ENGINEERING MANAGEMENT
Engineering Management
MANAGEMENT entails “The Basic Functions”
to efficiently reach a company's goals
which are PLANNING, ORGANIZING,
STAFFING, COMMUNICATING, MOTIVATING,
LEADING, AND CONTROLLING RESOURCES.
How One May Become A Successful
Engineer Manager
Management must seek to find out the
objectives of the organization, think of
ways how to achieve them, decide on
the ways to be adapted and the
material resources to be used,
determine the human requirements of
the total job, assign specific tasks to
specific persons, motivate them, and
provide means to make sure that the
activities are in the right direction.
Successful engineer managers do not
happen as a matter of chance,
although luck is contributory factor. It is
very important for the engineer
manager to know the various factors
leading to successful management.
According to Kreitner, there are at least
three general preconditions for
achieving lasting success as a
manager.
 ability
 motivation to manage, and
 opportunity
Managerial ability
Managerial ability refers to the capacity of
an engineer manager to achieve
organizational objectives effectively and
efficiently.
Effectiveness ( positive result ), according
to Higgins, refers to a description of
“whether objectives are accomplished”,
while efficiency (convenient and mabilis )is
a “description of the relative amount of
resources used in obtaining effectiveness.”
Motivation to Manage
Many people have the desire to work and
finish specific tasks assigned by superiors,
but not many are motivated to manage
other people so that they may contribute
to the realization of the organization’s
objectives.
Opportunity
Successful managers become possible
only if those having the ability and
motivation are given the opportunity to
manage. The opportunity for successful
management has two requirements
namely obtaining a suitable managerial
job, and finding a supportive climate once
on the job.
Functions of the Engineer in the
Organization
RESEARCH - where the engineer is
engaged in the process of learning about
nature and codifying this knowledge into
usable theories.
DESIGN AND DEVELOPMENT – where the
engineer undertakes the activity of turning
a product concept to a finished physical
items. Design for manufacturability and
value engineering teams are charged with
improvement of designs and specifications
at the research, development, and
production stages of product
development.
TESTING – where the engineer works in a
unit where new products or parts are
tested for workability.
MANUFACTURING – where the engineer is
directly in charge of production personnel
or assumes responsibility for the product
CONSTRUCTION – this is where the
construction engineer (civil engineer
usually) is directly in charge of the
construction personnel or may have
responsibility for the quality of the
construction process
SALES – where the engineer assists the
company’s customers to meet their needs,
especially those that require technical
expertise.
CONSULTING – where the engineer works
as consultant of any individual or
organization requiring his services.
GOVERNMENT – where the engineer may
find employment in the government
performing any of the various tasks in
regulating, monitoring, and controlling the
activities of various institutions, public or
private.
TEACHING – where the engineer gets
employment in a school and is assigned as
a teacher of engineering courses. Some of
them become deans, vice presidents, and
president.
MANAGEMENT – where the engineer is
assigned to mange groups of people
performing specific tasks.
The Ten Roles Of Management According
To Henry MintzBerg
Henry Mintzberg is a Canadian scientist. He
is specialized at organization structures and
organization design. According to him,
management is to be divided in to ten
roles divided in three categories.
In this model, a role is nothing more than
the expectations and responsibility that
one person has by occupying this position.
The Ten Roles Of Management
The Monitor: He actively searches and
seeks for company information and he
maintains interpersonal contact.
The Disseminator: He does nothing more
than forwarding the right information to the
right people. He also makes memos and
calls other personnel.
The Spokesperson: He represents the
company or division to the outside. This
can be the media, other companies,
clients, or even to the supply chain.
The Figurehead: He performs symbolic
activities and receives visitors. He also
contacts successful job applicants, for
example
The Leader: He motivates and leads a
company’s unit or operation. This might
sound generic and more of a
characteristic, but he also designs and
coordinates with the team and other
managers.
The liaison: He maintains the information
links within the company and with the
supply chain.
The entrepreneur: He invents new ideas
and business opportunities. He also initiates
and starts new projects according to the
company’s strategic goals.
The Disturbance Handler: He’s the one to
contact when there are any disruptions.
For example, when a production line fails
or when the supply chains fail to deliver on
