Fluid Lab Weir

Course Name ENGINEERING MANAGEMENT
Decision-making; the functions of management; managing

Course Description production and service operations; managing the marketing
function; and managing the finance function.
Number of Units for
Lecture and 3 units lecture
Laboratory
Number of Contact
Hours per Week 3 hours lecture
Prerequisite Third Year Standing
After completing this course, the student must be able to:
Course Objectives 1. Understand the field of engineering management;
2. Know and apply the different functions of management.
1. Introduction to Engineering Management
2. Evolution of Management Theory
3. Functions of Management
3.1. Planning
3.2. Organizing
Course Outline 3.3. Leading
3.4. Controlling
4. Decision Making
5. Managing Product and Service Operations
6. Managing the Marketing Function
7. Managing the Finance Function
Laboratory Equipment None
Eisner, Howard. Essentials of Project and System Engineering
Management, 2nd ed. John Wiley & Sons, Inc., 2002.
Gram, Harold A. An Introduction to Management. Holt, Rinehart
and Winston of Canada, Limited, 1990.
Suggested References Oberlender, Gerold D. Project Management for Engineering and
Construction, 2nd ed. McGraw-Hill, 2000.
Robbins, Stephen P. and Mary Coulter. Management, 6th ed.
Prentice Hall, Inc., 1999.
Wheeler, Thomas F. Computer and Engineering Management.
McGraw-Hill, 1990.
A. INTRODUCTION
Management - is the art of getting things done through people. (Mary Parker Follet)
- is the processes of planning, organizing, leading and controlling the effort of
organization members and of using all other organization and resources to
achieve stated organizational goals. (Stoner & Wankel)
Measurement of Management Performance

Peter Drucker, one of the most respected writers on management has argued that a manager’s
performance can be measured in terms of two concepts:
1. Efficiency - doing things right
2. Effectiveness - doing the right things
Efficiency is the ability to get things done correctly. It is an input-output concept. An efficient
manager is the one who achieves outputs, or results, that measure up to the inputs (labor,
materials, and time) used to achieve them. Managers who are able to minimize the cost of the
resources they use to attain their goals are acting efficiently.
Effectiveness on the other hand, is the ability to choose appropriate objectives. An effective
manager is the one who selects the right things to get things done. It must be remembered that no
amount of efficiency can compensate for lack of effectiveness.
Peter Drucker further said that effectiveness rather than efficiency is essential to business, the
pertinent questions is not how to do things right, but how to find the right things to do, and to
concentrate resources and effort on them.
Types of Managers
Managers can be classified in two ways: by their level in the organization and by the
range of organizational activities for which they are responsible.
According to the Management Level:

1. First Line Managers – direct operating employees only, they do not supervise
other managers. First level managers are often called supervisors.
ex. Section/Department Head, Foreman
2. Middle Managers – direct the activities of other managers and sometimes also
those of operating employees. Middle managers’ principal responsibilities are to
direct the activities that implement their organizations’ policies and to balance the
demands of their supervisors with the capacities of their subordinates.
ex. Dean, Director, Plant Manager
3. Top Manager – is responsible for the overall management of the organization. It
establishes operating employees and guides the organization’s interactions with its
environment.
ex. President, Vice-President, Chief Executive Officer
According To The Range Of Organizational Activities:
1. Functional Manager – is the responsible for only one organizational activity, such as
production, marketing, sales, etc.
2. General Manager – oversees a complex unit such as a company, a subsidiary, or an
independent operating division.
Managerial Skill and Roles:
Managerial Skills according to Robert Katz
1. Technical Skill - is the ability to use the tools, procedures and techniques of a
specialized field.
2. Human Skill - is the ability to work with understands and motivates other
people, either as individual or as a group.
3. Conceptual Skill - is the mental ability to coordinate and integrate all of the
organization interest and activities. It involves the manager's ability to see the
organization as a whole and to be understood how its parts depend on each
other.
Bottom
Middle
Top
Managerial Roles According to Henry Mintzberg:
Formal Authority and Status
Interpersonal Roles Information of Roles Decisional Roles

Figurehead Monitor Entrepreneurs
Leader Disseminator Disturbance
Liaison/ Ambassador Spokesman Handler
Resource
Allocator
Negotiator
Figure Head – As a figurehead he performs certain ceremonial duties such as: greeting of
visitors, attending a subordinates wedding, taking customer to lunch and other similar activities.
Leader – The manager guide, conduct, or direct his subordinates or entity. He is responsible in
hiring , training, motivating, and encouraging employees.
Liaison – The manager maintain communication between groups or organization other than his
subordinates
Monitor – The manager constantly looks for information that can be used to advantage.
Subordinates are questioned and unsolicited information is also collected.
Disseminator – The manager give out or spread information to the group or organization that
would otherwise be inaccessible to them.
Spokesperson – The manager transmits some of the information he or she has collected to
individuals outside the unit – or even outside the organization. He also keeps his superiors
satisfied by keeping them well informed.
Entrepreneur – The manager organizes, operates, and assumes the risk for a business venture.
He also initiates change voluntarily.
Disturbance Handler - A person who keep or handles the peace and order situation of the
organization. As a disturbance handler, he responds to situations that are beyond his control such
as strikes, bankrupt customer, etc.
Resources Allocator - The manager is responsible for deciding how and to whom the resources
of the organization and the manager’s own time will be allocated.
Negotiator – The manager arranges or settles agreement/contract in the group or organization.
Engineering Management
A field that concentrates on the application of engineering principles for the effective planning
and efficient operations of managing manufacturing or industrial operations.
Is a specialized form of management that is concerned with the application of engineering

principles to business practice. Engineering management is a career that brings together the
technological problem-solving savvy of engineering and the organizational, administrative, and
planning abilities of management in order to oversee complex enterprises from conception to
completion.
Is a term that is used to describe a specialized form of management that is required to

successfully lead engineering personnel and projects. The term can be used to describe either
functional management or project management- leading technical professionals who are working
in the fields of product development, manufacturing, construction, design engineering, industrial
engineering, technology, production, or any other field that employs personnel who perform an
engineering function.
Example areas of engineering are product development, manufacturing, construction, design

engineering, industrial engineering, technology, production, or any other field that employs
personnel who perform an engineering function.
Successful engineering managers typically require training and experience in business and
engineering. Technically inept managers tend to be deprived of support by their technical team,
and non-commercial managers tend to lack commercial acumen to deliver in a market economy.
Largely, engineering managers manage engineers who are driven by non-entrepreneurial
thinking, thus require the necessary people skills to coach, mentor and motivate technical
professionals. Engineering professionals joining manufacturing companies sometimes become
engineering managers by default after a period of time. They are required to learn how to manage
once they are on the job, though this is usually an ineffective way to develop managerial
abilities.
The Management Process
- Planning
- Organizing
- Leading
- Controlling
Prepared by: DANILO B. PULMA, DM

1. PLANNING
Before managers can organize, lead or control they must plans that give purpose and
direction to the organization, deciding what needs to be done, when and how it needs to be
done and who is to do it.
Planning therefore is the first step in managing an organization and can be seen as the
manager's most fundamental responsibility at all levels.
Four Basic Steps of Planning:

3. Establish a goal or set of goals. Planning begins with decisions about what the
organization or submit wants or needs. Without a clear definition of goals,
organizations to focus their resources effectively.
4. Define the present situation. How far is the organization from its goals? What
resources are available for reaching the goals? Only after the current state of affairs is
analyzed can plans be drawn up to chart further progress.
5. Identify the aids and barriers to the goals. What factors in the internal and external
environments can help the organization reach its goals? What factors might create
problem? Although it is difficult to do, anticipating future situations, problems and
opportunities is an essential part of planning.
6. Develop a plan or set of actions for reaching the goals. The final step in the
planning process involves developing various alternative courses of action for
reaching the desired goal or goals, evaluating these alternatives and choosing from
among them the most suitable alternative for reaching the goal.

G
O
Step 1 Step 2 Step 3 Step 4
Establish the Define the Determine Aids Develop a Set of
goals Present and Barries Action A
Situation
L
Two main types of Plans:
1.0 Strategic Plans - design to meet the broad objectives of the organization - to implement the
mission that provides the unique reason for the organization's existence.
1.1 Operational Plans - provides the details of how the strategic plans will be accomplished.
Types of operational Plans:
2.1 Single-use plan is developed to achieve specific purposes and dissolve when these have
been accomplished.
2. Program covers a relatively large set of activities. The programs show (1) the major
steps required to reach an objectives, (2) the organization unit or member responsible
for each step and (3) the order and timing of each step.
3. Projects are the smaller and separate portions of programs.
4. Budgets are statements of financial resources set aside for specific activities in a
given period of time.
2.2 Standing Plans are standardized approaches for handling recurrent and predicable
situations.
4. Policy is a general guideline for decision making. It sets up boundaries around
decisions, including those that can be made and shutting out those that cannot.
5. Standard Procedures provides a detailed set of instructions for performing a sequence
of actions that occurs often or regularly.
6. Rules are statement that a specific action must not be taken in a given situation. They
are the most explicit of standing plans and not guides to thinking or decision making.
Rather they are substitutes for them.

