MODULE 1

SYLLABUS:
Introduction to Industrial Engineering - Evolution of modern Concepts in Industrial Engineering -
Functions of Industrial Engineering - Field of application of Industrial Engineering Product
Development and research- Design function - Objectives of design, - Manufacturing vs purchase-
Economic aspects- C-V-P analysis – simple problems-Development of designs- prototype,
production and testing - Human factors in design- Value Engineering.

INTRODUCTION:
• The American Institute of Industrial Engineers (AIIE) has defined the special field of industrial
engineering as “Concerned with the design, improvement and installation of integrated
systems of people, materials, equipment and energy”.
• The prime objective of industrial engineering is to increase the productivity by eliminating
unproductive operations and improving the effective utilisation of resources.
• The main resources are men, money, materials, equipment and machinery.
• The Industrial Engineer carries out such analysis in order to achieve the objectives (to increase
productivity, or profits, etc.) and policies of the organization.
• Productivity improvement implies: (i) a more efficient use of resources, (ii) less waste per
unit of input supplied, (iii) higher levels of output for fixed levels of input supplied and so
on.
• The inputs may be (i) human efforts (ii) energy in any of its myriad forms, (iii) materials, (iv)
invested capital etc.
• Succinctly stated, the mission would be to try to produce more or to serve better without
increasing the resources being consumed.

EVOLUTION OF MODERN CONCEPTS IN INDUSTRIAL ENGINEERING:

• History of industrial engineering dates back to industrial revolution and it has passed through
precious phases to reach the present advanced and developed stage.
• Frederick Taylor is known as the father of scientific management and Industrial Engineering.
• Period between 1882-1912 was the critical period in the history of industrial engineering.
• The important works during this period are:
➢ Factory system and owner — engineer and manager concept.
➢ Equal work, equal pay and incentive schemes.
➢ Scheduling and Gantt charts.
➢ Engineers started taking interest in cost control, and accounting. The most often quoted
and acknowledged investigator that have led to be discipline of industrial engineering in
present form was F.W. Taylor, who took interest in human aspects of production and
productivity.
• The modern industrial engineering techniques had their origin during the period between
1940 to 1946.
• Predetermined time standards (PMTS), value analysis and system analysis are few
prominent ones. They were expanded, refined and applied in subsequent years.
• Operation Research technique has brought a revolution and changed and expanded the
scope of industrial engineering activities.
• The computers have added dimension to the industrial engineering activities.
Present stage in industrial engineering:

• Industrial engineering has not remained restricted to manufacturing activities but has
extended its services to service industries also. The development of techniques like
➢ Value Engineering
➢ Operation Research
➢ CPM and PERT
➢ Human Engineering (Ergonomics)
➢ Systems Analysis
➢ Advances in Information Technology and Computer Packages
➢ Mathematical and Statistical Tools have expanded the scope of activities of industrial
engineering.

FUNCTIONS OF INDUSTRIAL ENGINEERING:

1. Selection of processes and assembling methods.
2. Selection and design of tools and equipment.
3. Design of facilities including plant location, layout of buildings, machines and equipment
material handling system, raw materials and finished goods storage facilities.
4. Design and improvement of planning and control systems for production, inventory, quality
and plant maintenance and distribution systems.
5. Developing a cost control system such as budgetary control, cost analysis and standard
costing.
6. Development of time standards, costing, and performance standards.
7. Development and installation of job evaluation systems.
8. Installation of wage incentive schemes.
9. Design and installation of value engineering and analysis system.
10. Operation research including mathematical and statistical analysis.

APPLICATION OF INDUSTRIAL ENGINEERING:

• Before 1940, Industrial Engineering was mainly applied to manufacturing industries for
improving methods of production, to develop work standards or to formulate production
control and wage policies.
• Later on, the use of industrial engineering also spread to non-manufacturing activities such
as construction and transportation, farm and air-line operations and maintenance, public
utilities, government and military operations.
• Still today, Industrial Engineering finds major applications in manufacturing plants and
industries.
• In an industry besides the production, other departments utilising industrial engineering
concept are Marketing, Finance, Purchasing, Industrial Relations etc.
PRODUCT DEVELOPMENT:
• A Product is an article obtained by the transformation of raw material and is marketed/sold
by the manufacturer.
• It may be a consumer product such as cigarettes, televisions or an Industrial product, e.g., a
lathe, an overhead bridge crane, etc.
• Development is carried out after applied research which follows pure research.
• Development involves design/redesign and fabrication of new or modified product and then
testing it to find its usefulness.
• Product Research and Development are concerned with all aspects of the product design and
applications including its,
➢ Functional efficiency
➢ Quality
➢ Unexplored uses
➢ Investigation of materials and possible substitutes
➢ Utilization of waste products, and
➢ Standardization and customer satisfaction.
PRODUCT DEVELOPMENT PROCEDURE:
The various stages involved in selecting and developing the product may be listed as:
1. Venture new product ideas
2. Screening of ideas - The various project ideas are then carefully screened. Poor ideas are
dropped and through the process of elimination, only the most promising, feasible and
profitable ideas are selected for further detailed investigation and evaluation.
3. Concept development - All product ideas selected after preliminary investigation
(screening) are subjected to detailed investigation and analysis. The purpose is to develop
ideas into mature product concepts
4. Product analysis
5. Product design and development program
6. Test marketing
7. Commercialization.

