Industrial &System Engineering

MODULE 1
Presented by Jibin Bose T C
 Module 1
• Introduction to Industrial Engineering - Evolution of
modern Concepts in Industrial Engineering -Functions
of Industrial Engineering - Field of application of
Industrial Engineering - Design function- Objectives of
design- Development of designs- prototype, production
and testing - Human factors in design - Principles of
good product design- tolerance design- quality and
cost considerations- product life cycle- standardization,
simplification, diversification- concurrent engineering-
comparison of production alternatives - Economic
aspects- C-V-P analysis – simple problems.
 Definition
• Industrial engineering is the field of engineering focused on
designing, improving, and implementing integrated systems of
people, materials, information, equipment, and energy to
optimize processes and operations.
• It leverages knowledge from mathematical, physical, and
social sciences, along with engineering principles, to enhance
productivity, reduce waste, and improve efficiency in various
industries.
 Evolution of modern concepts in
industrial engineering
• Origins in the Industrial Revolution and Scientific
Management
• Industrial engineering began during the Industrial
Revolution (18th century), but its significant evolution
started in the late 19th century in the United States.
Frederick W. Taylor, a mechanical engineer, played a
key role by introducing time study and scientific
management to systematically improve production
and shop floor operations.
• Time study is the process of measuring and analyzing
the time taken to complete each element of a job to
improve efficiency and set performance standard
Growth Due to Wartime Production Demands
• The Second World War (1939–1945) created a
high demand for efficient production, which
accelerated the development and application
of industrial engineering methods to meet
these needs, particularly in manufacturing and
logistics.
Foundation of Modern Techniques (1940–1946)
• Modern industrial engineering techniques
were developed between 1940 and 1946,
laying the foundation for today's tools and
practices. This period marked a shift from
traditional methods to more structured,
analytical, and systematic approaches in
industrial engineering.
the development of the techniques as listed below
took place during that time.
➢ Value engineering
➢ Operations research
➢ CPM and PERT
➢ Ergonomics or human engineering
➢ System analysis
➢ Advances in IT and computer packages
➢ Mathematical and statistical tools
 Value Engineering
• Purpose: A systematic approach to improve the
value of a product, process, or project by
balancing cost, performance, and quality.
• Method: Involves functional analysis, creative
problem-solving, and cost-benefit evaluation to
eliminate unnecessary expenses without
compromising functionality or safety.
• Application: Widely used in manufacturing,
construction, and design, it fosters innovation
and teamwork to deliver higher customer
satisfaction at lower costs
• Thus, industrial engineering has taken a firm
position in the organization and it is
contributing maximum towards increasing
productivity and efficiency in particular and
quality of work-life in general.
 Operation Research
• Definition & Purpose: Operations Research applies
mathematical models, statistics, and optimization
techniques to support data-driven decision-making
and solve complex organizational problems.
• Applications: Used in areas like logistics, scheduling,
inventory control, and resource allocation across
sectors such as transportation, healthcare, defense,
and business.
• Benefits: Helps organizations maximize efficiency,
reduce costs, and improve productivity by evaluating
different scenarios and identifying the optimal
solution.
 CPM & PERT
• CPM(Critical Path Method) focuses on
identifying the longest path of dependent tasks
in a project to determine the shortest possible
completion time and manage schedules
efficiently.
• PERT(Program Evaluation and Review Technique)
handles uncertainty in activity durations using
probabilistic time estimates, helping plan,
monitor, and control complex projects through
network diagrams and task analysis.
Ergonomics or Human Engineering
• Ergonomics focuses on designing workplaces,
tools, and systems to match human physical
and mental capabilities, enhancing comfort,
safety, and efficiency.
• It helps reduce fatigue, injuries, and errors
while improving productivity and user
satisfaction in areas like workstation design,
product usability, and interface layout.
 System Analysis
• System Analysis involves examining a system’s
inputs, processes, outputs, and feedback to
understand how it functions and identify areas
for improvement or optimization.
• It is used in fields like engineering, software,
and business to detect inefficiencies, support
better system design, and enable informed
decision-making and planning.
 Advances in IT and Computer
Packages
• Modern IT tools and computer packages like
CAD, CAM, ERP, and simulation software
enhance design, planning, and operational
efficiency across industries.
• Innovations in cloud computing, AI,
databases, and cybersecurity enable real-
time access, automation, and faster, more
accurate decision-making, driving digital
transformation and productivity.
Mathematical and Statistical Tools
• Mathematical and statistical tools like algebra,
calculus, probability, regression, and
optimization are used to analyze data, model
systems, and support informed decision-making.
• These tools help in pattern recognition, outcome
prediction, and risk assessment, and are widely
applied in engineering, quality control,
economics, and research for process
improvement and strategic planning.
 Work System design