2. ORGANIZING
It is a process of making the organization's structure fit with its objectives, its
resources, and its environment.
Organization Structure is the arrangement and interrelationship of the component
parts and position's of a company.
The Organizing Process:
3. Detailing all the work that must be done to attain the organization's goals. Every
organization is created with a set of purposes - hospitals are created to care for the
sick, basketball team are created to win games while business are created to sell
goods and services. Each of this purpose can be achieved if the tasks of the
organization as a whole must fist were determined.
4. Dividing the total load into activities that can logically and comfortably be
performed by one person or by a group of individuals. Organizations are created
because one person alone cannot perform the work they are meant to accomplish.
Thus, the work of the organization must be appropriately divided among its members.
5. Combining the work of the organization's members in logical and efficient manner.
As an organization expands in size and hires more people to perform various
activities, it becomes necessary to group individuals whose assigned tasks are related.
Sales, human resources, production, accounting and marketing are some typical
departments in manufacturing organizations.

4. Setting up a mechanism to coordinate the work of organization members into
unified, harmonious whole. As individuals and departments carry out their
specialization activities, the overall goals of the organization may become submerged
or conflicts between organization members may develop. Coordinating mechanism
enable members of the organization's to keep sight of the organization's goals and
reduce inefficiency and harmful conflicts.
5. Monitoring the effectiveness of the organization and making adjustments to

maintain or increase effectiveness. Because organizing is an on-going process,
periodic reassessment of the four preceding steps is necessary. As organizations grow
and situations change, the organization's structure must be evaluated to be sure it is
consistent with effective and efficient operation to meet present needs.
Elements of organizational structure

1. Specialization of Activities refers to the specification of individual and group work
tasks throughout the organization and the aggregation of this task into work units.
2. Standardization of activities refers to the procedure used by the organization to
ensure the predictability of its activities. Many of these procedures are established by
formalizing the activities of the relationships within the organization. To standardize
is to make uniform and consistent.
3. Coordination of activities refers to the procedures that integrate the functions of
submits within the organization.
4. Coordination of activities refers to the location of decision-making power. In a
centralized organizational structure, a single individual makes decisions at high level
by top managers or even. In a decentralized structure, the decision making power is
dispersed among more individuals at middle and at lower management levels.
5. Size of the work unit refers to the number of employees in a work group.
Determinants of Organizational Structure

1. Strategy and organizational structure: According to Alfred D. Chandler says that
"structure follows strategy," it means that the mission and overall goals of
organizations will help shape its design. Strategy will determine how the lines of
authority and channels of communications are set up between various managers and
submits. It will influence the information that flows along those lines, as well as the
mechanisms for planning and decision making.
2. Technology as a determinant of structure: The nature of the technology used in an
organization to create its products also influences that way organization is set up.
Technology also influences the coordination of mechanism the level at which
decisions are made, and the size of organizational units.
3. People as a determinant of structures: The people involved in the organization's
effect its structure. Managers make decisions relating to the lines of communication
and authority and the relationship between work units. In making these decisions,
managers are influenced by their own need to work with each other in specific ways,
must also be taken into account when work units are set up and tasks allocated. In
addition, people outside, the organization influences its structure, which provide for

regular interactions with clients or customers, suppliers, and others in the external
environment.
4. Size and structure: Both the overall size of an organization and the size of its sub-
units influence its structure. Larger organizations tend to have greater specification of
activities and more formalized procedures.
The Organizational Chart:

As company grows, the number of work units and submits' increases and layers of
supervision are added. Managers and subordinates alike become further removed from the
eventual results of their actions. They need a clear understanding of how their activities fit into
larger picture of what the organization is and does. Most organizational structures are too
complex to be conveyed verbally. To show the organization's structure, managers customarily
draw up an organization chart, which diagrams the functions, department, or position of the
organization and shows how they are related. The organization chart illustrates five major aspects
of an organization's structure. They are:
1. The division of work
2. Managers and Subordinates
3. The type of Work Being Performed
4. The Grouping of Work Segments
5. The Levels of Management
The three Major Formal Organizational Structure
A. Functional Organization is perhaps the most logical and basic form of

departmentalization. It is used mainly by smaller firms that offer a limited line of
products, because it makes efficient use of specialization resources.
Advantages:
1. Suited to a stable environment
2. Fosters development of expertise
3. Offers colleagues for specialists
4. Requires little internal coordination
5. Requires fewer interpersonal skills
Disadvantages:
1. Slows response time in large organizations
2. Causes bottlenecks due to sequential task performance
3. Does not encourage innovation; has narrow perspective
4. Fosters conflicts over product priorities
5. Does not foster development of general managers
6. Obscure responsibility for the overall task.

B. Product/ market Organization is used by large, multiproduct companies such as General
Motors. When a company departmentalization becomes too complex for the functional
structure, top managers will generally create semiautonomous divisions, each of which
designs, produces, and makes its own products. A product or market organization can follow
one of the three major patterns:
1. Division by product
2. Division by geography
3. Division by customers
Advantages:
1. Suited to fast change
2. Allows for high product visibility
3. Allows full-time concentration on tasks
4. Clearly defines responsibilities
5. Permits parallel processing of multiple tasks
6. Facilitates the training of general managers
Disadvantages:
1. Fosters politics in resouce allocation
2. Does not foster coordination of activities among divisions
3. Encourages neglect of long-term priorities
4. Permits in-depth competencies to decline
5. Creates conflict between divisional tasks and corporate priorities.

C. Matrix Organization attempts to combine
Product/ Market Organization while avoiding
employees have two superior - that is they are the benefits of Functional Organization and
their drawbacks. In a matrix organization, the
under dual authority.

Advantages:
1. Gives flexibility to organization
2. Stimulates interdisciplinary cooperation
3. Involves and challenges people
4. Develops employee skills
5. Frees top management for planning
6. Motivates people to identify with end product
7. Allows experts to be moved to crucial areas as needed.
Disadvantages:
1. Risks creating a feeling of anarchy
2. Encourage power struggles
3. May lead to more discussions than action
4. Requires high interpersonal skills
5. Is costly to implement
6. Risk duplication of effort by project teams
7. Affects morale when personnel are rearranged.
MANAGERIAL LEADERSHIP
It is the process of directing and influencing the task related activities of group members.
Three important implication of the definition above. First, Leadership must involve people -
subordinates or followers. By willingness to accept directions from the leaders, group members
help define the leader's status and make the leadership process possible. Without subordinates, all
the leadership qualities of manager would be irrelevant. Second, Leadership involves an
unequal distribution of power among leaders and group members. Leaders have the authority
to direct some of the activities of group members who cannot similarly direct the leader's
activities. Nonetheless, group members will obviously affect those activities in a number of
ways. Third, Leaders also influence subordinates in a variety of other ways.

Influence are actions or examples that either directly or indirectly cause a change in behavior or
attitude of another group or person.
Power is the ability to exert influence.
Source of Leaders Power

1. Reward Power is based on one person (the influencer) having the ability to reward
another person (the influences) for carrying out orders or meeting other requirements.
2. Coercive Power is the negative side of reward power. If is based on the influencer's
ability to punish the influencee for not meeting requirements. Punishment may range
from loss of a minor privilege to loss of a job. Coercive power is usually used to
maintain a minimum standard of performance or conformity among subordinates.
3. Legitimate Power corresponds to the term authority. This exists when a subordinate
or influencee acknowledges has the " right" or is lawfully entitled to exert influence
within certain bounds. It is also implied that the influncee has an obligation to accept
this power.
4. Expert Power is based on the perception or belief that the influencer has some
relevant expertise or special knowledge that the influncee does not.
5. Referent Power is based on the influencee's desire to identify with or imitate the
influencer. This can be held by a person or a group of person. Referent power also
functions at peer level - charismatic colleagues may sway us to their sides in
department meetings.
Personality and Situational Factors that Influence Effective Leadership
1. The Leader's Personality, Past Experiences, and Expectations. The manager's values,
background, and experiences will affect his or her choice of style. A manager who had
experience success in exercising little supervision or who values the self-fulfillment needs of
subordinates may adopt an employee oriented style of leadership. While, a manager who
distrusts subordinates or who simply likes to manage all work activities directly may adopt a
more authoritarian role. In short, managers develop the leadership style with which they are
most comfortable.
2. Superiors Expectation's and Behavior. The leadership style that a manager's superiors
approve is very important in determining the orientation a manager will select. Because of
the power of superiors to dispense organizational rewards, such as bonuses and promotions,
superiors clearly will affect the behavior of lower level managers. In addition, lower level
managers tend naturally to model themselves after their superiors.
3. Task Requirements. The nature of subordinates' job responsibilities will also affect the type
of leadership style a manager will use.

4. Peers' Expectations and Behavior. One's fellow mangers are an important reference group.
Managers form friendships with their colleagues in the organization, and the opinions of
these colleagues matter to them. And the attitude of a manager's peers can often affect how
effectively the manager performs.
5. Subordinates' Characteristic, Expectations, and Behavior. Subordinates play a critical role
in influencing the manager's leadership style. They are, after all, the people whom that style
is supposed to affect. Ultimately, the response of subordinates to the manager's leadership
determines how effective the manager will be.
6. Organizational Culture and Policies. The culture of an organization shapes both the leaders
behavior and the expectations of subordinates. The stated policies of the organization also
affect a manager's leadership style.
MANAGEMENT CONTROL
Is the process through which managers assure that actual activities conformed to planned
activities.
Management Control is a systematic effort to set performance standards with planning
objectives, to design information feedback systems, to compare actual performance with these
predetermined standards, to determine whether there are any deviations and to measure their
significance, and to take any action required to assure that all corporate resources are being used
in the most effective and efficient way possible in achieving corporate objectives.
Basic Steps in the Control Process:
1. Establish Standard and Methods for Measuring Performance. This step involve standards
and measurements for everything from sales and production targets to worker attendance and
safety records. For this step to be effective, the standards must be specified in meaningful
terms and accepted by the individuals involved. The methods of measurement should also be
accepted as accurate.
2. Measure the Performance. Like all aspects of control, this is an ongoing, repetitive process
with the actual frequency dependent on the type of activity being measured.