INTRODUCTION TO PRODUCT DESIGN:

• It is essential to design a product before starting its manufacture.
• The idea for new or improved products comes from many sources, such as
➢ Customer’s suggestions and complaints.
➢ R & D department.
➢ Other competitor products in the market.
REQUIREMENTS (OR OBJECTIVE) OF A GOOD PRODUCT DESIGN:
It is not possible to specify exactly what constitutes a good design, but the essential requirements
are that it should bring:
(a) Customer satisfaction
(b) An adequate profit.
a) In order to achieve customer satisfaction:
➢ The product should function correctly.
➢ It should possess desired degree of accuracy.
➢ It should have required standard of reliability.
➢ Product design should be such that it is easy to achieve accessibility for servicing.
➢ Product design should obtain good space utilization.
➢ Product should be sufficiently rugged to withstand all but exceptionally rough handling.
➢ Product should have pleasant appearance. Colours play an important role in product
design.
➢ Product should be of reasonable price to compete other products in the consumer
market.
b) Making adequate profit means:
➢ It should be easy to manufacture the product within the available resources.
➢ Manufacturing process should be decided on the basis of the product quantity to be
manufactured. Small parts on mass scale may be produced by Die casting rather than the
sand casting.
➢ The use of standard component parts wherever possible can lead to great saving.
➢ A well-designed product will consist of minimum number of parts.
➢ Good product design will call for minimum number of operations.
➢ Good product design should not extend the time.

C-V-P (COST - VOLUME - PROFIT) ANALYSIS:

• CVP analysis is the analysis of three variable viz. cost, volume and profit.
• Such analysis explores the relationship existing amongst costs, revenue, activity level and
resulting profit.
• It aims at measuring variation of cost with profit.
• Fixed Cost: -These are the costs which incurred for a period and which within certain output
and turnover limits, tend to be unaffected by fluctuations in the levels of activity (Output or
turnover). For example: Rent, insurance of factory building etc. remain the same for different
levels of production.
• Variable Cost: - These costs tend to vary with the volume of activity. Any increase in activity
results in an increase in the variable cost and vice versa. For example: Cost of direct labour,
direct material, etc.
• Semi-Variable Cost: - These costs contain both fixed and variable components and thus partly
affected by fluctuation in the level of activity. Examples of semi variable costs are telephone
bill, gas and electricity etc.

ANALYSIS:

• CVP analysis considers:

➢ the total costs (fixed and variable)
➢ the total sales revenues
➢ desired profits and the sales volume
• It is used for predicting how the changes in costs and sales volume affect profit. It is also
known as 'Break-Even Analysis'.
• CVP analysis could be helpful in the following situations:
➢ Budget planning: for forecasting profit by considering cost and profit relation, and
volume of production volume. This will help in determining the sales volume
required to make a profit.
➢ To make decisions regarding pricing and sales volume.
➢ Preparing flexible budget considering costs at different levels of production.

OBJECTIVES OF CVP ANALYSIS:

• Understand the interaction among:

➢ Prices of products.
➢ Volume or level of activity.
➢ Per unit variable cost.
➢ Total fixed cost.
➢ Mix of product sold.

CALCULATIONS

• Profit Equation and Contribution Margin

1. Profit = Sales -Total costs
2. Profit = Sales -Total variable costs - Total Fixed costs
3. Contribution margin = Total revenue – Total variable costs
4. Profit = (S-VC)*Q – FC
5. Q = (FC + Expected Profit)/(S - VC)
Q is the no. of units required to be sold to obtain target profit.
 S = Selling Price per unit
VC = Variable cost per unit
FC = Fixed Cost.

Example:

• Suppose that Super Bikes wants to produce a new mountain bike called Hero1 and has
forecast the following information.
Price per bike = 800
Variable cost per bike = 300
Fixed costs related to bike production = 55,00,000
Target profit = 2,00,000
Estimated sales = 12,000 bikes
• We determine the quantity of bikes needed for the target profit as follows:
Quantity = (55,00,000 + 2,00,000) / (800 - 300) = 11,400 bikes.