time.
The Resource Allocator: He ensures that
each process receives a fair and good
number of resources in order to use for their
sub process of transformation.
The negotiator: he does the same as the
spokesperson, only he represents the unit
or organization to the supply chains side.
He also works with sponsors and distributors
to make agreements.
What Are
Managerial Competencies?
Competency – a combination of
knowledge, skills, behaviors, and attitudes
that contribute to personal effectiveness
Managerial Competencies – sets of
knowledge, skill, behaviors, and attitudes
that a person needs to be effective in a
wide range of positions and various types
of organizations
Why are Managerial Competencies
Important?
 You need to use your strengths to do
your best
 You need to know your weaknesses
 You need developmental experiences
at work to become successful leaders
and address your weakness
 You probably like to be challenged with
new learning opportunities
 Organizations do not want to waste
human resources
 Globalization deregulation,
restructuring, and new competitors add
to the complexity of running a business
A Model of Managerial Competencies
 Managerial Effectiveness
 Communication Competency
 Planning and Administration
Competency
 Strategic Action Competency
 Self-Management Competency
 Global Awareness Competency
 Teamwork Competency
Communication Competency
Ability to effectively transfer and exchange
information that leads to understanding
between yourself and others
 Informal Communication
Used to build social networks and
good interpersonal relations
 Formal Communication
Used to announce major events/decisions/
activities and keep individuals up to date
 Negotiation
Multicultural Competency
Used to settle disputes, obtain resources,
and exercise influence
 Understanding, appreciating and
responding to diverse political, cultural,
and economic issues across and within
nations
 Cultural knowledge and understanding
of the events in at least a few other
cultures
 Cultural openness and sensitivity to how
others think, act, and feel
 Respectful of social etiquette variations
 Accepting of language differences
Planning and Administration
Competency
 Deciding what tasks need to be done,
determining how they can be done,
allocating resources to enable them to
be done, and then monitoring progress
to ensure that they are done
 Information gathering, analysis, and
problem-solving from employees and
customers
 Planning and organizing projects with
agreed
upon completion dates
 Time management
 Budgeting and financial management
Teamwork Competency
 Accomplishing tasks through small
groups of people who are collectively
responsible and whose job requires
coordination
 Designing teams properly involves
having
people participate in setting goals
 Creating a supportive team
environment gets people committed to
the team’s goals
 Managing team dynamics involves
settling
conflicts, sharing team success, and
assign tasks that use team members’
strengths
Strategic Action Competency
Overall Mission
Understanding the overall mission and
values of the organization and ensuring
that employees’ actions match with them
Integrate
Understanding how departments or
divisions of the organization are
interrelated
Strategies
Taking key strategic actions to position the
firm for success, especially in relation to
concern of stakeholders
Self-Management Competency
 Developing yourself and taking
responsibility
 Integrity and ethical conduct
Personal drive and resilience
Balancing work and life issues
Self-awareness and personal development
activities
FUNCTION OF MANAGEMENT
Management entails “The Basic Functions”
to efficiently reach a company's goals
which are PLANNING, ORGANIZING,
STAFFING, COMMUNICATING, MOTIVATING,
LEADING, AND CONTROLLING RESOURCES.
The Basic Functions of Management
1. Planning
The primary management function, the
one on which all others depend. Managers
engaged in planning develop strategies
for success, establish goals and objectives
for the organization, and translate their
strategies and goals into action plans. To
develop long-term strategies and goals,
managers must be well informed on a
number of key issues and topics that could
influence their decisions.
Strategic plans outline the firm's longrange (two to five years) organizational
goals and set a course of action the
firm will pursue to reach its goals. These
long-term goals encompass eight major
areas of concern: market standing,
innovation, human resources, financial
resources, physical resources,
productivity, social responsibility, and
financial performance. A good
strategic plan answers:
· Where are we going?
· What is the environment?
· How do we get there?
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Tactical plans typically focus on
departmental goals and cover a period
of one to three years. Their limited
scope permits them to be changed
more easily than strategic plans.
Tactical plans lay out the actions and
the allocation of resources necessary to
achieve specific, short-term objectives
that support the company's broader
strategic plan.