3. Measure the Performance Match the Standards. This is the easiest step in the control
process. It is just a matter of comparing measured results with the targets or standards
previously set. If performance matches the standards, managers may assume that "everything
is under control".
4. Take corrective action. This corrective action may involve a change in one or more activities
of the organization's operation, or it may involve a change in the standards originally
establish.
Organizational Factors Creating the Need for Control
1. Change. Even in the most stable industries, change is an inevitable. This is because market
shifts, new product emerge, new materials are discovered, new regulations are passed, etc.
2. Complexity. Today's vast organizations require a much formal and careful approach.
Diversified product lines must be watched closely to ensure that quality and profitability are
maintained, sales in retailed outlets need to be recorded accurately and analyzed and the
organization's various markets, foreign and domestic, require close monitoring.
Decentralization also cause complexity today organization's.
3. Mistakes. If superiors and subordinates never made mistakes, managers could simply
establish performance standards and note significant and unexpected changes in the
environment. But organization members do make mistakes thus a control system allows
managers to detect these mistakes before they become crucial.
4. Delegation. When managers delegate their authority to subordinates, their responsibility to
their own superiors is not diminished. The only way managers can determined if their
subordinates are accomplishing the tasks that have been delegated to them is implementing a
system of control.
Types of Control Methods
1. Pre-action Control. Pre-action control is called pre-control. This ensure that before an action
is undertaken the necessary human, materials, and financial resources have been budgeted.
When thee time for action occurs, budgets make sure the requisite resources will be available
in the types, quality, quantities, and locations needed.
2. Steering Control. Steering control is also called feed forward controls. They are designed to
detect deviations from some standard or goal and to allow corrections to be made before a
particular sequence of actions is completed. Steering control is effective only is effective
only if the manager is able to obtained timely and accurate information about changes in the
environment or about progress toward the desired goal.
3. Yes/ No or Screening Control. Yes/ no provides a screening process in which specific aspects
of a procedure must be approved or specific conditions met before operations may continue.
4. Post-action Control. As the term suggests, post-action controls measure the results of a
completed action. The causes of any deviation from the plan or standard are determined and
the findings are applied to similar future activities. Post-action controls are also used as a
basis for rewarding or encouraging employees.

Characteristic of Effective Control Systems
1. Accurate
2. Timely
3. Objective and Comprehensible
4. Focused on Strategic Control Points
5. Economically Realistic
6. Organizationally Realistic
7. Coordinated with the Organization's work Flow
8. Flexible
9. Prescriptive and Operational
10. Accepted by Organization Members
RELATIVE AMOUNT OF TIME THAT MANAGERS SPEND ON

THE FOUR MANAGERIAL FUNCTIONS
Prepared by:
Group 1
LEADER:
Shiela Marie M. Afable
MEMBERS:
Aireen C. Abasolo
Jordan D.
Baldesco
Sheena Marjorie P.
Cabidog Nemesia Y.
Capalar Marlou B.
Comeo
Jerimae G. Daep
Aldrin Jade A.
Faller Allison M.
Getubig Christian
G. Luares Jeinevie
T. Maurillo Mary
Chris Olivar Rica
Y. Palconit
Jean Rose L. Quintana
Kenneth John Z.
Villamor BSCE 4B
CLASSICAL SCHOOL OF THOUGHT
INTRODUCTION
 Management has been practiced for a long period of time with people
responsible for planning, organizing, leading, and controlling activities.
 Management as a practice gained ground when the concept of working

together in groups to achieve common objectives was realized by men. But
the study of management as a systematic field of knowledge began at the
advent of the Industrial Revolution, which ushered in a new era of serious
thinking and theorizing on management.
EARLY MANAGEMENT
1. Ancient Times
There are projects of tremendous scope, employing tens of thousands of
people, were completed in ancient times.
 Egyptians pyramids and the Great Wall of China
 City of Venice, which was a major economic and trade center in

the 1400s
 The Venetians developed an early form of business enterprise
and engaged in many activities common to today’s
organization:
o Warships were floated along the canals and at each stop,
material and riggings were added to the ship.
o Venetians used warehouse and inventory systems to keep
track of materials, human resource management
functions to manage the labor force, and an accounting
system to keep track of revenues and cost.
2. Division of Labor and Adam Smith
Published The Wealth of Nations in 1776 in which he
claimed the economic advantages that
organizations and society would gain from the
division of labor or job specialization – breaking
down jobs into narrow and repetitive tasks.
3. Industrial Revolution
Started in the late 18th century
when machine power was substituted
for human power; when agricultural
societies became more industrialized
and urban
It became more economical
to manufacture goods in factories
rather than at home
Large efficient factories
needed managers to forecast
demand, ensure that enough
material was on hand to make
products, assign tasks to people,
direct daily activities, and so forth.
Managers would need formal
theories to guide them in running
these large organizations.
The first steps toward
developing such theories were
taken in 1900s.
CLASSICAL SCHOOL OF THOUGHT
 Developed during the Industrial Revolution when new problems related to

the factory system began to appear. Managers were unsure of how to
train employees (many of them non‐English speaking immigrants) or deal
with increased labor dissatisfaction, so they began to test solutions.
 Body of management thought based on the belief that employees have

only economical and physical needs, and that social needs and need
for job‐ satisfaction either do not exist or are unimportant.
 As a result, the classical management theory developed from efforts to
find the “one best way” to perform and manage tasks
 Dominated management thinking in the 1920s and 1930s by

emphasizing rationality and the efficiency of the work process.
 Has three theories:

1. Scientific Management, which identifies the best way to do a line
of work
2. Administrative Management, which emphasizes the flow
of information within the organization
3. Bureaucratic Management, which focuses on rules and
procedure, hierarchy and clear division of labour
Scientific Management
 The classical scientific branch arose because of the need to increase

productivity and efficiency. The emphasis was on trying to find the best
way to get the most work done by examining how the work process was
actually accomplished and by scrutinizing the skills of the workforce.
 Scientific management, according to an early definition, refers to that

kind of management which conducts a business or affairs by standards
established by facts or truths gained through systematic observation,
experiment, or reasoning. Advocators of this school of thought attempted
to raise labor efficiency primarily by managing the work of employees on
the shop floor.
 Contributors:
 Frederick Winson Taylor
 born March 20, 1856, Philadelphia,
Pennsylvania, U.S.—died March
21, 1915, Philadelphia
 American inventor and engineer
 Father of Scientific Management
 His system of industrial
management has influenced the
development of virtually every
country enjoying the benefits of
modern industry
 Believed that organizations should
study tasks and develop precise
procedures
 Taylor’s approach was to increase
organizational productiveness by
increasing the efficiency of the production process through
emphasizing on the empirical research.
 Taylor’s management theory is founded upon a fundamental belief
that managers not only are intellectually better than an average
employee, but they have a positive duty as well to oversee staff and
to organize their work activities. Therefore, his theory was only used
on low‐level repetitive and routine tasks which could be easily
managed at supervisory level.
 Taylor developed four principles for his theory of Scientific
Management:
1. Develop a science for each element of individual’s work to
replace the old rule‐of‐thumb method.
2. Scientifically select and then train, teach, and develop the
worker
3. Heartily cooperate with the workers so as to ensure that all
work is done in accordance with the principles of the science
that has been developed
4. Divide work and responsibility almost equally between the
management and workers. Management does all work for
which it is better suited than the workers.
 Henry Laurence Gantt (1861 – 1919)
 An associate of Taylor's
 An American engineer and famous
management consultant
 He was best known for his
planning methodology, the Gantt Chart.
This methodology helped him realize
major infrastructure projects including
the construction of the Hoover Dam in
the United States.
 Developed the Gantt chart, a bar
graph that measures planned and
completed work along each stage of
production. Based on time instead of
quantity, volume, or weight, this visual
display chart has been a widely used
planning and control tool since its
development in 1910
Example of Gantt Chart:
 Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1972)
 Frank Gilbreth, a construction contractor by trade, gave up that

career to study scientific management after hearing Taylor speak at
a professional meeting.
 Frank and his wife Lillian, a psychologist, studied work to
eliminate inefficient hand‐and‐body motions.
 Further improvised on Taylor’s time studies, devising motion studies
by photographing the individual movements of each worker.
 In Frank's early career as an apprentice bricklayer, he was
interested in standardization and method study. He watched
bricklayers and saw that some workers were slow and inefficient,
while others were very productive.
 Frank isolated the basic movements necessary to do the job and
eliminated unnecessary motions.
 They carefully analyzed the motions and eliminated unnecessary
ones. These motion studies were preceded by timing each task, so
the studies were called time and motion studies.
 Developed the microchronometer to time worker motions and
optimize performance. Wasted motions missed by the naked eye
could be identified and eliminated.
 Application to Modern Management