• A work system consists of human participants

and/or machines performing work (processes
and activities) using information, technology,
and other resources to produce products or
services for internal or external customers.
Goal Alignment and System Interaction
• For effective functioning, all components and
interactions in a work system must be aligned
with the system’s goals. Misalignment can
reduce efficiency and value delivered to
customers.
Components of Work System Design
• The three main components are:
• Job Design: Defines roles and responsibilities
of employees.
• Process (Methods) Analysis: Examines task
steps and workflows.
• Work Measurement: Determines standard
time to complete tasks efficiently.
Job Design and Method Analysis
• Job design involves assigning tasks and specifying
what, who, how, and where a job is performed.
Method analysis breaks the job into steps to
improve efficiency, including:
• Flow Process Chart: Tracks material/labor flow to
find delays.
• Employee-Machine Chart: Analyzes simultaneous
activities to optimize employee and machine
efficiency.
Behavioral Aspects of Job Design
• Focuses on improving employee motivation and
satisfaction:
• Job Enlargement: Adds similar-level tasks
(horizontal loading).
• Job Rotation: Workers switch tasks to reduce
monotony.
• Job Enrichment: Adds higher-responsibility tasks
(vertical loading) to increase engagement.
• Principles of Motion Economy: Principles of
motion economy aim at minimizing the human
fatigue of workers due to repetitive motion of
the different parts of the body like hands, feet,
eyes, etc. and thus, maximizing the efficiency
of the worker during the performance of a job.
Functions of an Industrial Engineer
• Industrial engineering activities span the entire
enterprise. The most common functions of an
Industrial Engineer are:
• 1. Developing the simplest work methods and
establishing the one best way of doing work(standard
method)
• 2. Establishing the performance standards as per the
standard methods (standard time)
• 3. Developing a sound wage and incentive scheme
4. Assisting in the design of a sound inventory
control, determination of economic lot size for
production
5. Preparing a detailed job description and job
specification for each job and evaluating them
6. Establishing a sound cost system and developing
cost control programmes
7. Sound selection of site and developing an
optimal layout for smooth flow of work
8. Developing standard training programmes for
various levels in the organization
Different Roles of an Industrial Engineer
The different roles an industrial engineer may need to
take on are:
1. Adviser/Consultant for interpretation of data, review,
etc.
2. Advocate/Activist to promote actively a process or
approach
3. Analyst to analyse a problem to obtain insights
4. Liaison agent to interface between company and
customer/user
5. Motivator to provide stimulus/skills
6. Decision-maker to select a preference from alternatives
7. Designer/Planner to produce solutions, specifications
8. Expert to provide high level knowledge, experience, skills
9. Coordinator/Integrator to achieve the defined goals
10. Innovator/Inventor to produce creative solutions
11. Measurer to obtain data and facts
12. Project Manager to operate, supervise, evaluate projects
13. Trainer/Educator in the skills and knowledge of industrial
engineering
14. Negotiator/Conflict manager for proper workplace
relation.
 APPLICATIONS
• Initial Focus on Manufacturing
Industrial Engineering (IE) originally aimed at improving
production processes in manufacturing industries.
• Post-1940 Developments Expanded Scope
Introduction of applied mathematics (e.g., linear programming,
simulation), industrial psychology, and computer-based tools
broadened IE applications.
• Adoption in Non-Manufacturing Sectors
• IE techniques are now used in construction, transportation,
farming, business, airlines, public services, healthcare, and
government.
• Broad Industrial Applications
• Besides production, IE supports marketing, finance,
procurement, and industrial relations in improving efficiency
 Engineering Design