Operational plans designate the
actions and resources required to
achieve the objectives of tactical plans.
Operational plans usually define actions
for less than one year and focus on
accomplishing a firm's specific
objectives such as increasing the
number of new subscribers by 5 percent
over the next six months.
Managers use and study the
information below to set a firm's longterm course of direction during a
process called strategic planning.
Budgets
Production schedules
Industry and economic data
Customer preferences
Internal and external data
Competition and so on.
Managers
Translate the Vision into a Meaningful
Mission Statement are the employees
responsible for performing these five
functions in addition to a number of other
duties to coordinate the organization's
work. These duties, or roles, fall into three
main categories:
 Interpersonal roles. Managers perform
ceremonial obligations; provide
leadership to employees; build a
network of relationships with bosses,
peers, and employees; and act as
liaison to groups and individuals both
inside and outside the company (such
as suppliers, competitors, government
agencies, consumers, special-interest
groups, and interrelated work groups).
 Informational roles. Managers spend a
fair amount of time gathering
information by questioning people both
inside and outside the organization.
They also distribute information to
employees, other managers, and
outsiders.
 Decisional roles. Managers use the
information they gather to encourage
innovation, to resolve unexpected
problems that threaten organizational
goals (such as reacting to an economic
crisis), and to decide how
organizational resources will be used to
meet planned objectives. They also
negotiate with many individuals and
groups, including suppliers, employees,
and unions.
2. Organizing
the process of arranging resources to carry
out the organization's plans is the second
major function of managers. During the
organizing stage, managers think through
all the activities that employees carry out
(from programming the organization's
computers to mailing its letters), as well as
all the facilities and equipment employees
need in order to complete those activities.
They also give people the ability to work
toward organizational goals by
determining who will have the authority to
make decisions, to perform or supervise
activities, and to distribute resources.
 Top Managers
 They are the upper-level managers who
have the most power and who take
overall responsibility for the
organization. An example is the chief
executive officer (CEO). Top managers
establish the structure for the
organization as a whole and they select
the people who fill the upper-level
positions. Top managers also make
long-range plans, establish major
policies, and represent the company to
the outside world at official functions
and fund-raisers.
 Middle Managers
 They have similar responsibilities, but
usually for just one division or unit. They
develop plans for implementing the
broad goals set by top managers, and
they coordinate the work of first-line
managers. In traditional organizations,
managers at the middle level are plant
managers, division managers, branch
managers, and other similar positions—
reporting to top-level managers. But in
more innovative management
structures, middle managers often
function as team leaders who are
expected to supervise and lead small
groups of employees in a variety of job
functions. Similar to consultants, they
must understand every department's
function, not just their own area of
expertise. Furthermore, they are
granted decision-making authority
previously reserved for only high-ranking
executives.
 First-line Managers (or supervisory
managers)
They oversee the work of operating
employees, and they put into action the
plans developed at higher levels. Positions
at this level include supervisor, department
head, and office manager.
They are at the bottom of the
management pyramid
Three levels of a corporate hierarchy
before acting. Moreover, they know
how to utilize the appropriate emotion
at the right time and in the right
amount.
 Motivation. Motivated managers are
driven to achieve beyond
expectations— their own and everyone
else's
 Empathy. Empathetic managers
thoughtfully consider employees'
feelings, along with other factors, in the
process of making intelligent decisions.
 Social skill. Socially skilled managers
tend to have a wide circle of
acquaintances, and they have a knack
for finding common ground with people
of all kinds. They assume that nothing
important gets done by one person
alone and have a network in place
when the time for action comes
The three broad categories of leadership
style are autocratic, democratic, and
laissez-faire
3. Directing or Leading
•
Autocratic leaders make decisions
without consulting others
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Democratic leaders delegate authority
and involve employees in decision
making. Even though their approach
can lead to slower decisions, soliciting
input from people familiar with
particular situations or issues may result
in better decisions.
•
