Order Writing: Giving authority to one or more persons to undertake a particular job.

Product Design: Collection of information regarding specifications, bill of materials,

drawings etc.

Process Planning and Routing: Finding the most economical process of doing a work

and deciding how and where the work will be done.

Material Control: It involves determining the requirements and control of materials.

Tool Control : It involves determining the requirements and control of tools

Loading : Assignment of work to manpower, machinery etc

Scheduling: It is the time phase of loading and determines when and in what sequence

the work will be carried out. It fixes the starting and finishing time.

Dispatching: It is the transition from planning to action phase. In this phase the worker

is ordered to start the actual work.

Progress Reporting: i) Data regarding the job progress is collected. ii)It is interpreted

by comparison with the present level of performance.

19


Functions and Principles of Material Handling:

Two main Functions:

-to choose production machinery and assist in plant lay out to eliminate the need of material

handling.

-to choose most appropriate material handling equipment at the minimum possible overall

cost.

General Functions and Principles:

-minimize the movements involved in production operations.

-employ mechanical laids in place of manual labour.

-minimizes the distances moved.

-to minimize back tracking and duplicate handling, changes in sequence of production

operations may be suggested.

-safe, standard, efficient, appropriate, flexible and proper sized material handling equipment

should be selected.

-utilizing gravity for assisting material movements.

Selection of Material Handling Equipment:

-the following factors are to be considered

Material to be moved

Plant buildings and lay out.

Type of production machines

20


Type of material flow pattern

Type of production

Cost of material handling equipment

Handling cost.

Life of the equipment

Amount of care and maintenance required for the material handling equipment.

Q.13: Define inventory. What economic order quantity and reorder point?

Derive the equation for economic order quantity. See math.

Inventory: Inventory is the collection of unsold products waiting to be sold. Inventory is

listed as a current asset on a company's balance sheet.

Economic order quantity: Economic order quantity (EOQ) is the order quantity that

minimizes total inventory holding costs and ordering costs. It is one of the oldest classical

production scheduling models. The framework used to determine this order quantity is also

known as Wilson EOQ Model or Wilson Formula. The model was developed by Ford W.

Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, is given credit for

his in-depth analysis.

Reorder point: The reorder point (ROP) is the level of inventory which triggers an action to

replenish that particular inventory stock. It is normally calculated as the forecast usage

during the replenishment lead time plus safety stock. In the EOQ (Economic Order Quantity)

model, it was assumed that there is no time lag between ordering and procuring of materials.

Therefore the reorder point for replenishing the stocks occurs at that level when the

inventory level drops to zero and because instant delivery by suppliers, the stock level

bounce back.

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/balance-sheet-1083

http://en.wikipedia.org/wiki/Inventory

http://en.wikipedia.org/wiki/Lead_time

http://en.wikipedia.org/wiki/Economic_Order_Quantity



21


Q.14: Define material handling. What are the factors may be considered while

selecting material handling equipments.

Material handling:

Material handling is the movement, protection, storage and control of materials and

products throughout manufacturing, warehousing, distribution, consumption and disposal.

As a process, material handling incorporates a wide range of manual, semi-automated and

automated equipment and systems that support logistics and make the supply chain work.

Material Handling Equipment (MHE) are mechanical devices for handling of supplies with

greater ease and economy. MHE facilitates the movement and storage of materials within a

facility or at a site.

Factors for Selecting Material Handling Equipments:

According to the work and the product, the equipments should be selected. the following

factors are to be considered

Material to be moved

Plant buildings and lay out.

Type of production machines

Type of material flow pattern

Type of production

Cost of material handling equipment

Handling cost.

Life of the equipment

Amount of care and maintenance required for the material handling equipment.

The basic FUNCTIONS of MHE:

1. Transport: moving the material from one location to another. (e.g. between workplaces,

http://www.mhi.org/glossary?q=%22material+handling%22&pb=1&fq=&sort=score+desc

http://www.mhi.org/glossary?q=%22manual+handling%22&pb=1&fq=&sort=score+desc

http://www.mhi.org/glossary?q=automation&pb=1&fq=&sort=score+desc

22


loading docks & storage area)

2. Positioning: handling material at a single location so that it is in the correct position for

subsequent handling, machining, transport, or storage.

3. Unit Load Formation: to restrict materials so that they maintain their integrity when

handled a single load during transport and storage.

4. Storage: holding or buffering materials over a period of time. Some may involved the

transport of the materials too.

5. Identification and Control: to collect and communicate the information used to coordinate

the flow of materials within a facility and between a facility and its suppliers and customers.

Q.15: Define maintenance. What are the functions of maintenance? What are the

types of maintenances policy? Describe each of them.

In modern industry equipment and machinery are very important.

-for sophisticated machines and equipments their idle condition or down time becomes much

more expensive.

-for this reason machinery should be properly maintained.

What are the functions of maintenance?

Corrective or breakdown maintenance:

-implies that repairs are made after the equipment is out of order and it can perform its

normal function any longer.

-after removing the fault, maintenance engineers don’t attend the equipment again until

another failure or breakdown occurs.

Scheduled Maintenance:

-stitch in time procedure aimed at avoiding breakdowns.

-incorporates inspection, lubrication, repair and overhaul of certain equipments which if

neglected can result in breakdown.

-it is followed for overhauling of machines, cleaning of water and other tanks.

Preventive Maintenance:

-tries to minimize the problems of breakdown maintenance before failure.

-it is a stitch in time procedure.

-locates weak point in all equipments, provides them regular inspection.

-principle is prevention is better than cure.

Predictive maintenance:

-based on prediction whether a failure can occur or not.

Useful of Corrective or breakdown maintenance:

-are indifferent to the benefits of scheduling.