 Many of the guidelines and techniques that Taylor and the Gilbreths
devised for improving production efficiency and are still used in
organizations today. When managers analyze the basic work tasks
that must be performed, use time‐and‐motion study to eliminate
wasted motions, hire the best‐qualified works for a job, or design
incentive systems based on output, they are using the principles of
scientific management.
Administrative Management
 The classical administrative approach concentrates on the total organization.
 It is focused more on what managers do and what constituted good

management practice.
 While pioneers of the scientific management tried to determine the best

way to perform a job, those in the administrative management explored the
possibilities of an ideal way to put all jobs together and operate an
organization. Thus, the emphasis of administrative or general management
theory is on finding ‘the best way’ to run an organization.
 Attempts to find a rational way to design an organization as a whole. The

theory generally calls for a formalized administrative structure, a clear
division of labor, and delegation of power and authority to administrators
relevant to their areas of responsibilities.
 Contributors:
1. Henri Fayol (1841-1925)
 Born in France, where he worked for a coal‐mining business

 French mining engineer and director who developed a general theory
of business administration and was one of the most influential
contributors to modern concepts of management
 He is considered as the “Father of Modern Management”
 Fayol first identified the five functions that managers perform:
1. Planning: Planning is forecasting the future and making a
structural plan of action and determining the goals and
objectives of the action. Fayol considers planning as most
essential function.
2. Organizing: Organizing is the creation of an organizational
structure which brings human resources and non‐human
resources together to work together.
3. Commanding: The process of giving direction and orders by the
superior to the subordinate is known as commanding.
4. Coordinating: There are various divisions in an organization. So,
coordinating is the process of bringing the action of all the
divisions and departments and integrating their efforts for the
fulfillment of organizational goals .
5. Controlling: Controlling means comparing the actual
performance of the organization with the desired performance
level and checking if there is the need for improvement and
when a deviation is found implementing the necessary changes
to improve the performance.
 While Taylor was concerned with first‐line managers and the
scientific method, Fayol’s attention was directed at the activities of
all managers.
 H. Fayol observed the organization from a manager’s point of view.
He identified six major activities in which industrial activities can
be divided. They are:
1. Technical activities: This activity is related to the production or
manufacturing of goods and services.
2. Commercial activities: This activity is concerned with the
marketing dealing with sales, purchase, and distribution of
goods and services.
3. Financial activities: This activity is related to the creation of

necessary capital and its optimum use for development and
growth.
4. Accounting activities: This activity is related to the recording of
transactions and then preparing the financial statements.
5. Managerial activities: This activity is considered with the
elements of management which are planning, organizing,
commanding, coordinating and controlling.
6. Security activities: This activity is related to the protection of
people and property in an organization by providing safe working
condition, insurance policies etc.
 Fayol has focused on the role of a manager. He believes that anyone

cannot be a manager. A manager needs some skills and qualities to
manage people and resources in an organization. The six managerial
skills are:
1. Physical qualities: This quality is concerned with the good

health, well‐maintained dress and outlook and high energy level
of the manager.
2. Mental qualities: To become a good manager they must possess
the quality to learn and understand, judge and adapt to the
problems and should have the mental energy to focus.
3. Educational qualities: To become a sound manager, one needs
to have a general understanding of the subject matter of the
basic functioning of the organization.
4. Moral qualities: To become a good manager, one needs to have
high energy level, willingness to take responsibilities, loyal to
action, tactful and feeling of dignity.
5. Technical qualities: One needs to have technical knowledge
regarding what are the procedures to carry out the action in an
organization.
6. Experience: Experience comes with years of practice of an
action. So a good manager needs years of experience to work
smoothly and efficiently.
 His belief that management was an activity common to all business

endeavors, government, and even the home led him to develop 14
principles of management.
1. Division of work ‐ Employees are specialized in different areas

and they have different skills. Different levels of expertise can
be distinguished within the knowledge areas (from generalist to
specialist). According to Henri Fayol specialization promotes
efficiency of the workforce and increases productivity. In
addition, the specialization of the workforce increases their
accuracy and speed.
2. Authority ‐ The accompanying power or authority gives the

management the right to give orders to the subordinates.14
Principles of Henry Fayol
3. Discipline ‐ This third principle of the 14 principles of

management is about obedience. It is often a part of the core
values of a mission and vision in the form of good conduct and
respectful interactions 14 principles of management
4. Unity of command ‐ Every employee should receive orders from

only one superior or behalf of the superior.
5. Unity of direction ‐ Each group of organizational activities that

have the same objective should be directed by one manager
using one plan for achievement of one common goal.
6. Subordination of Individual Interest ‐ The interests of any one

employee or group of employees should not take precedence
over the interests of the organization as a whole.
7. Remuneration ‐ All workers must be paid a fair wage for their

services.
8. Centralization ‐ Centralization refers to the degree to which

subordinates are involved in decision making.
9. Scalar chain ‐ The line of authority from top management to the

lowest ranks represents the scalar chain. Communications
should follow this chain.
10. Order ‐ this principle is concerned with systematic arrangement
of men, machine, material etc. There should be a specific place
for every employee in an organization
11. Equity ‐ Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel ‐ High employee turnover is

inefficient. Management should provide orderly personnel
planning and ensure that replacements are available to fill
vacancies.
13. Initiative ‐ Employees who are allowed to originate and carry

out plans will exert high levels of effort.
14. Esprit de corps ‐ Promoting team spirit will build harmony and
unity within the organization.
2. Mary Parker Follett (1868-1933)
 Stressed the importance of an

organization establishing common
goals for its employees
 However, she began to think
somewhat differently than the
other theorists of her day,
discarding command‐style
hierarchical organizations where
employees were treated like
robots. She began to talk about
such things as ethics, power, and
leadership.
 She encouraged managers to
allow employees to participate in
decision making. She stressed the
importance of people rather than
techniques — a concept very
much before her time. As a result,
she was a pioneer and often not
taken seriously by management
scholars of her time.
 But times change, and innovative ideas from the past suddenly take
on new meanings. Much of what managers do today is based on the
fundamentals that Follett established more than 80 years ago.
3. Chester Barnard (1886-1961)
 President of New Jersey Bell

Telephone Company
 Introduced the idea of the informal
organization
 He felt that these informal
organizations provided necessary
and vital communication functions
for the overall organization and that
they could help the organization
accomplish its goals.
 According to Barnard, organizations
are not long‐lived because they do
not meet the two criteria necessary
for survival: effectiveness and
efficiency.
o Effectiveness ‐ being able to accomplish stated goals.
o Efficiency ‐ as the degree to which that organization is able to
satisfy the motives of the individuals
 If an organization satisfies the motives of its members while attaining
its explicit goals, cooperation among its members will last.
 The Functions of Executive:
o Establishing and maintaining a system of communication;
o Securing essential services from other members;
o Formulating organizational purposes and objectives.
o To manage people and make sure they do their jobs
 Authority and Incentives:
o Barnard felt that it was particularly important for managers to
develop a sense of common purpose where a willingness to
cooperate is strongly encouraged. He is credited with developing
the acceptance theory of management, which emphasizes the
willingness of employees to accept that managers have
legitimate authority to act.
o He proposed two ways of convincing subordinates to cooperate:
tangible incentives and persuasion.
4. James D. Mooney (1884-1957) and Alan C. Reiley
James D. Mooney
 Studied mechanical engineering and eventually became a key

member of General Motors' top management team.
 In 1931, Mooney and Reiley wrote Onward Industry! The book is
considered by many scholars to be a significant contribution to
administrative management theory.
 Organization is the form of every human association for the
attainment of a common purpose.
 3 major principles:
1. Coordination is the orderly arrangement of group efforts, to
provide unity of action in the pursuit of a common purpose.
Known as the master principle, involves an organization
coordinating the tasks of multiple workers in order to accomplish
their organizational objectives. As coordination is the all‐
inclusive principle of organization it must have its own principle
and foundation in authority, or the supreme coordination power.
Always, in every form of organization, this supreme authority
must rest somewhere, else there would be no directive for any
coordinated effort.
2. Scalar Principle refers to the principle of hierarchy, which was a
term first utilized by Fayol. Tasks are assigned based on levels of
authority arranged vertically in the organization. It is created by
delegating, which entails authority from a higher official to a
lower official.
“The subordinate is always responsible to his immediate supervisor
for doing the job, the superior remains responsible for getting it
done, and this same relationship, based on coordinated
responsibility, is repeated
up to the top leader, whose authority makes him responsible for
the whole”.
3. Functional Principle focuses on horizontal differences based on

types of tasks. It identifies the method of each individual’s work
duties and how they contribute to the organization’s goals.
 Line and staff principle refers to the creation of staff
units to advise or support line authorities in the
performance of their duties.