Laissez-faire leaders take the role of
consultant, encouraging employees'
ideas and offering insights or opinions
when asked. The laissez-faire style may
fail if workers pursue goals that do not
match the organizations. However, the
style has proven effective in some
situations. Laissez-faire, is sometimes
referred to as free-rein leadership. The
French term laissez faire can be
translated as "leave it alone," or more
roughly as "hands off."
Leading—the process of influencing and
motivating people to work effectively and
willingly toward company goals—is the
third basic function of management.
Managers with good leadership skills have
greater success in influencing the attitudes
and actions of others, both through the
demonstration of specific tasks and
through the manager's own behavior and
spirit.
Additional studies have shown that
managers with strong interpersonal skills
and high emotional quotients (EQs) tend to
be more effective leaders. The
characteristics of a high EQ include:
 Self-awareness. Self-aware managers
have the ability to recognize their own
feelings and how they, their job
performance, and other people are
affected by those feelings. Moreover,
managers who are highly self-aware
know where they are headed and why.
 Self-regulation. Self-regulated
managers have the ability to control or
reduce disruptive impulses and moods.
They can suspend judgment and think
4. Controlling
Controlling is the fourth basic managerial
function. In management, controlling
means monitoring a firm's progress toward
meeting its organizational goals and
objectives, resetting the course if goals or
objectives change in response to shifting
conditions, and correcting deviations if
goals or objectives are not being attained.
The Control Cycle
Many firms control for quality through a
four-step cycle that involves all levels of
management and all employees.
 First step, top managers set standards,
or criteria for measuring the
performance of the organization as a
whole.
 In the second step of the control cycle,
managers assess performance, using
both quantitative (specific, numerical)
and qualitative (subjective)
performance measures.
 In the third step, managers compare
performance with the established
standards and search for the cause of
any discrepancies.
 If the performance falls short of
standards, the fourth step is to take
corrective action, which may be done
by either adjusting performance or
reevaluating the standards.
 If performance meets or exceeds
standards, no corrective action is taken.
Management Skills
 Interpersonal Skills - To communicate
with other people, work effectively with
them, motivate them, and lead them
are interpersonal skills.
 Technical Skills - A person who knows
how to operate a machine, prepare a
financial statement, program a
computer, or pass a football has
technical skills: Managers at all levels
use administrative skills, which are the
technical skills necessary to manage an
organization.
 Conceptual Skills - Managers need
conceptual skills to see the organization
as a whole, in the context of its
environment, and to understand how
the various parts interrelate.
Conceptual skills are especially
important to top managers. These
managers are the strategists who
develop the plans that guide the
organization toward its goals. A key
managerial activity requiring
conceptual skills is decision making, a
process that has five distinct steps: (1)
recognizing the need for a decision, (2)
identifying, analyzing, and defining the
problem or opportunity, (3) generating
alternatives, (4) selecting an alternative
and implementing it, and (5) evaluating
the results.
5. Staffing
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
"the management function that
determines human resource needs,
recruits, selects, trains, and develops
human resources for jobs created by an
organization." Staffing is undertaken to
match people with jobs so that the
realization of the organization's
objectives will be facilitated.
Staffing is important since it is
concerned with assigning jobs with skills,
ability, aptitude, talents, and
specializations. In this way, manpower is
efficiently utilized.
Human resource planning activities
1. Forecasting – an assessment of future
human resource needs in relation to the
current capabilities of the organization
2. Programming – translating forecasted
human resource needs to personnel
objectives and goals.
3. Evaluation and control – monitoring
human resource action plans and
evaluating their success.
6. Motivation
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A motivating force; incentive a force
which excites and drives a person to
action
It is subjective and qualitative, rather
than objective and quantitative
Motivation varies with time (for example
the age of the person) and not logical
entity.
There are two main types of motivation
driver:
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Primary motivation drivers, which are
instinctive (natural), such as hunger,
thirst, pain.
Secondary motivation drivers, which are
learned, for example that certain
behavior gives pleasure.
7. Communicating