• Engineering design is a systematic and

intelligent process used to generate, evaluate,
and define solutions that meet client
objectives and user needs.
• It involves creating devices, systems, or
processes that fulfill specific functions while
satisfying defined constraints such as cost,
safety, performance, and feasibility.
Objectives of Design
• To ensure growth of the organization
• To utilize the surplus capacity of the organization,
such as physical facility, man power,etc.
• To utilize the surplus fund of the organization
• To meet new requirement of the customers
• To increase company’s market share and to
target new market segment
• To ensure complete product range in company’s
portfolio.
• Steps of Product Design
1. Synthesis: Try to develop different alternatives
2. Sketching: Draw sketches in exact scale for different
alternatives
3. Analysis: Analysis different alternatives with respect to
operability, maintainability,
inspection, assembling and dismantling issues, cost
parameters, production methods,etc.
4. Selection: Select the best alternative
5. Basic engineering: Prepare layout in exact scale, calculate
strength of components, select proper cost-effective material.
6. Detail design: Prepare detail engineering drawing for each
component
7. Prototype: If option is there, then prepare prototype and test it
8. Manufacturing: If prototype is not made, then follow manufacturing
steps and solve manufacturing problems and assembly problems.
9. Operation: collect feedback during actual operation of the new
product. If any problem
exists, try to provide design-based solution. Also, implement lessons in
the future design.
10. Product development: If any modification can be done, implement
the same in the next generation product.
 PROTOTYPING
• A prototype is the first fully functional product
made using specified materials to test
performance, unlike models used to study
specific aspects in designs like aircraft or
buildings.
• Prototyping is costly due to limited
production, but modern 3D printing offers a
faster and more economical alternative to
conventional methods.
• Prototyping is the general process of creating a full or
partial model of a product to evaluate its design,
functionality, and performance. It often uses
conventional manufacturing methods like machining,
casting, or fabrication, which can be time-consuming
and costly.
• Rapid Prototyping (RP) uses computer-aided design
(CAD) and advanced technologies like 3D printing to
quickly create physical prototypes. It is faster, more
flexible, and less expensive for small batches, making
it ideal for early design iterations and faster product
development cycles.
Here are the stages and benefits of 3D prototyping in 5 concise points:
• Design & CAD Modeling: Engineers create a 3D model using CAD
software, which is then sliced into layers for printing.
• Rapid Prototyping: A 3D printer builds the prototype layer by layer
using methods like SLA(Stereolithography), SLS(Selective Laser
Sintering), or FDM(Fused Deposition Modeling).
• Testing & Feedback: The prototype is tested for function, fit, and
durability, helping identify design flaws, validate performance, and
gather feedback.
• Refinement: The design is improved based on test results and
feedback to enhance performance, usability, and manufacturability.
• Production Readiness: Finalized prototypes are used for pre-
production trials or direct production of end-use parts with
advanced 3D printing.
Here are the advantages of 3D printing for prototyping in
a lab, summarized into smaller points:
• Faster development: Enables quick design iterations
and shorter product launch times.
• Cost-effective: Avoids tooling costs; ideal for low-
volume production.
• Design flexibility: Allows complex and customized
shapes.
• Material efficient: Minimizes waste through additive
manufacturing.
• Better collaboration: Physical models improve team
communication and feedback.
 Definition of production system
• The methods, procedure or arrangement which
includes all functions required to accumulate
(gather) the inputs, process or reprocess the
inputs, and deliver the marketable
• Production system utilizes materials, funds,
infrastructure, and labour to produce the required
output in form of goods (5Ms).
MEN, MATERIAL, MACHINE, MONEY &
METHODS
• Production system consists of three main
components viz., Inputs, Conversion Process and
Output.
• Inputs include raw-materials, machines, man-
hours, components or parts, drawing, instructions
and other paper works.
• Examples of Environmental Factors:
• Market demand – Trends, customer needs, and
preferences
• Economic conditions – Inflation, interest rates, supply chain
costs
• Regulations and laws – Government policies, safety
standards, environmental rules
• Competition – Rival companies and products
• Technological changes – New innovations or disruptions
• Social and cultural trends – Changes in workforce
expectations or consumer behavior
 Production Management
• Production management centers around two
major areas.
1-Design of production system which include
product ,process, plant equipment and so on &
2-Development of control system to manage
inventories, product quality, product schedules
and productivity.
• The Production Management System involves
a series of steps that ensure efficient and cost-
effective production of goods.
1. Product Design: Defining the features,
appearance, and functionality of a product.
Example: Designing a smartphone with specific
screen size, camera quality, and software
features.
• Strategic Planning
Long-term decisions about the overall goals of the production system.
Examples: Choosing a production location, selecting core products,
investing in new technology.
• Tactical Planning
Medium-term decisions that translate strategy into workable plans.
Examples: Deciding on monthly production volumes, manpower
schedules, equipment maintenance routines.
• Implementation
Putting tactical plans into action by allocating resources and initiating