 Administrative management is about managing information through
people. Information is central to all management processes and people
are the resources who make best use of that information to add value.
Most working professionals and all managers have some element of
administrative management in their jobs.
 Fayol’s 14 principles serve as a frame of reference from which many
current management concepts – such as managerial authority,
centralized decision making, reporting to only one boss.
Bureaucratic Management
 Bureaucracy refers to the management of large organizations characterized

by hierarchy, fixed rules, impersonal relationship, rigid adherence to
procedures, and a highly specialized division of labor.
 “Bureau” and “Kratos” refers to the Greek suffix “kratia or kratos”; means
power or rule
 Contributors:
1. Max Weber (1864–1920)
 German Sociologist and political economist

 Finished his studies at the University of Berlin
and earning his doctorate in 1889 joining the
University of Berlin’s faculty, lecturing and
consulting for the government
 Appointed professor of economics at the
University of Freiburg (1894) and the University
of Heidelberg (1896)
 According to him, bureaucracy is the most
efficient form of government.
 Believed that all bureaucracies have the
following characteristics:
1. A well-defined hierarchy. All positions within a bureaucracy are
structured in a way that permits the higher positions to supervise and
control the lower positions. This clear chain of command facilitates
control and order throughout the organization.
2. Division of labor and job specialization. All responsibilities in an
organization are specialized so that each employee has the necessary
expertise to do a particular task. Jobs are divided into simple,
routine and fixed category based on competence and functional
specialization.
3. Rules and regulations. Standard operating procedures govern all
organizational activities to provide certainty and facilitate
coordination and to ensure uniformity.
4. Impersonal relationships between managers and employees.
Managers should maintain an impersonal relationship with employees
so that favoritism and personal prejudice do not influence decisions.
Biasness and favouritism are not preffered.
5. Competence. Competence, not “who you know,” should be the basis
for all decisions made in hiring, job assignments, and promotions in
order to foster ability and merit as the primary characteristics of a
bureaucratic organization. All organization members are to be
selected on the basis of technical qualifications and competence
demonstrated by training, education or formal examination.
6. Career Orientation. Employees of a bureaucratic organization are
selected on the basis of their expertise. This helps in the deployment
of the right people in the right positions and thereby optimally
utilising human capital. It is possible to build a career on the basis of
experience and expertise. As a result, it offers lifetime employment.
The bureaucratic organization also allows employees to specialise
themselves further, so that they may become experts in their own
field and significantly improve their performance. They work for a
fixed salaried and pursue their career within the organization.
 3 Types of Power that can be found in organizations:

 Traditional Power
 Charismatic Power
 Legal Power
 Advantages of Bureaucracy
1. The rules and procedures are decided for every work; it leads to
consistency in employee behavior.
2. The duties and responsibilities of each job are clearly defined, there
is no question of overlapping or conflicting job and duties.
3. The selection process and promotion procedures are based on merit
and expertise. It assists in putting right persons on right jobs. There
is optimum utilization of human resources.
4. The division of labor assists workers in becoming experts on their
jobs. The performance of employees improves considerably.
5. The enterprise does not suffer when some persons leave it. If one
person leaves then some other occupies that place and work does not
suffer.
 Disadvantages of Bureaucracy
1. The system suffers from too much of red tape and paper work.
2. The employees do not develop belongingness to the organization.
3. The excessive reliance on rules and regulations and adherence to
these policies inhibit initiative and growth of the employees. They
are treated like machines and not like individuals. There is neglect of
human factor.
4. The employees become so used to the system, they resist to any
changes and introduction of new techniques of operations.

 Weber’s bureaucracy was an attempt to formulate an ideal prototype
for organizations. Although many characteristics of Weber’s
bureaucracy are still evident in large organizations, his model is not
as popular today as it was in the past. Many managers feel that a
bureaucratic structure hinders individual employee’s creativity and
limits an organization’s ability to respond quickly to an increasingly
dynamic environment. However, some bureaucratic mechanisms are
necessary to endure that resources are used efficiently and
effectively.
ADVANTAGES AND DISADVANTAGES OF CLASSICAL SCHOOL OF THOUGHT
ADVANTAGES
 Hierarchical Structure
 One of the advantages of the classical management structure is a
clear organizational hierarchy with three distinct management
levels. Each management group has its own objectives and
responsibilities. he levels of leadership and responsibilities are
clear and well defined.
 Division of Labor
 Projects are broken down into smaller tasks that are easy to
complete. Employees' responsibilities and expectations are clearly
defined. This approach allows workers to narrow their field of
expertise and to
specialize in one area. The division of labor approach leads to
increased productivity and higher efficiency, as workers are not
expected to multitask.
 Monetary Incentive
 According to classical management theory, employees should be
motivated by monetary rewards. In other words, they will work
harder and become more productive if they have an incentive to
look forward to. This gives management easier control over the
workforce. Employees feel appreciated when being rewarded for
hard work.
 Autocratic Leadership
 It states that an organization should have a single leader to make
decisions, to organize and direct the employees. All decisions are
made at the top level and communicated down. The autocratic
leadership approach is beneficial in instances when small‐business
decisions need to be made quickly by a leader, without having to
consult with a large group of people, such a board of directors.
DISADVANTAGES
 The main weakness of the classical management theory arose from its
tough, rigid structure. One of the main principles of the classical
management theory is to increase productivity and efficiency;
however, achieving these goals often came at the expense of
creativity and human relations.
 Failure to Consider the Informal Organization
 Their basic assumption is that workers are primarily motivated by
money and that they work only for more money. These assumptions
fail to recognize that employees may have wants and needs
unrelated to the workplace or may view their jobs only as a
necessary evil. For instance, Taylor's and Fayol's work came
primarily from their experiences with large manufacturing firms
that were experiencing stable environments.
 Human Machinery
 Classical theories leave the impression that the organization is a
machine and that workers are simply parts to be fitted into the
machine to make it run efficiently.
 Reliance on Experiences
 Many of the writers in the classical school of management
developed their ideas on the basis of their experiences as managers
or consultants with only certain types of organizations.
 A heavy emphasis on rules and regulations may cause people to
obey rules blindly without remembering their original intent.
Thus, many of the principles are concerned first with making the
organization efficient, with the assumption that workers will
conform to the work setting if the financial incentives are
agreeable.
 Unintended Consequences
 Classical approaches aim at achieving high productivity, at
making behaviors predictable, and at achieving fairness among
workers and between managers and workers; yet they fail to
recognize that several unintended consequences can occur in
practice. It may be unwise to generalize from those situations to
others‐especially to young, high‐ technology firms of today that
are confronted daily with changes in their competitors' products.
 Static Conditions
 Organizations are influenced by external conditions that often
fluctuate over time, yet classical management, theory presents
an image of an organization that is not shaped by external
influences.
 It was assumed that all humankind could do was to adapt to the
rapidly changing conditions. Second, it took place when
technology was undergoing a rapid transformation, particularly in
the area of manufacturing. It is likely that many important
factors affecting satisfaction and performance, such as letting
employees participate in decision making and task planning, will
never be explored or tried.
SOURCES:
WEB
https://content.wisestep.com/advantage-disadvantage-scientific-management-theory/
http://ezinearticles.com/?Weaknesses-of-the-Classical-Management-Theories&id=5322747
https://managementmania.com/en/henri-fayol
https://smallbusiness.chron.com/advantages-benefits-classical-management-theory-37990.html
https://www.britannica.com/biography/Frederick-W-Taylor
https://www.cliffsnotes.com/study-guides/principles-of-management/the-evolution-of-management-
thought/classical-schools-of-management
https://www.history.com/topics/industrial-revolution
https://www.slideshare.net/ismailhossen5059/administrative-management-lec-4
https://www.toolshero.com/toolsheroes/henry-gantt/ https://www.toolshero.com/management/bureaucratic-
theory-weber/
https://www.tutorialspoint.com/management_principles/management_principles_classical_schools_thought.
htm
https://www.ukessays.com/essays/business/classical-management-theory-humanistic-contingency.php
https://www.ukessays.com/essays/business/three-schools-of-thought-of-classical-management-theory-
business-essay.php
BOOK
Robbins, Stephen P. and Mary Coulter. Management, 11 th Edition. Pearson Education Limited.
Page 1 of 30
Eastern Visayas State University Tacloban City- Main Campus

Department of Civil Engineering
ASSIGNMENT
IN
MGT 102
(ENGINEERING
MANAGEMENT)
GROUP 2
Leader: Beloy, Jeffrey H.
Members: Heguillena, Sincere
Adina, Bryan Macasusi, Arnel
Apresto, Jay Alexter Navarro, Shekinah
Cabornay, Ma. Elaiza Openion, Abegail
Carolino, Maria Noralyn Panao, Frenz Nikko
Comique, Anna Mae Dave
Dugos, Marjorie Relosa, Manilyn
Gagarino, Nina Yubal, John Ray
Dr. Danilo B. Pulma, dm

Instructor
Prepared by: GROUP 2

Page 2 of 30
NEO- CLASSICAL SCHOOL OF THOUGHT
1920’s to 1950’s
The neoclassical school of thought encompasses approaches and theories that focus on the human
side of an organization. There are two main sources of neoclassical theory: The Human Relations
Approach and the Behavioral Science Approach. The human relations movement arose from
the work of several sociologists and social physiologists who concerned themselves with how
people relate and interact within a group. The behavioral science movement came from various
psychologists who focused on the individual behavior of employees.
Neo-classical Era – The Human Relations Approach

The human relations theory of management began development in the early 1920's
during the industrial revolution. This approach deals with the factors which encourage higher
performance on the part of workers. The improvement of working conditions, lowering of hours
of work, improvement of social relations of workers, besides monetary gains help in increasing
productivity.
The contributions of some thinkers in this approach are discussed herein below.
A. George Elton Mayo

(26 December 1880 – 7 September 1949)
- Known as the ‘Father of Human Relations Movement’.
- Married to Dorothea McConnel (married 18 April 1913) having children namely;

Patricia and Gael.
- An Australian psychologist, an industrial researcher and an academic
organizational management scientist.