It is a process of sharing information
through symbols, including words and
message.

Communication may happen between
superior and subordinate, between

peers, between a manager and a
client or customer, between an
employee and a government
representative. It may be done faceto-face or through printed materials, or
through an electronics device like
telephone.
AGGREGATE PLANNING
Aggregate Planning at Frito-Lay
 More than three dozen brands, 15
brands sell more than $100 million
annually, 7 sell over $1 billion
 Planning processes covers 3 to 18
months
 Unique processes and specially
designed equipment
 High fixed costs require high volumes
and high utilization
 Demand profile based on historical
sales, forecasts, innovations, promotion,
local demand data
 Match total demand to capacity,
expansion plans, and costs
 Quarterly aggregate plan goes to 36
plants in 17 regions
 Each plant develops 4-week plan for
product lines and production runs
Job assignments
Ordering Job scheduling
Dispatching
Overtime Part-time help
Sales and Operations Planning
 Coordination of demand forecasts with
functional areas and the supply chain
 Typically done by cross-functional
teams
 Determine which plans are feasible
 Limitations must be reflected
 Provides warning when resources do
not match expectations
 Output is an aggregate plan
 Decisions must be tied to strategic
planning and integrated with all areas
of the firm over all planning horizons
 S&OP is aimed at
1. The coordination and integration of the
internal and external resources necessary
for a successful aggregate plan
2. Communication of the plan to those
charged with its execution
New product plans
 Requires
 A logical overall unit for measuring sales
and output
 A forecast of demand for an
intermediate planning period in these
aggregate terms
 A method for determining relevant
costs
 A model that combines forecasts and
costs so that scheduling decisions can
be made for the planning period
Capital investments
AGGREGATE PLANNING
Facility location/expansion
The objective of aggregate planning is
usually to meet forecast demand while
minimizing cost over the planning period
The Planning Process
Top Executives
Long-range plans (over one year)
Capacity decisions critical to long range
plans
Issues: Research and Development
Operations managers with sales and
operations planning team
Intermediate-range plans (3 to 18 months)
Issues:
Sales and operations planning Production
planning and budgeting Setting
employment, inventory, subcontracting
levels Analyzing operating plan
Operations managers, supervisors, foremen
Responsibility
Short-range plans (up to 3 months)
Scheduling techniques
Issues:
 Combines appropriate resources into
general terms
 Part of a larger production planning
system
 Disaggregation breaks the plan down
into greater detail
 Disaggregation results in a master
production schedule
Aggregate Planning Strategies
1. Should inventories be used to absorb
changes in demand?
2. Should changes be accommodated by
varying the size of the workforce?
3. Should part-timers, overtime, or idle time
be used to absorb changes?
– May not be sufficient to balance
demand and capacity
4. Should subcontractors be used and
maintain a stable workforce?
2. Back ordering during high-demand
periods
5. Should prices or other factors be
changed to influence demand?
 Requires customers to wait for an order
without loss of goodwill or the order
 Most effective when there are few if
any substitutes for the product or
service
 Often results in lost sales
Capacity Options
1. Changing inventory levels
 Increase inventory in low demand
periods to meet high demand in the
future
 Increases costs associated with storage,
insurance, handling, obsolescence, and
capital investment
 Shortages may mean lost sales due to
long lead times and poor customer
service
2. Varying workforce size by hiring or layoffs
 Match production rate to demand
 Training and separation costs for hiring
and laying off workers
 New workers may have lower
productivity
 Laying off workers may lower morale
and productivity
3. Varying production rates through
overtime or idle time
 Allows constant workforce
 May be difficult to meet large increases
in demand
 Overtime can be costly and may drive
down productivity
 Absorbing idle time may be difficult
 Subcontracting
 Temporary measure during periods of
peak demand
 May be costly
 Assuring quality and timely delivery may
be difficult
 Exposes your customers to a possible
competitor
5. Using part-time workers
 Useful for filling unskilled or low skilled
positions, especially in services
DEMAND OPTIONS
1. Influencing demand
– Use advertising or promotion to increase
demand in low periods
– Attempt to shift demand to slow periods
3. Counterseasonal product and service
mixing
 Develop a product mix of
counterseasonal items
 May lead to products or services
outside the company’s areas of
expertise
MIXING OPTIONS TO DEVELOP A PLAN
 A mixed strategy may be the best way
to achieve minimum costs
 There are many possible mixed
strategies
 Finding the optimal plan is not always
possible
Chase strategy
 Match output rates to demand forecast
for each period
 Vary workforce levels or vary
production rate
 Favored by many service organizations
 Level strategy
 Daily production is uniform
 Use inventory or idle time as buffer
 Stable production leads to better
quality and productivity
Some combination of capacity options, a
mixed strategy, might be the best solution
METHODS FOR AGGREGATE PLANNING
Graphical Methods
Popular technique
 Easy to understand and use
 Trial-and-error approaches that do not
guarantee an optimal solution
 Require only limited computations
DECISION MAKING
What is Decision-making?
 Decision-making may be defined as
“the process of identifying and
choosing alternative courses of
action in a manner appropriate to
the demands of the situation.”
 Decision-making, according to
Nickels and others, “is the heart of all
the management functions.”
 Decision-making is a responsibility of
the engineer manager. It is
understandable for managers to
make wrong decisions at time. The
wise manager will correct them as
soon as they are identified. The
bigger issue is the manager who
cannot or do not want to make
decisions.
 Management must strive to choose
a decision option as correctly as
possible. Since they have that
power, they are responsible for
whatever outcome their decisions
bring. The higher the management
level is, the bigger and the more
complicated decision-making
becomes.
Example:
 The production manager of a
certain company has received a
written request from a section head
regarding the purchase of an air
conditioning unit. Almost
simultaneously, another request from
another section was forwarded to
him requiring the purchase of a
forklift. The production manager was
informed by his superior that he can
only buy one of the two requested
items due to budgetary constraints.
 The production manager must now
make a decision. His choice,
however, must be based on sound
arguments for he will be held
responsible later on, if he had made
the wrong choice.
The Decision-making process
1. Diagnose Problem
2. Analyze Environment
3. Develop viable Alternatives
4.
5.
6.
7.
Evaluate Alternatives
Evaluate and adapt decision results
Implement decision
Make a choice
The Decision-making process
Diagnose problem – if a manager wants to
make an intelligent decision, his first move
must be to identify the problem. If the
manager fails in this aspect, it is almost
impossible to succeed in the subsequent
steps.
Analyze the environment – the
environment where the organization is
situated plays a very significant role in the
success or failure of such an organization. It
is therefore, very important that an analysis
of the environment be undertaken.
Components of the Environment. The
environment consists of two major
concerns: the internal and external