operations.
• Control
❑ Monitoring operations to ensure performance matches plans.
❑ Deviations are identified and corrective actions are taken.
• Operations
Core production activities: actual manufacturing, assembly, processing.
• Instrumentation
Refers to tools, data collection systems, and performance monitoring
mechanisms used to assess operations in real time.
• Evaluation
Assessing outcomes from operations and comparing them to desired goals.
Identifies what worked well and what needs improvement.
• Feedback to Control
• Provides real-time updates from operations to control systems for
immediate adjustments.
• Replanning
• Based on evaluation, plans are revised to improve efficiency and
outcomes.
Production Management Vs Industrial
Engineering
• Production management attempts to familiarize a
person with concepts and techniques specific to
the analysis and management of a production
activity.
• These activities involve converting raw materials
into finished goods or services in an efficient and
cost-effective manner.
• Industrial engineering deals with analysis, design
and control of productive system. By a productive
system is meant any system that produce either a
product or service.
• For example:
• In a manufacturing system, such as an
automobile assembly line, industrial
engineering helps streamline operations,
reduce waste, and improve quality.
• In a service system, such as a hospital or a
bank, industrial engineers may design better
workflows, reduce customer waiting times,
and improve resource utilization.
 Classification of Production systems
• Production systems can be classified as Job-
shop, Batch, Mass and Continuous production
systems.
 Job Shop production
• Job shop production refers to a manufacturing process
where small batches of a variety of custom products
are made. Each product is different and typically made
to customer specifications. The equipment used is
general-purpose, and the workflow is flexible,
meaning that products may follow different paths
through the facility based on their requirements.
• It is best suited for low-volume, high-variety
production scenarios
• Eg Tool room/Machine shop,Automobile workshop
• Key Features:
• Products are made to order.
• High customization and variety.
• Skilled labor is required.
• Machines are arranged by function (e.g., all
drilling machines in one area, all welding
machines in another).
• Longer production times and higher costs per
unit than mass production.
 Batch Production
• Batch production is a manufacturing process in
which a specific quantity of identical products is
produced in a group or batch. Each batch goes
through the production process together, before
the next batch begins. This method lies between
job shop production and mass production in
terms of volume and variety.
• It is suitable when the product demand is
recurring but not continuous.
• Eg Pharmaceuticals and Textile and apparels
Key Features:
• Products are made in batches (groups).
• Setup changes are required between batches.
• Equipment is general-purpose, but more
specialized than in job shops.
• Used when quantities are not large enough for
mass production.
 Mass production
• Mass production is the manufacturing of large
quantities of standardized products, often using
assembly lines or automated machinery. It is designed
to produce high volumes with low unit cost,
emphasizing efficiency, consistency, and speed.
• Mass production is typically used when demand is high
and constant, and the product has little or no
variation.
• Eg.Automobile Manufacturing – Cars like Toyota,
Hyundai, or Maruti are produced on assembly lines.
• Household Appliances – Refrigerators, washing
machine etc.
 Continuous Production
• Continuous production (also called process
production) is a non-stop manufacturing process used
to produce standardized products in very large
volumes. The operations are carried out continuously
24/7, often involving automated machines and
conveyor systems with minimal human intervention.
• This method is suitable for high-demand, uniform
products, especially in industries where stopping the
process would be inefficient or costly.
• Eg. Petroleum refining ,cement manufacturing etc.
Key Features:
• High-volume, continuous production.
• Standardized product with low variety.
• Specialized and highly automated equipment.
• Use of assembly line techniques.
• Low labor cost per unit due to division of
work.
 Work Study
• Work Study is a systematic examination of the
methods of carrying out activities in order to
improve the effective use of resources and to set
up standards of performance.Key Components
of Work Study:
• Method Study – Focuses on how a job is done. It
aims to develop easier and more effective
methods.
• Work Measurement (Time Study) – Focuses on
how long a job should take. It helps in setting
time standards.
Objectives of Work Study:
• Increase productivity and efficiency.
• Reduce unnecessary effort or waste.
• Optimize resource utilization (man, machine,
materials).
• Improve workplace layout and process flow.
• Set fair work standards for performance.
Definition of Method study
• Method study can be defined as “Systematic
recording and critical examination of existing
and proposed ways of doing work, as a means of
developing and applying easier and more
effective method and thereby reducing costs”.
 Method Study
 Method Study is a technique to reduce the work content by
analysing each operation of a given piece of work very closely
in order to eliminate unnecessary operations/movements by
workers, materials or equipments. It includes standardization
of equipment, method and working conditions, and training the
operators to follow the standard method
 However, even after that, there could be substantial
unnecessary time taken for the process because of lack of
management control or inaction of worker.
 Method Study approaches and tools of Method Analyst:
 Flow Diagrams & Process Charts etc.