Page 3 of 30
7. After attending several schools in Australia without finishing, George Elton

Mayo started a study philosophy and psychology at the University of Adelaide in 1907.
8. He then graduated with honours 1910 (B.A.) and also won the Roby
Fletcher prize in psychology. After that, he also got his Master degree (M.A.) in 1926.
9. After graduation, Elton Mayo stayed connected to the scientific world
and became in 1911 foundation lecturer in philosophy at the new University of
Queensland.
10. Between 1919 and 1923 Elton Mayo held the first chair of philosophy. After
1923 his focus shifted to Industrial research and became professor at the Harvard Business
School.
11. His first ground breaking research involved workers that

worked at a textile mill. The high rate of turnover had a big influence on their mental
abnormalities. Elton Mayo helped them by the introduction of rest periods which
lead to great results and recognition, which then became the foundation for the
human relations theory and his book The Human Problems of an Industrialized
Civilization (1933).
12. His research between the 1920’s and 1930’s showed the importance of
groups in affecting the behavior of individuals at work. His principles and ground
rules are still repeatedly used today in numerous of “how” books on leadership,
management and mentoring. Elton Mayo continued his research and lectures as a
professor of industrial research and stayed connected to the Harvard Business School
until 1947.
13. When he retired in 1947, he moved from Harvard to the United
Kingdom. Elton Mayo died in 1949 during the effects of excessively smoking and
suffering from chronic hypertension.
Features of Elton Mayo’s Human Relations Approach:

The main features of the Human Relations Approach to management are the following:
5. Since management is getting things done through and with people, a manager must have
a basic understanding of human behaviour in all respects—particularly in the context of
work groups and organisations.
6. The managers must study the inter-personal relations among the people at work.
7. Larger production and higher motivation can be achieved only through good human
relation.
8. The study of management must draw the concepts and principles of various
behavioural sciences like Psychology and Sociology.
Contribution of Elton Mayo to Management Thought:

Elton Mayo conducted the famous ‘Hawthorne Experiments’ at the Hawthorne plant of
the Western Electric Company in the USA during 1927-32 with his associates. These
experiments are described below:
Page 4 of 30
7. Illumination Experiments:
From these experiments, it was revealed that productivity could be increased not only by
improving the working environment, but also through informal social relations among
the members of the working group.
6. Relay Assembly Test Room Experiment:

In this experiment a small homogeneous working group was constituted. Several new
elements were introduced in the work environment such as—shorter working hours, proper
rest periods, improved physical conditions, friendly supervision, free social interaction among
the group members, and so on.
During the period of the experiment, productivity and morale increased. Productivity
and morale were maintained even if the improvements in the working conditions were
withdrawn. The researchers concluded that socio- psychological factors such as the feelings of
being important, recognition, participation, informal work group, non-directive supervision etc.
held the key for higher productivity.
6. Mass Interviewing Programme:

A large number of workers were interviewed to know their perceptions and orientation on
the working life. The results again confirmed the importance of informal relation, social and
psychological needs and their impact on the behaviour of the workers.
6. Bank Wiring Observation Room Experiment:

A group of 14 workers was observed with regard to their work behaviour. The
observation revealed the informal production norms set by the workers and the existence of
informal relations in the group.
The conclusions of the Hawthorne Experiments are pointed out below:

4. A factory is not only a techno-economic unit but a psycho-social organisation also.
5. The workers spontaneously form small informal groups. The norms and values of such
groups have significant influence on the behaviour and performance of the workers.
6. Physical conditions of work have some influence on the workers’ morale and pro-
ductivity. But their inter-personal relations, attitude of the supervisors and other social
and psychological factors have a far greater influence.
7. Usually, the workers act or re-act not as individuals but as the members of a group.
8. The workers are not mere economic men motivated by money alone. They respond to the
total work situation including recognition, participation etc.
9. The informal leaders play an important role in setting and enforcing group norms.
10. The managers must understand and recognise the inter-personal and group relations on
the job.

Page 5 of 30
Mary Parker Follet (September 3, 1868 – December 18, 1993)

5. She was an American social worker, management consultant, philosopher, and
pioneer in the fields of organizational behavior.
6. Along with Lillian Gilbreth, she was one of two great women management experts
in the early days of classical management theory.
7. She has been called the “Mother of Modern Management”
8. One of the most important figures in twentieth century management theory. Her
approach is pragmatic and humanist.
9. Follett’s main concern was the efficient use of people. She used the tool of
psychology to answer various questions.
Contribution to management thought:

Mary Parker Follett, or the "Mother of Modern Management," believed that management
was "the art of getting things done through people.” Though she never managed a for-profit
enterprise, she offered valuable insight on the importance of "powering with" rather than
"powering over," and integrating with employees to solve conflicts.
"Leadership is not defined by the exercise of power but by the capacity to increase the sense
of power among those led," Follett once said. "The most essential work of the leader is to
create more leaders."
Follett practiced these principles of coordination that helped develop her theory of
management:

Page 6 of 30
Direct contact. Direct contact between employees and managers helps organizations avoid
conflict and misunderstandings. Holding regular meetings or discussing assignments in person
is a simple way to practice this principle.
Early stages. Coordination should be learned and mastered straight away. No employee should
feel less important than the next; each has a significant role that compliments the roles of others.
Reciprocal relationship. Every worker, regardless of their level in hierarchy, is responsible for
pulling their weight and integrating with the rest of the organization. No one person should be
trying less or more than another – it's a team effort.
Continuous process. Coordination must be maintained. Don't just learn it and forget about it;
channel it in everything you do.
Known well for her mediating tendencies and managing tactics, Follett created a management
theory that is still in favor today. Its main principals include:
Integration
Follett thought that workers of all levels should integrate to reach the organization's goals. If
conflict arises, there should be a conscious effort to pull instead of push, and to work together as
a team. Because each member is doing their part, overall, they'll be more likely to be content
with result.
Power with
Rather than establishing a strict hierarchy and delegating power to certain individuals over
others, Follett believed that workers should practice co-active power. Powering with their team is
better than powering over them; this way, each member feels just as valued as the next.
This is not to say that hierarchy should be eliminated entirely, however. Structure is still crucial,
but employees should not feel like they are less valuable than their managers.
Group power
Group power should be valued over personal power. Organizations do not exist for one person's
benefit, but rather the entire company of workers. If this selfless mindset prevails, then all
workers will feel like they're on the same team, rather than in competition with each other.
ADVANTAGES AND DISADVANTAGES OF HUMAN RELATION APPROACH

DISADVANTAGES
ADVANTAGES
6. first real attempt to undertake
6. From 1930s -1950s
genuine social research in industrial some doubt was cast on the
setting increased applicability of these
7. individuals cannot
be treated in isolation, but
theories to every day working life
function with group members

8. that individual
motivation did not primarily lie in
monetary or physical condition, but
in need and status in a group

Page 7 of 30
7. the strength of informal

(as opposed to formal) groups
demonstrated a behaviour of workers
(formal supervisors were powerless in
Stage 4)
8. it highlighted need for
supervisors to be sensitive and cater
for social needs of workers within
the group
Neo-classical Era – The Behavioral Science Approach

This approach utilises methods and techniques of social sciences such as psychology,
sociology, social- psychology and anthropology for the study of human behaviour. This approach
advocates that managing an organisation involves getting things done with and through people
and the study of management must be centred around people and their interpersonal relations. It
emphasizes motivation, individual drives, group relations, leadership, group-dynamics etc.
Also, this approach is regarded as a further refinement of human relations movement. It

covered wider aspects in inter-personal roles and responsibilities. It laid emphasis on the
application of the methods and findings of general and social psychology and sociology for
understanding the organisational behaviour.
The contributions of some thinkers in this approach are discussed herein below.
4. Abraham Maslow (1908 – 1970)

C. an American psychologist, developed one of the most widely recognized need theories,
a theory of motivation based upon a consideration of human needs.
D. was concerned with the issue of worker motivation and sought to explain how
workers could be motivated to achieve higher performance.
E. Maslow's hierarchy of needs theory helped managers visualize employee motivation.

Page 8 of 30
7. He stressed the importance of focusing on the positive qualities in people, as

opposed to treating them as a "bag of symptoms."
His theory of human needs had three assumptions:
6. Human needs are never completely satisfied.

7. Human behavior is purposeful and is motivated by the need for satisfaction.
8. Needs can be classified according to a hierarchical structure of importance, from the
lowest to highest.
Maslow broke down the needs hierarchy into five specific areas:
8. Physiological needs. Maslow grouped all physical needs necessary for maintaining basic
human well‐being, such as food and drink, into this category. After the need is
satisfied, however, it is no longer is a motivator.
9. Safety needs. These needs include the need for basic security, stability, protection, and
freedom from fear. A normal state exists for an individual to have all these needs
generally satisfied. Otherwise, they become primary motivators.
10. Belonging and love needs. After the physical and safety needs are satisfied and are no
longer motivators, the need for belonging and love emerges as a primary motivator. The
individual strives to establish meaningful relationships with significant others.
11. Esteem needs. An individual must develop self‐confidence and wants to achieve
status, reputation, fame, and glory.
12. Self‐actualization needs. Assuming that all the previous needs in the hierarchy
are satisfied, an individual feels a need to find himself.

