INDUSTRIAL MANAGEMENT:

THE BACKGROUND
Industry ? Management ?
■ An industry is a branch of an economy that produces a closely-related set of raw
materials, goods, or services.

■ Industry Types (Economic Sectors)

– Primary – Extractive industries; agriculture & allied activities.
– Secondary – Manufacturing, construction, energy
– Tertiary – Services such as banking, finance, insurance, investment, real estate
services; wholesale, retail, and resale trade; transportation; professional,
consulting, legal, and personal services; tourism, hotels, restaurants, and
entertainment; repair and maintenance services; and health, social welfare,
administrative, police, security, and defense services.
– Quaternary Industry – Information, knowledge-based services
 Industry Types as per NIC-2008:
■ NIC-2008 has 21 sections, 88 divisions, 238 groups, 403 classes and 1304 sub-classes of Industries

■ Agriculture, forestry and fishing; Mining and Quarrying, Manufacturing, Electricity, gas, steam and air conditioning
supply; Water supply; sewerage, waste management and remediation activities; Construction; Wholesale and retail
trade, Auto Repair; Transportation and storage; Accommodation and Food service activities; Information &
Communication; Financial and insurance activities; Real estate activities; Professional, scientific and technical
activities; Education’ Human health and social work activities; Arts, entertainment and recreation; etc.

(Reference: [Link]
 National Industrial Classification (NIC, 2008):

■ NIC 2008 list is a standardized system used to categorize economic activities which is used
for statistical and analytical purposes, such as classifying the economically active
population, statistics of industrial production and distribution, the different fields of labor
statistics and other economic data such as national income.

■ It helps in economic research and informing policy decisions related to industries.

■ Businesses in India are required to register with their respective NIC codes, especially for
Udyam (MSME) registration.

■ The NIC code helps in identifying the specific nature of the business activity, which is
essential for regulatory compliance and accessing various government scheme benefits.
Management
■ The most basic aspect of Industrial Management is related to the 4Ms of an
organization:
– Man – Ensure HR with right skills, professional ethics, and creativity
– Method – Ensure standardized process, maintenance and innovation.
– Materials – Ensure supply of raw materials and other inputs for production
– Machines – Ensures the necessary equipment, technology, and tools
The 5th M- Money – Ensure financial capital for other 4 Ms

■ Role of a Manager:
– Observing their interactions and optimizing their management in an efficient and
effective manner.
– The management of operations depends on the design of products and services.
 Functional Divisions in Management
• Operations interacts with other functional areas of the organization,
including legal, management information systems (MIS), accounting,
personnel/human resources, and public relations

▪ Product and process design

▪ Forecasting
▪ Setting realistic schedules
▪ Purchasing
▪ Budgeting & Fund Provisioning ▪ Quality and Quantity decisions
▪ Economic analysis of investment proposals ▪ Distribution
The Operations Functions
■ The operations function of an organization applies to matching the supply (output) with
the demand with the help of transformation process which converts inputs into outputs.
■ Operation function can be performed either by an organization, a department, or an
individual process.
The Operations Functions
■ The operations function of an organization applies to matching the supply (output) with
the demand with the help of transformation process which converts inputs into outputs.
■ Operation function can be performed either by an organization, a department, or an
individual process.

Provider’s System Customer’s System

Examples: Steel Industry Operations
Input Transformation Output
Examples: Automobile Industry
Input Assembly Output
Service Industry
Differentiating Goods and Services

The assumption was that services can’t be manufactured

and stored like goods for future distribution, neither any
transfer of ownership is possible.

■ The conventional characteristics of services: IHIP (W.J. Regan, 1963)

– I – Intangible
– H – Heterogeneous
– I – Inseparable (or Simultaneous)
– P- Perishable

■ Note: Digital products (e.g., online content) violates above assumptions.

Differentiating Goods and Services
■ Inseparability
– Produced and consumed at the same time
– Can’t be inventoried
– Quality control can’t be ensured before consumption

■ Heterogeneity
– Perception of quality vary from customer to customer
– Wide variation in service outcome from the same client
– Potential for personalization increases heterogeneity
Differentiating Goods and Services
■ Intangibility:
– Service are part of a process
– Dependency on service providers’ reputation and the trustI
– Government regulations are made to ensure a minimum acceptable quality

■ Perishability
– Services can’t be stored for later use
– Unused service facilities are assumed to be wasted (depreciation)
– Service capability optimization is a the key aspect of planning
Goods Services Continuum
 Types of Services: Process Perspective
Direct Service Recipients
Lovelock’s Service Classification Scheme

Nature of
Service Acts
People Possessions

Tangible People (Customer) Processing Services Possession (of customers) Processing Services
Actions
• Healthcare • Repair
• Salons • Dry-cleaning
• Restaurant • Tailor
Intangible Mental Stimulus (Customer’s mind) Information (of customers' assets) Processing
Actions Processing
• Banking services
• Education • Financial consultancy
• Entertainment • Legal services
• Information services • Academic writing
 Service Operations: The FTU Framework
■ “A good is an object, a device, a thing; a service is a deed, a performance, an effort” or “services is something
that can be bought and sold, but which can not drop on your foot”
(Berry, 1980, p. 24; Gummesson, 1987,p. 22).

■ The FTU framework includes three stages of service provision: facilities, transformation and usage and two
types of resources: customers’ and providers’ resources (Moeller, 2008).

– Facilities: Service Infrastructure, manpower and other service provider's resources

– Transformation: Occurs in service provider’s or customer’s resources when those are combined together

– Usage or Value Creation for Customers

Framework for Operations Management

Model 1
Input Transformation Output
(Goods)

Model 2 Facility Transformation Usage

(Services)
FTU Framework in Services

Transformation

Service Value Creation

Model 3
Facility
(Services)
Usage

Services as an open system of cocreation

Typology of Values in Services
Entertainment services

Experiential

News Art & Craft

Informational Facilitating
Agencies

Core Values
in Services
Insurance/
Entrusting Creative Art & Craft
Warranties

Problem
Regulatory
Consultancy solving
Patenting
(IT/HR/Legal/Financial, etc.)
Productivity

■ A measure of how well an institution (Country, Industry or a business unit) is using

its resources.

■ Total Measure of Productivity

– Output/Input Or Goods and Services Produced divided by ‘utilized resources’
Measures of Productivity
■ Partial Measures of Productivity (with respect to type of inputs)

• Units of outputs per labor hour (or per shift)

• Monetary value of output per labor hour

• Units of outputs per machine hour

• Monetary value of output per machine hour

• Units of outputs/invested capital

• Monetary value of output/ invested capital

• Units of outputs per kilowatt-hour

• Monetary value of output per kilowatt-hour
Measures of Productivity
■ Multifactor Measures of Productivity

– Monetary Value of the Output/Monetary value of the Inputs

– Inputs = Factor 1 + Factor 2 + Factor 3

■ Measure of productivity for services

– Restaurant - Customers (Meal) per hour
– Retail Store - Sales per square foot
– Utility Plant - Kilowatt hours per ton of coal
Example
■ You are a business of two professionals who work 40 hours a week, each. That's 80
hours worked in a week. During this specific week, the total amount of sales is
$3,000. What is your professional productivity ?

Productivity = $3,000 / 80 = $37.50/ hour

Example
■ Four workers installed 720 square yards of carpeting in eight hours. Determine the
productivity:

Productivity = 22.5 yards / hour/worker

■ A machine produced 70 pieces in two hours. However, two pieces were unusable.
Determine the productivity:

Productivity = 34 pieces / hour