 Critical questioning techniques.

 Method Study Recording Techniques

• Used to record how a task is being performed.

1. Process Charts
• These are graphical representations of the steps involved in a process.
• Outline Process Chart
Records only main operations and inspections in a process.
• Flow Process Chart
Records all activities (operation, inspection, transport, delay, storage)
related to a process.
– Man-type: for operator activities.
– Machine-type: for machine utilization.
– Material-type: for material movement.
• Two-Handed Process Chart
Used in motion study to record the movements of both hands separately,
typically for short-cycle manual tasks.
2. Flow Diagrams / Flow Maps
• Show the physical path taken by men, materials,
or equipment in a layout.
• Useful in plant layout studies to minimize
unnecessary movement.
3. String Diagram
• A scaled layout of a workplace with a string
representing the path of movement.
• Helps in minimizing travel distance by rearranging
equipment or processes.
4. Travel Chart (Distance Chart)
• A table showing the frequency and distance of
movements between different locations.
• Used with flow diagrams for layout optimization.
5. Multiple Activity Chart (Man-Machine Chart)
• Shows inter-relationship of activities between
man and machine over time.
• Helps identify idle time and balance workloads.
 Method Study Objectives
 Improvement of processes and procedures so as to
improve productivity and thereby reduce operating
cost.
 Improvement in the design of plant and equipment.
 Improvement of layout.
 Improvement in the use of men, materials and
machines.
 Economy in human effort and reduction of
unnecessary fatigue.
 To Standardise work methods or processes, machinery,
equipments and tools.
 Development of better working environment.
 Human Considerations in Work Study
1. Importance of Human Relations in Work-Study
• Work-study becomes an effective tool for improving
productivity only when there is a good relationship
between managers, supervisors, and workers. Everyone
involved should be treated with respect and fairness,
ensuring that no one feels their job security or self-respect
is threatened.
2. Work-Study as a Participative Approach
• Work-study should be seen as a collaborative effort. It
involves the participation of workers, supervisors, and
management in analyzing and improving the way work is
done. Building trust and cooperation is essential for its
success.
 ERGONOMICS
• The application of human biological sciences
along with engineering sciences to achieve
optimum mutual adjustment of men and his
work, the benefits being measured in terms of
human efficiency and well-being.(ILO)
• "Ergonomics (or human factors) is the
scientific discipline concerned with the
understanding of interactions among humans
and other elements of a system, and the
profession that applies theory, principles,
data, and methods to design in order to
optimize human well-being and overall system
performance."
• Key Goals of Ergonomics: Improve safety,
comfort, efficiency, Reduce fatigue, strain, and
work-related injuries &Enhance productivity
and job satisfaction.
1. What is a Man-Machine System?
• A man-machine system is a combination of
humans and machines working together to
achieve a goal that neither could accomplish
alone. The system includes tools, equipment,
and human actions that interact to produce
desired outputs.
Types of Systems Based on Control Level:
• Manual System: Operated fully by humans
using hand tools and physical effort.
• Mechanical System: Semi-automatic;
machines provide power, and humans control
them using devices.
• Automated System: Fully automatic; performs
tasks without human intervention, but needs
humans for setup and maintenance.
3. How the Man-Machine System Works:
• The human receives feedback from the
machine (e.g., dials, displays).
• The human processes the information, makes
decisions, and controls the machine.
• Environmental factors (lighting, noise, etc.)
and personal traits (age, training, motivation)
affect performance.
 Product Design
• Organizations are required to design the new products or the
following reasons;
1. Long-Term Survival and Growth
• Companies need new products to stay relevant and continue
business in the long run.
2. Customer Demand
• New products help meet unfulfilled customer needs and changing
preferences.
3. Declining Performance of Existing Products
• When current products face declining sales, profits, or saturation,
new designs are needed.
4. Market Competition and Diversification
• To handle intense competition or expand into new markets,
companies develop new or diversified products.
• Importance of Product Design in Meeting Customer Needs
1. Customer Needs Drive New Product Design
• Companies must respond to rising customer expectations.
• New product ideas are generated based on market trends
and feedback.
2. Collaboration Between Key Functions
• Marketing identifies customer needs and suggests product
ideas.
• Product Development translates those needs into technical
specifications and design.
• Manufacturing selects the right processes and materials to
build the product.
Product Design – A Bridge Between Market and
Manufacturing
3. Product Design Links All Departments
• Acts as a bridge between customer needs, marketing
strategy, and manufacturing capability.
• Ensures products are aligned with customer preferences
and production efficiency.
Summary:
• Effective product design ensures market relevance,
technical feasibility, and smooth production.
• Close collaboration across departments is essential for
success.
 WHAT DOES PRODUCT AND SERVICE
DESIGN DO?
1. Translate customer wants and needs into product and
service requirements(Marketing)
2. Refine existing products and services. (Marketing)
3. Develop new products and/or services. (Marketing,
operations)
4. Formulate quality goals. (Quality assurance,
operations)
5. Formulate cost target. (Accounting)
6. Construct and test prototypes. (Marketing, operations)
7. Document specifications
PRODUCT DESIGN (DEVELOPMENT)
PROCESS
 Principles of Good Product Design
1. Functionality: The product must function properly for intended purpose.
2. Reliability: The product must perform properly for the designated period
of time.
3. Productivity: The product must be produced with a required quantity and
quality at a defined and feasible cost.
4. Quality: The product must satisfy customer’s stated and unstated needs.
5. Standardization: The product should be designed in such a fashion so that
most of the components are standardized and easily available in the market
6. Maintainability: The product must perform for a designated period with a
minimum and defined maintenance. Adequate provision for maintenance
should be kept in the product.
7. Cost effectiveness: The product must be cost effective. The must be
manufactured in the most cost-effective environment.
 Tolerance design
• Tolerance Design is the process of specifying
acceptable limits of variation (tolerances) for
product or process parameters in such a way
that the performance remains within
acceptable limits, while minimizing both
quality loss due to variation and
manufacturing cost.
• Purpose: Tolerance design defines the acceptable variation in
product parameters to reduce quality loss when performance
deviates from the target.
Example: In an engine piston, a tolerance of ±0.01 mm
ensures smooth operation without leakage or jamming.
• Factors Considered: Designers consider system parameters,
environmental conditions, and noise factors to determine
tolerances.
Example: A gear in a vehicle must perform well across
temperature variations, so tolerances are designed
accordingly.
• Cost vs Quality Trade-off: Tight tolerances
improve performance but increase
manufacturing cost. The goal is to find a balance
between cost and quality loss.
Example: Manufacturing a Shaft for a Gearbox
• Outcome: A good tolerance design minimizes
variations in product performance and ensures
reliability and customer satisfaction over time.
Example: In aerospace components, tight
tolerances ensure consistent flight performance
and safety
• Quality & Cost Considerations
• Quality Definition:
• Quality means fitness for purpose — how well a
product or service conforms to performance
standards and customer expectations.
• Cost of Quality:
Refers to the total cost involved in preventing,
detecting, and addressing defects across all
stages — from design to customer use.
• Goal:
Minimize total quality cost while ensuring high
performance and customer satisfaction.
 Four Categories of Quality Costs:

• Prevention Costs:
Cost of avoiding defects (e.g., quality planning,
training, process control).
• Appraisal Costs:
Cost of inspecting and testing to identify defects (e.g.,
inspection tools, quality audits).
• Internal Failure Costs:
Cost due to defects found before product reaches the
customer (e.g., rework, scrap).
• External Failure Costs:
Cost of defects found after delivery (e.g., customer
complaints, returns, replacements).
 Product Life Cycle
PLC refers to the period from the product’s first launch into the market until its final
withdrawal and any PLC has four stages.
 Introduction stage
• This stage marks the introduction of the product
into the market.
• It may be an entirely new product in the market
or old product to the new market.
• The demand is low as customers do not know
much about the product. So the organisations
have to invest heavily in advertisement to make
the product familiar to the customer.
• The volume of sales will be low and if proper care
is not taken, the chances of product failures are
high.
Growth: Once the product passes through the
introduction stage, the sales starts increasing
because of the acceptability of the product by
the customer. The sales growth rate is high
because of limited or no competition.
Maturity (Saturation):
• The sales growth reaches a point above which
it will not grow. This is due to the market
share taken by the competitor's products.
Thus, the sales will be maintained for some
period.
Decline:
• Market Competition Threat:
Competitors may introduce products with better
features, advanced technology, and lower
prices, posing a serious threat to existing
products.
• Need for Timely Improvements:
Without timely design upgrades or feature
enhancements, the product may lose relevance,
leading to a decline in sales and eventual
withdrawal from the market.
 Standardization
• standardization refers to the process of establishing and
implementing consistent guidelines, procedures, or
specifications for products, services, and processes.
• It aims to create uniformity and reduce variability,
leading to improved efficiency, quality, and
reliability. Standardization is crucial for
achieving interchangeability of parts, facilitating mass
production, and streamlining operations.
• The different levels of standards are: Company, National
(ISI, BIS) and International (ISO 9000) Standards.
• Objectives of Standardization
• Interchangeability:
Parts can be easily replaced or used in different assemblies.
Example: A standard USB charger works with multiple
phone brands.
• Minimizing Variety:
Limit the number of different types or models.
Example: A company manufacturing only 3 types of screws
instead of 10 simplifies production.
• Improved Control:
Fewer variations make quality control easier.
Example: Car manufacturers using the same engine bolts
across several models ensures consistency.
 Advantages of Standardization
• Less Waste & Obsolescence:
Common parts are used longer and not quickly outdated.
Example: Standard-sized A4 paper is globally accepted and consistently
produced.
• Reduced Inventory Needs:
Fewer variations mean fewer stock items.
Example: A hardware store stocking only standard nail sizes simplifies
storage.
• Simplified Accounting:
Less variety reduces complexity in tracking and documentation.
Example: Using standard packaging sizes reduces bookkeeping effort.
• Lower Costs:
Mass production of standard items reduces unit cost.
Example: Standardized LED bulbs cost less due to bulk production.
• Ease of Procurement:
Easier to find parts from multiple suppliers.
Example: Standard laptop chargers are widely available in electronic
Concurrent Engineering
• Concurrent Engineering is a systematic
approach to integrated product development
that emphasizes the parallel (simultaneous)
execution of tasks by cross-functional teams.
This contrasts with traditional (sequential)
engineering, where each department works
one after another.
Key Features of Concurrent Engineering
• All departments (R&D, Design, Manufacturing,
QA, Marketing, Procurement, etc.) collaborate
from the beginning of the design process.
• Tasks are performed in parallel, not sequentially.
• It reduces design iteration, product development
time, and cost.
• Promotes Design for Manufacturability (DFM)