VALUE ANALYSIS/ENGINEERING:

• Value analysis aims at a systematic identification and elimination of unnecessary costs.

• Value analysis is an organized approach to identify unnecessary costs associated with any
product, material, part, component, system or service by analysis of function and efficiently
eliminating them (i.e. unnecessary costs) without impairing the quality, functional reliability
or its capacity to give service.
• Thus, it enables to produce the products with the same performance, quality and efficiency
with a less overall unit cost and consequently greater profits.
• Value Analysis is applied to the existing product with a view to improve its value. It is analysis
after the fact and it is a remedial procedure.
• Value Engineering is applied to the product at the design stage and thus ensures prevention
rather than elimination.
1. VALUE:
• Value is the price we pay for a product, process, material, or service required to perform a
specific function or service with the required quality and reliability.
𝑓𝑢𝑛𝑐𝑡𝑖𝑜𝑛 (𝑜𝑟 𝑢𝑡𝑖𝑙𝑖𝑡𝑦) 𝑤𝑜𝑟𝑡ℎ 𝑡𝑜 𝑦𝑜𝑢
• 𝑣𝑎𝑙𝑢𝑒 = =
𝑐𝑜𝑠𝑡 𝑝𝑟𝑖𝑐𝑒 𝑦𝑜𝑢 𝑝𝑎𝑦

2. TYPES OF VALUES:
• Economic value can be subdivided into four types:
 a) Cost value (b) Use value (c) Esteem value (d) Exchange value.
• Cost value: It is the cost of manufacturing a product or a component. It is the measure of
sum of all costs incurred in producing the product. The cost value, therefore, is the sum
of raw material cost, labour cost, tool cost and overheads expended to produce the
product.
• Use value: It is the price paid by the buyer (customer’s view) or the cost incurred by the
manufacturer (manufacturer’s view) in order to ensure that the product performs its
intended functions (i.e. renders the required services) efficiently. Item without use value
can have neither exchange value nor esteem value. .
• Esteem value: It is the measure of properties, features, attractiveness, qualities, fancy,
packaging, etc., which increases sales appeal, or which attracts persons and creates in
them a desire to possess the product. Esteem value, therefore, is the price paid by the
customer or the cost incurred by the manufacturer beyond the use value.
• Exchange value: A product is said to possess exchange value if the same (because of its
qualities, usefulness) can be exchanged for another product or money. In a conventional
sense, exchange value refers to the price that a customer will offer for the product, the
price being dependent upon the satisfaction (value) which he derives from the product.
3. USES OF VALUE ENGINEERING
• It is a cost prevention as well as cost elimination technique thus reducing cost of the
product.
• Helps employees for better understanding of their jobs and orients them towards creative
thinking.
• Balance the cost and performance.
• Prevents over design of components.
• Motivates employees to come out with creative ideas.
• Increases the profits and deflates costs.
• Helps to satisfy the customer with company’s products.
4. WHEN TO APPLY VALUE ANALYSIS?
• Company’s products are losing in the market and there is a decline in sales.
• Company’s products are priced higher than the competitors.
• New design of products being undertaken.
• Symptoms of disproportionate increase in cost of production.
• Decreasing profitability and return on investment (ROI).
• Company failing to meet its delivery commitment.
5. VALUE ANALYSIS PROCEDURES (STAGES IN VALUE ANALYSIS):
a) Orientation phase: This phase involves identification of the problems very clearly,
selection of projects, formation of teams, laying down objectives and targets and in-depth
training of all the team members.
b) Information phase: After clearly identifying what is to be accomplished, all the relevant
information like drawings and technical specifications, manufacturing processes, detailed
cost break up, performance/ failure reports, quality and production problems etc. is
gathered.
c) Functional analysis phase: This phase involves analysis and identification of functions.
d) Creative phase: All the possible alternatives are generated. This can be achieved by
application of brain storming and other creativity techniques in order to generate a large
number of ideas for providing the functional requirements.
e) Evaluation phase: In this phase the possible alternatives developed are analysed. The cost
of each idea is estimated. Critical evaluation of all points of the solution is carried out.
f) Investigation/Development phase: In this phase short listed ideas are investigated in-
depth to arrive at optimum and practical solution.
g) Presentation phase: In this phase the selected alternative is presented to the decision
maker for approval and implementation.
h) Implementation phase: As a result of all the above phases a definite, specific and tangible
solution acceptable to all is reached
i) Follow up phase: This is the last stage which compares the results with original
expectations and suggests corrective action in the approach for the next project.