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Douglas-McGregor (1906-1964)
8. McGregor was a social psychologist and professor at Massachusetts Institute
of Technology. U.S.A. He was a leading expert on personal relations.
9. Douglas McGregor is a contemporary of Abraham Maslow. Likewise, he also
contributed much to the development of the management and motivational theory. He is best
known for his Theory X and Theory Y as presented in his book ‘The Human Side of
Enterprise’
(1960), which proposed that manager's individual assumptions about human nature
and behaviour determined how individual manages their employees
10. His famous works included: The Professional Manager, Leadership and
Motivation, The Human Side of Enterprise.
11. An important aspect of McGregor's idea was his belief that

managers who hold either set of assumptions can create self‐fulfilling prophecies — that
through their behavior, these managers create situations where subordinates act in ways
that confirm the manager's original expectations.
12. McGregor, the illustrious sociologist states that two specific view systems
take shape in most managers’ mind in connection with the attitude of employees related
to the world of work. He called the two extreme formulations of the two possible view
systems theory X and Y. In general these view systems are not necessarily shown in their
extreme form, but they determine how a manager looks upon people whom he works with.
The two
‘theories’ can be described with the following few statements.
The approach of theory X (the ‘authoritarian management’ style):
– The average person dislikes work and will avoid it if he/she can.
– Because of their reluctance to work most people must be incentivised. Force, supervision
and direction must be used to achieve that an employee make the expected efforts in order to
achieve the organisational objectives.
– The average person prefers to be directed and to refuse the responsibility of
decision-making.

Page 10 of 30
– The average person has little ambition and wants security above all.
The approach of theory Y (the ‘participative management’ style):
– The physical and intellectual effort is a need which arises from the nature of man,
and which – in ideal conditions – is carried out with pleasure.
– People will apply self-direction and self-control in the pursuit of objectives to which they
have been committed.
– Commitment to objectives is a function of the disirability of the objectives and of the
conviction associated with their achievement.
– The average person, in appropriate circumstances, not only accepts but also
seeks responsibility.
– The average people also have a great number of abilities, which they would like to develop
but which are only partially utilised by conventional management.
The manager who directs his X-type staff according to theory Y commits an obvious mistake.
But the same mistake is made - and this is more often - when a manager wants to direct his Y-
type employees by the X theory. One of the fundamental messages of the X -Y theory is that a
manager is to fit his management model to the needs of the employees.
Hugo Münsterberg (June 1, 1863 – December 16, 1916)

3. was a German-American psychologist. He was one of the pioneers in applied
psychology, extending his research and theories to industrial/organizational (I/O), legal,
medical, clinical, educational and business settings.
4. Father of Industrial Psychology
Applied psychological method to practical industrial problems.
Psychology and Industrial Efficiency (1913)
5. View of I/O psychology,
People need to fit the organization- training!

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Applied behavioural sciences should help organizations to shape people to serve as

replacement parts for organizational machines.
5. Thus established the field of Industrial psyschology.
6. 1. Study jobs and determine which people are best suited to specific jobs.
Identify the psychological conditions under which employees do their best work.
Devise management strategies to influence employees to follow management’s
interests.
Rensis Likert (1903 – 1981)

5. He was an American educator and organizational psychologist best known
for his research on management styles.
6. Likert was the Director of Institute of Social Sciences, Michigan, U.S.A.
He conducted extensive research for fourteen years with the help of 4C researchers in
the field of leadership.
7. Likert’s Management Systems are management styles developed by him
in the 1960’s.
8. He is also famous for developing the 5 point Likert Scale, a
psychometric scale that allows people to respond to questions of interest, in order
to measure people's attitudes (such as personality and attitude tests).
9. His famous writings included: New Patterns of Management (1961) and
Human Organization (1967).
10. He was of the view that traditional job-oriented supervision was
the cause of low productivity and low morale. He suggested participative
management in the field of decision making.
His contribution to management thought is summarised below:
(i) Management Styles:

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Likert developed leadership theories based on his observation of leader behaviour in

business and non-business organisations. According to him, best supervisors focus on
human aspects of subordinates’ problems. He developed four leadership styles;
(a) System 1 (Exploitative-authoritative style):
All decisions are made by top managers. They have no confidence in their subordinates
and the subordinates also, therefore, contribute the minimum to organisational output.
(b) System 2 (Benevolent authoritative style):
Major decisions are made by top managers. Very few decisions are made by people at
lower levels. Leaders have some confidence in subordinates and the subordinates,
therefore, contribute slightly more than system 1 to organisational output.
(c) System 3 (Consultative style):
Leaders have substantial confidence in subordinates. All operating decisions are made at
lower levels. Subordinates’ contribution to organisational output is good.
(d) System 4 (Participative style):
Leaders have complete confidence in subordinates. Managers at different levels make
decisions jointly. Subordinates’ contribution to organisational output is also excellent.
(ii) Behaviour of Leaders:
Best known leaders are generally employee-centered. They help the subordinates by
solving their problems, allow them to participate in decision-making processes, develop
their confidence and merge the individual goals with organisational goals.
(iii) Linking Pins:
In order to integrate individual goals with organisational goals, Likert developed the
concept of linking pins. Linking pins are members of more than one group. They act as
leaders of groups (units) below their units and are members of upper units. They link
each work group with rest of the organisation.
(iv) Theory of Organisation:
If personal needs of employees are satisfied, they are committed towards the
organisational goals and contribute their best to achieve them. This increases
productivity. A satisfied work force creates a productive organisation. Workers should
not be considered as economic means of production. Managers and workers should
support each other and maximise each other’s interests.
(v) Management by Group Objectives:
He advocated the concept of management by group objectives (MBGO) rather than
management by objectives (MBO). He suggested that people should set individual goals
and group goals. Each individual synthesizes his goals with group goals and group
goals with organisational goals.

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Kurt Lewin (September 9, 1890 – February 12, 1947)

11. He is a German-American psychologist, known as one of the
modern pioneers of social, organizational, and applied psychology in the United States.
12. He considered individuals as ones whose action was defined by
external and internal forces encountering each other in a specific space and time. The
behaviour followed in a given moment will result from the interaction of these forces.
Some new behaviour occurs when the volume and/or the direction of the forces
determining the individual’s behaviour change, and the equilibrium of the ‘force field’
is found.
13. The most important factors in the change of the individual’s
behaviour are the group and the cultural norms. The experiments in which he
examined how the leadership style of the formal manager led to affect the conduct
and the performance of the group are still of great importance.
14. Lewin identified three leadership styles: the autocratic, the
democratic and the laissez-faire styles. He carried out research to study the
behaviour-change of individuals. He has established that the effective changes of
conduct are made up of three phases:
– ‘Unfreezing’ the existing habits, routines, operational schemes, i.e. dismantling
existing stabilities
– move toward the new behaviour, i.e. achieving the change
– fixing, i.e. ‘freezing’ the changed behaviour.

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F. CHESTER IRVING BARNARD
(NOV 7, 1886 – JUNE 7, 1961)
management
American Business Executive, Public administrator and author of pioneering work in
theory & organizational studies.
 President of New Jersey Bell Telephone Company and served various other organizations.
 He was known for his books, THE FUNCTIONS OF EXECUTIVE (1938)
which was regarded the most influential book on management during the pre-modern
management era. Where he emphasized the importance of leadership and communication,
and the ORGANIZATION AND MANGEMENT (1948), where he adopted a
sociological approach.
Contributions to management thoughts:

As he spent his life-time as a practitioner managing business systems he then viewed the
organization as a social system. That’s why he introduced SOCIAL SYSTEMS APPROACH IN
MANAGEMENT where he proposed that organization is not just an economic entity but it is
also a social system that needs cooperation among humans working for it.
He though that manager is responsible for communicating with worker and boost their
potential to a higher level.
1. Informal Organisations
Executives should encourage the development of informal organisation as a means of
communication and bringing cohesion in the organisation. Both formal and informal
organisations depend on each other and there is a continuous interaction between the two.

Page 15 of 30
2. Organizational Equilibrium
This refers to the matching of individual efforts and organizational efforts to satisfy
individuals. There should be a balance between what employees get out of the organisation
(money, status, recognition, etc.) and what they contribute in form of time, knowledge,
discomfort, etc.
3. Acceptance Theory of Authority
He said authority comes from bottom and it is only confirmed if it is accepted by a person
to whom it has been addressed. But if a subordinate does not accept his manager’s authority, then
it does not exist.
A person will only accept authority under this conditions:
 He can and does understand the communication.
 He believes that it is not inconsistent with the purpose of the organisation and is
compatible with his personal interest.
 He is able mentally and physically to comply with it.
4. Functions of Executives
These functions are:
 Maintaining proper communication in the organisation
 Obtaining essential services from individuals for achieving organisational goals
 Formulating purpose and objectives at all levels
5. Formal Organisations
Defined as a system of consciously coordinated activities of forces of two or more persons.
The initial existence of the organisation depends upon 3 elements:
 The willingness of persons to contribute efforts to the co-operative systems
 There should be an objectives of co-operation
 Proper communication system is essential.

Page 16 of 30
G. Coimbatore Krishnarao Prahalad (8 August 1941 – 16 April 2010)

contributed
A well-known management educationist from the University of Michigan. He has
to the development of management in a number of ways.
 His famous contributions include the importance of people’s skills and Competing for the
Future. The old model of organisational structure was based upon the assumption of
hierarchy. It was presumed that the top leadership knows all the answers and is in charge
of goals and work processes for the organisation.
 The emerging team model, on the other hand, is constructed on new assumptions
that knowledge, and therefore insight and answers, are found throughout the organisation
in the abilities and know-how of all organisational members when brought together in
teams. Key to the success of this approach is the understanding that managers must share
both power and responsibility with teams of people who were once disempowered by the
rigid bureaucratic lines of authority.
 According to him, the emphasis will be on people skills. Even those managers
designated leaders will need to learn how to follow the team. Management—Stoner,
Freeman and Gilbert Jr. Expressing his views on organisational change, Prahalad opined,
“as important as it is to learn for the future, it is equally important to unlearn the
past and remove its bagasse.”
 He is popularly known for his book ‘The Core Competence’, co-authored with
Gary Hamel. Prahlad’s ideas on management focus primarily on core competence. Core
competence is an organisational skill and capability which is not possessed by competing
firms. It is a bundle of skills and technologies that enables a company to provide a
particular benefit to the customers.