and Design for Assembly (DFA).
• Consumer Electronics (e.g., Smartphones):
When designing a new phone, companies like
Apple or Samsung bring together teams for
hardware, software, camera design, materials,
and user experience design right from the
concept stage. This ensures:
• Components fit well in compact spaces.
• Software and hardware are well integrated.
• Fast transition from design to production.
Benefits of Concurrent Engineering
• Shorter product development cycle.
• Lower overall development cost.
• Fewer last-minute changes.
• Improved product quality.
• Better communication and collaboration.
 Production Cost Concepts and
Break-even Analysis
1. Importance of Cost Monitoring
The production manager must closely monitor
all costs incurred in the production department
to ensure efficient operations and cost control.
2. Types of Production Costs
• Production costs fall under two broad
categories:
• Costs of capital assets (e.g., machinery,
equipment)
• Costs of production (e.g., materials, labor,
utilities)
3. Need for Cost Classification
• Proper classification and analysis of these
costs help the manager implement control
measures and ensure products are
manufactured within the pre-established cost
levels.
• COSTS OF PRODUCTION
The costs of production include:
1. Purchase costs of raw materials, bought out
components and subassemblies,
2.procurement and transportation costs.
3.Purchase costs of supplies such as oils, lubricants,
tools of small value, fuel oil,
machinery spares, cotton waste, etc.
4.Wages and salaries paid to direct production workers,
maintenance inspection,
stores staff, supervisors and other staff.
5.Costs paid to subcontractors for the orders placed on them.
6.Cost of production line rejections, wastage, spoilage and
rework.
7.Expenses towards rent and insurance of factory buildings,
insurance on plant and
machinery, stores, etc.
8.Interest on working capital to the extent it relates to
inventory.
9.Cost of procurement of capital assets like buildings,
machinery, tooling, inspection
equipment, furniture, etc., and the depreciation of these
capital assets.
CLASSIFICATION OF COSTS
Classification of costs are based on the following:
1. Natural characteristics (material, labour and overhead)
2. Changes in activity or volume (fixed, variable, mixed)
3. Degree of traceability to the product (direct cost,
indirect cost)
4. Costs for analytical and decision-making (sunk costs,
opportunity costs, controllable and non-controllable,
differential, imputed costs)
5. Other classifications (product cost, period cost).
 Natural classification of Cost
1. Direct Material
• These are raw materials that become a significant
and identifiable part of the finished product.
Examples: Cotton in textiles, steel in auto parts.
Includes:
• Job-specific purchased materials
• Materials from stores
• Purchased/produced components
• Inter-process transferred materials
2. Direct Labour
• Labour directly involved in the manufacturing
process and traceable to specific products.
Examples: Machine operators, assembly line
workers.
3. Direct Expenses (Chargeable Expenses)
• Costs (other than direct materials/labour)
incurred for specific jobs/products.
Examples: Special drawings, hiring unique
machines, design layout costs.
4. Factory Overheads (Manufacturing Costs)
• These include indirect costs related to
production:
• Indirect materials: e.g., lubricants, cutting oil
• Indirect labour: e.g., supervisors, maintenance
staff
• Indirect expenses: Costs from production start to
transfer of goods
Note: Direct costs + factory overheads =
Conversion costs
5. Distribution Overheads (Selling & Marketing)
Costs related to promoting and delivering the
product.
Examples: Advertising, packaging,
transportation, sales staff salaries.
6. Administrative Overheads
• General business operation costs not linked to
production or sales.
Examples: Office rent, director fees,
chairman's salary.
Fixed Cost – Definition
• Fixed costs are those costs that do not change
with the level of production or sales volume.
They remain constant regardless of how much
you produce, at least within a certain range of
activity.
• These costs are incurred even if the output is
zero, and are usually time-based (e.g.,
monthly, annually).
 Fixed Cost Item Explanation