23


-don’t feel a financial justification for scheduling techniques.

-get seldom demand in excess of normal operating capacity.

Disadvantages Corrective or breakdown maintenance:

-reduction of output

-faster plant deterioration.

-increased chances of accidents.

-more spoilt materials.

-direct loss of profits.

Q.16: Define purchasing. Activities, duties, and functions of purchasing

department, what are the steps involved in complete purchasing cycle?

Purchasing: Purchasing is the activity responsible for getting the right material to the right

place at right time in the right quantity.

Major purchasing Activities:

Obtaining and analyzing quotations of vendors/suppliers

interview representatives and corresponding

deciding best buying terms and conditions

Negotiating orders and following up

work with finance department to obtain, discount, matching invoices , verify receipt,

purchase journal entry , passing of invoices for payment and settlement of accounts

disposing of surpluses

Other activities like assisting with preparation of material expenditure/purchasing budget.

Functions: Typically activities of even the simplest purchasing program me include.

Procurement-

Checking departmental purchase requisitions.

Floating the enquiries.

choosing appropriate suppliers

Scheduling purchasing deliveries

Make or buy decisions

Following up for delivery.

verifying invoice

Checking legal conditions of the contract.

Materials Management

Maintaining minimum stocks.

maintaining inventory balance.

Transferring materials.

Avoiding excess stocks and obsolescence.

24


Standardizing packages and containers. Research

Market studies

Material studies

cost analysis

Investigating supply sources

Development alternate materials and sources.

Miscellaneous

Maintaining purchasing records

Maintaining

stock and consumption records

Maintaining vendor records

Maintaining specification files

Maintaining catalogue files

Steps in a Standard Procurement Cycle:

(i) The Need: You need to identify that there is a need to update the inventory or stock. You

may also need a business service or ad hoc product.

(ii) Specify: Now you need to decide how much and when you want the products or services

delivered.

(iii) Requisition or Order: This is when you write the purchase order or requisition order.

(iv) Financial Authority: Before the order can be placed, it usually requires some kind of

authority for its purchase. With some purchase orders, this is reasonably automatic. With a

large order that will be put out to tender it could be multi staged.

(v) Research Suppliers: Repetitive orders usually have set suppliers, although it does no

harm to review the options sometimes. Other orders will either need to go out to tender or

there will be a choice of suppliers.

(vi) Choose Supplier: The supplier is now chosen.

(vii) Establish Price and Terms: In a large company, many suppliers will be contracted

with a Master Agreement where prices and terms are set for a defined period. For other

orders, now is the time to negotiate terms and prices.

(viii) Place Order: At this stage in the purchasing cycle, the order is placed and this

becomes a contract between the business and the supplier.

(ix) Order Received and Inspected: The goods are delivered, checked in the warehouse

and entered into the inventory. Shortages and breakages are reported to the supplier for the

appropriate credits to be supplied.

(x) Approval and Payment: Usually within 30 days, the invoices are received and paid.

(xi) Update of Records: The purchasing ledger and stock records are updated. This is

automatically done by many purchasing computer systems.

http://www.purchasing-procurement-center.com/what-is-inventory-management.html

25


Q.5: Importance of promotion: Promotion allows businesses to reach out to consumers

using various forms of media, techniques and strategies to capture their attention. Promotion

delivers a brand marketing message to consumers' television screens and radios; in the stores

where they shop; online; on billboards; and in magazines.

Accounting Part

Definition of account.

Account: The systematic and comprehensive recording of financial transactions pertaining

to a business. Accounting also refers to the process of summarizing, analyzing and reporting

these transactions.

L.C Croper: “An account is a statement of particular matter or service of dealings

expressed dealings to Book keeping in words and figure”.

Larson and Miller: “Accounts are separate locations in an accounting system each one of

which is used to store to increases and decreases in a different type of Revenue, Expenses,

Assets, Liability and owner’s equity item”.

Jerry J. weygandt, Donald E. Kieso and Paul D. Kimmel: “An Account is an individual

accounting record of increases and decreases in a specific Assets”.

Characteristics of Account:

Head:

Specific Chart

Account Code

Two parties

Date

Classification

Resulting

Balancing of Account

Mathematical Correcting

Determination of proper financial positions

Comparative analysis

Q. Classification of an Account.

Classification of Account: Classification of accounting is broadly divided into two heads:

26


(i) According to classification assets traditional method

(ii) Classification of accounts According to modern method

Traditional method: This is very old method of classifying accounts and is not used in

most of the advanced countries. Under this method, accounts are classified into two types.

These are: (i) Personal accounts (ii) Impersonal Account

(i) Personal accounts: A personal account is an account for use by an individual for that

person's own needs.

(ii) Impersonal Account: Impersonal account is an account which are not personal.

Nominal accounts: Nominal accounts record liabilities, expenses, revenues, capital and

drawing. Examples of nominal accounts are loan account, sales account, capital account etc.

Modern Classification of Accounts: Modern accountants classify accounts as follows:

ACCOUNTS

1 2 3 4 5 6

Assets

Account

Liabilities

Account

Owner’s

equity

Account

Revenue

Account

Expenses

Account

Drawing

Account

27


Q. What are the Golden Rules for Determining Debit and Credit in Modern method?

Types of Accounts Rules

Assets Increase: Debit

Decrease: Credit

Liabilities Decrease: Credit

Increase: Debit

Owner’s equity Decrease: Credit

Increase: Debit

Revenue Decrease: Credit

Increase: Debit

Expenses Increase: Debit

Decrease: Credit

Drawing Increase: Debit

Decrease: Credit

Industrial Management

Education

characteristics of management

importance of management

various aspects of management

industrial management

scientific methods

ashek mahmud khan

scientific knowledge

organizational goals