Internal environment – refers to
organizational activities within a firm
that surrounds decision-making.
External environment – refers to
variables that are outside the
organization and not typically within
the short-run control of top
management.
Develop Viable Alternatives – oftentimes,
problems may be solved by any of the
solutions offered. The best among the
alternative solutions must be considered by
management. This is made possible by
using a procedure with the following steps:

Prepare a list of alternative solutions.

Determine the viability of each
solutions.

Revise the list by striking out those which
are not viable.
Evaluate Alternatives – after determining
the viability of the alternatives and a
revised list has been made, an evaluation
of the remaining alternatives is necessary.
This is important because the next step
involves making a choice.
Make a choice – after the alternatives
have been evaluated, the decision-maker
must now be ready to make a choice. This
is the point where he must be convinced
that all the previous steps were correctly
undertaken. To make the selection process
easier, the alternatives can be ranked from
best to worst on the basis of some factors
like benefit, cost, or risk.
that managers tend to use the qualitative
approach when:
Implement Decision – refers to carrying out
the decision so that the objectives sought
will be achieved. To make implementation
effective, a plan must be devised.

The problem is fairly simple.

The problem is familiar.

The costs involved are not great.
Evaluate and Adapt Decision Results – In
implementing the decision, the results
expected may or may not happen. It is,
therefore, important for the manager to
use control and feedback mechanisms to
ensure results and to provide information
for future decisions.