Paid monthly whether 10 or 10,000 units

Factory Rent
Examples of Fixed Costs:
are produced

Paid regularly, not tied to production

Salaries of Admin Staff
quantity

Depreciation of Equipment Based on time, not how much it's used

Insurance Premiums Remain fixed during the coverage period

Property Taxes Payable regardless of business activity

Variable Cost –Variable costs are costs that
change directly and proportionally with the
level of production or sales. The more you
produce, the higher the variable cost; if you
produce nothing, variable cost is zero.
Variable Cost Item Explanation

More units require more materials (e.g.,

Raw Materials
Examples of Variable Costs:
steel, cotton)

Wages paid based on output or hours

Direct Labour
worked per unit

Each item produced needs packaging

Packaging
material

Increases with machine usage during

Electricity for Machines
production

Paid per unit sold or as a percentage of

Sales Commission
sales
Mixed Cost – Definition
• Mixed costs (also called semi-variable costs) are
costs that have both fixed and variable
components.
• A part of the cost remains constant (fixed)
regardless of activity.
• The other part varies with production or usage.
• These costs increase with higher activity, but not
in direct proportion from zero.
Mixed Cost Item Fixed Part Variable Part

Electricity Bill Minimum monthly charge Varies with machine usage

Examples of Mixed Costs: Extra charges per call or

Telephone Bill Monthly rental
data usage

Incentives based on
Salaries with Incentives Base salary
production or sales

Extra cost for wear and

Equipment Maintenance Routine maintenance fee
tear due to higher use

Fuel and servicing per

Vehicle Costs Insurance & depreciation
kilometer run
• Opportunity Cost Opportunity cost is the value
of the next best alternative foregone when a
decision is made.
It represents the benefit you give up by choosing
one option over another.
• Eg Example 1: Studying vs Working
If you choose to pursue a full-time course instead
of taking a job that pays ₹30,000/month,
→ Your opportunity cost is the ₹30,000/month
salary you gave up.
• Sunk Cost
• A sunk cost is a past cost that has already been
incurred and cannot be recovered, regardless of
future actions.
It should not influence current or future business
decisions, since it's irreversible.
• Example : Machinery Purchase
A company buys a machine for ₹5 lakh. Later, it
becomes outdated.
→ The ₹5 lakh is a sunk cost—already spent and
cannot be recovered.
1. Controllable Cost
• A controllable cost is a cost that can be
influenced or regulated by a manager at a
specific level of the organization within a given
time frame.
Example:
• A production manager can control raw material
usage, overtime payments, or power usage in
the production line.
→ These are controllable at the department
level.
2. Non-Controllable Cost
• A non-controllable cost is a cost that cannot be
influenced by a specific manager because it is
fixed by higher-level policies, contracts, or
external factors.
Example:
• Depreciation of machinery, building rent, or
corporate office salaries allocated to a
department.
→ These are non-controllable by a departmental
manager.
• Imputed Cost – Definition
• Imputed cost (also known as notional cost) is
a hypothetical or estimated cost that does
not involve any actual cash outflow, but is
considered for decision-making, cost analysis,
or internal accounting.
• rental value of company owned property, etc
7. Out of Pocket Costs
• Out of pocket costs signify the cash cost
associated with an activity. Non-cash costs
such as depreciation are not included in out of
pocket costs.
• Owner’s Salary (not paid)
If the owner works full-time in the business
without taking a salary, the estimated salary is
an imputed cost.