Immediate decisions are needed.
Make a choice – after the alternatives
have been evaluated, the decision-maker
must now be ready to make a choice. This
is the point where he must be convinced
that all the previous steps were correctly
undertaken. To make the selection process
easier, the alternatives can be ranked from
best to worst on the basis of some factors
like benefit, cost, or risk.
Implement Decision – refers to carrying out
the decision so that the objectives sought
will be achieved. To make implementation
effective, a plan must be devised.
Evaluate and Adapt Decision Results – In
implementing the decision, the results
expected may or may not happen. It is,
therefore, important for the manager to
use control and feedback mechanisms to
ensure results and to provide information
for future decisions.


Control – refers to actions made to
ensure that activities performed match
the desired activities or goals, that have
been set.
Feedback – refers to the process which
requires checking at each stage of the
process to assure that the alternatives
generated, the criteria used in
evaluation, and the solution selected
for implementation are keeping with
the goals and objectives originally
specified.
 In decision-making, the engineer
manager is faced with problems which
may either be simple or complex. To
provide him with some guide, he must
be familiar with the following
approaches:
Qualitative evaluation – refers to
evaluation of alternatives using intuition
and subjective judgment. Stevenson states
Quantitative evaluation – refers to the
alternatives using any technique in a group
classified as rational and analytical.
Inventory models – consists of several types
all designed to help the engineer manager
make decisions regarding inventory. They
are as follows:

Economic order quantity model – this
one is used to calculate the number of
items that should be ordered at one
time to minimize the total yearly cost of
placing orders and carrying the items in
inventory.

Production order quantity model – this is
and economic order quantity
technique applied to production
orders.

Back order inventory model – this is an
inventory model used for planned
shortages.

Quantity discount model – an inventory
model used to minimize the total cost
when quantity discounts are offered
by suppliers.
Queuing theory – is one that describes how
to determine the number of service units
that will minimize both customer waiting
time and cost of service. The queuing
theory is applicable to companies where
waiting lines are a common situations.
Network models – these are models where
large complex tasks are broken into smaller
segments that can be managed
independently. The tow most prominent
network models are:

The program evaluation review
technique – a technique which enables
engineer managers to schedule,
monitor, and control large and complex
projects by employing three time
estimates for each activity.

The critical path method – this is a
network technique using only one time
factor per activity that enables
engineer managers to schedule,
monitor, and control large and complex
projects.
Forecasting – there are instances when
engineer managers make decision that will
have implications in the future.
Regression analysis – the regression model
is a forecasting method that examines the
association between two or more
variables. It uses date from previous period
to predict future events. Regression analysis
may be simple or multiple depending on
the number of independent variables
presents. When one independent variable
is involved, it is called simple regression,
when two or more independent variables
are involved, it us called multiple
regression.
Simulation – is a model constructed to
represent reality, on which conclusions
about real-life problems can be used. It is a
highly sophisticated tool by means of
which the decision maker develops a
mathematical model of the system under
consideration.
Linear programming – is a quantitative
technique that is used to produce an
optimum solution within the bounds
imposed by constraints upon the decision.
Linear programming is very useful as a
decision making tool when
supply and
demand limitations at plants, warehouse,
or market areas are
constraints upon
the system.
Sampling theory – is a quantitative
technique where samples of populations
are statistically determined to be used for
a number of processes, such as quality
control and marketing research. When
data gathering is expensive, sampling
provides an alternative. Sampling, in
effect, saves time and money.
Statistical Decision-theory – refers to the
“rational way to conceptualize, analyze,
and solve problems in situations involving
limited, or partial information about the
decision environment.”
Economic Order Quantity
S = Fixed Cost
H = Holding Cost
D = Demand
Definition:
Fixed Cost - Fixed cost refers to the cost of
a business expense that doesn’t change
even with an increase or decrease in the
number of goods and services produced
or sold. Fixed costs are commonly related
to recurring expenses not directly related
to production, such as rent, interest
payments, insurance, depreciation, and
property tax.
Holding Cost – this is the cost associated to
storing unsold inventory
Demand – Consumers demand to
purchase a product or service
•
Order Frequency (N):
N = D/Q
N = Frequency
•
Optimum Order Interval -
Tdays = # of Production days per year / N