Page 17 of 30
H. Michael Eugene Porter (born May 23, 1947)

 an American academic known for his theories on economics, business strategy,
and social causes. He is the Bishop William Lawrence University Professor at Harvard
Business School.
competitive
Michael Porter has authored 18 books and many articles on competitive strategy and
advantage of nations.
field is competition
He is one of the most cited authors in business and economics. Michael Porter’s core
and company strategy.
organisations
He is recognised as the father of the modern strategy. Michael Porter views
as open systems that actively interact with the environment.
Major Contribution to Management Thought:

The five Forces of Model, Value Chain Model, Cluster Management, Diamond Model, and
Generic Strategies Model

Page 18 of 30
BARGAINING
POWER OF
SUPPLIERS
THREAT OF
NEW
ENTRANTS THREAT OF
COMPETITIVE
RIVALRY SUBSTITUTES
BARGAINING
POWER OF
BUYERS/
CONSUMERS

Page 19 of 30
FIVE FORCES MODEL
THREATS OF NEW ENTRY

Consider how easily other could enter your market and threaten your company’s position.
If competitors can enter your market with a little money and effort, you will need to adopt your
strategy to handle any potential rivals. The increasing number of potential entrants’ reflect a high
risks to the profitability of the established company.
THREATS OF SUBSTITUTION
This section of five forces asks you to determine the likelihood that your customer will
replace your product or service with an alternative that solve the same need.
BARGAINING POWER OF SUPPLIERS
This section analyzes how easily suppliers could increase their prices and thus affect your
bottom line.
BARGAINING POWER OF BUYERS
On the other end, you only need to determine whether the buyers or customers have
power to drive your prices down. The more customer you have, the more power you retain.
COMPETITIE RIVALRIES
The four previous forces largely affect this last one. Porter has seen rivalry among the
existing players as a result of pressure to improve their competitive position at market place. You
need to look at the number and strength of your existing competitors.

Page
20 of
30
FIRM
INFRASTRUCT
URE OUTBOUND
LOSGISTIC
H
U
M
A
N
R
E
S
O
U
R
C
E
MANAGEMENT PROCUREMENT
OPERA
TIONS
TECHNOLOGICAL INBOUND
DEVELOPMENT LOGISTICS
SERVICE
SUPPORT ACTIVITIES
PRIMARY ACTIVITIES
Prepared by:
GROUP 2
Page 21 of 30
VALUE CHAIN MODEL
TWO MAIN CATEGORIES:

1.PRIMARY ACTIVITIES
Those activities which are directly associated with production and delivery of the
production and delivery of the products or services. FIVE MAJOR AREAS: Inbound logistics,
operations, outbound logistics, marketing and sale, services.
2.SUPPORT ACTIVITIES
These are linked with the primary activities and fulfill the basic requirement which
are required to improve the effectiveness and efficiency of the primary activities. The four
main support activities: procurement, technology development, human resource management,
and infrastructure.
MARGIN
The ability of the organization to earn by managing the linkage between the primary and
support activities.
Note:
The value chain model targeted towards the analysis of various activities within and around the
organization, and used it to define the competitive strength or position of the organization. Thus
it helps the organization to measure the impact and importance of different activities and
prioritize their role in the performance of organization in the market in comparison to its
competitors.
CLUSTER MANAGEMENT
Porter proposed these model to show the role of external factors on the growth of an
organization. A cluster can be defined as: “geographically proximate group of interconnected
companies and complementarities and commodities.”
This theory made the organization to consider the role of “public” in the strategy formulation
and today geographic location are one of the Importance aspect of the management.
DIAMOND FRAMEWORK
Diamond framework is considered as one of the most important models developed by Michael E.
Porter. The prime motive of developing this framework is to ascertain the various factors that are
responsible for strengthening or weakening the economic competitiveness of any country. These
four main elements determined the level of competitiveness of the country: demand conditions,
factor conditions, firm strategy, structure and supporting industries.

Page 22 of 30
GENERIC STRATEGIES MODEL

According to Porter there are three generic strategies that need to be taken into consideration
by a firm in order to outperform other firms in the industry:
1.COST LEADERSHIP
Refers to producing goods at low cost within a broad market without compromising with
quality.
2.DIFFERENTIATION
Refers to offering additional or unique benefits I product that is perceived as
differentiating factor easily.
3. FOCUS
The most significant generic strategies that have been identify by Porter. This strategy
enables firm to get most out of specific segment and develop a competitive advantage which
hard to imitate by other firms in the industry.
I. Chris Argyris (July 16, 1923 – November 16, 2013)

held thewas a Greek business theorist, Professor Emeritus at Harvard Business School, and
position of "Thought Leader" at Monitor Group.
 Studied the needs of people and the needs of organisation. He felt that classical models
of organisation promoted 'immaturity' (see below). He felt that it was important to
understand the needs of people and integrate them with needs of organisation. Only in
this way, he said, can employees become co-operative rather than defensive or

Page 23 of 30
aggressive.
.
Characteristics of Employee
Immaturity Maturity
Passivity --------------------------------------------------- Activity

Dependence-------------------------------------------------- Relative independence
Behave in a few ways---------------------------------------- Behave in many ways
Erratic, shallow interests---------------------------------- Deeper interests
Short time perspective------------------------------------- Long time perspective
Subordinate position--------------------------------------- Equal or superior position
Lack of awareness of self-------------------------------- Awareness and self control
J. PETER FERDINAND DRUCKER (November 19, 1909 – November 11, 2005)

 Peter Ferdinand Drucker was an Austrian-born American management consultant,
educator, and author, whose writings contributed to the philosophical and practical
foundations of the modern business corporation.
 He was also a leader in the development of management education, he invented the
concept known as management by objectives and self-control, and he has been described
as "the founder of modern management".
CONTRIBUTIONS MADE:
 Drucker’s primary contribution is not a single idea, but rather an entire body of
work that has one gigantic advantage: nearly all of it is essentially right. Drucker has an
uncanny ability to develop insights about the workings of the social world, and to later
be proved right by history.

It was Drucker who introduced the idea of decentralization -- in the

Page 24 of 30
in the world.

1940s -- which became a bedrock principle for virtually every large organization
not as liabilities
He was the first to assert -- in the 1950s -- that workers should be treated as assets,
to be eliminated .
 He originated the view of the corporation as a human community --
again, in the 1950s -- built on trust and respect for the worker and not just a profit-making
machine, a perspective that won Drucker an almost godlike reverence among the
Japanese.
customer,"
He first made clear -- still the '50s -- that there is "no business without a
a simple notion that ushered in a new marketing mind-set.
style, forHeinstitutionalized
argued in the 1960s -- long before others -- for the importance of substance over
practices over charismatic, cult leaders.
 And it was Drucker again who wrote about the contribution of knowledge
workers -- in the 1970s – long before anyone knew or understood how knowledge
would trump raw material as the essential capital of the New
Economy.
6 MAJOR CONTRIBUTIONS OF PETER DRUCKER TO MANAGEMENT

Some of the major contributions of Peter Drucker are as follows: 1. Nature of
Management 2. Management Functions 3. Organisation Structure 4. Federalism 5.
Management by Objectives 6. Organizational Changes.
Among the contemporary management thinkers, Peter Drucker outshines all. He has
varied experience and background which include psychology, sociology, law, and journalism.
Through his consultancy assignments, he has developed solutions to number of managerial
problems. Therefore, his contributions cover various approaches of management. He has
written many books and papers.
1. Nature of Management
Drucker is against bureaucratic management and has emphasised management with
creative and innovative characteristics. The basic objective of management is to read towards
innovation. The concept of innovation is quite broad. It may include development of new ideas,
combining of old and new ideas, adaptation of ideas from other fields or even to act as a catalyst
and encouraging others to carry out innovation.
He has treated management as a discipline as well as profession. As a discipline,
management has its own tools, skills, techniques and approaches. However, management is
more a practice rather than a science. Thus, Drucker may be placed in ’empirical school of
management’.
While taking management as a profession. Drucker does not advocate to treat
management as a strict profession but only a liberal profession which places more emphasis that
managers should not only have skills and techniques but should have right perspective putting

Page 25 of 30
the things into practice. They should be good practitioners so that they can understand the social
and cultural requirements of various organizations and countries.
2. Management Functions
According to Drucker, management is the organ of its institution. It has no functions in
itself, and no existence in itself. He sees management through its tasks. Accordingly, there are
three basic functions of a manager which he must perform to enable the institution to make its
contribution for:
(i) the specific purpose and mission of the institution whether business, hospital or university;
(ii) making work productive and the worker achieving; and
(iii) managing social impacts and social responsibilities.
All these three functions are performed simultaneously within the same managerial
action. A manager has to act as administrator where he has to improve upon what already exists
and s already known. He has to act as an entrepreneur in redirecting the resources from seas of
tow or diminishing results to areas of high or increasing results.
Thus, a manager has to perform several functions: setting of objectives, making,
organising and motivating. Drucker has attached great importance to the objective setting
function and has specified eight areas where clear objective setting is required. These are: market
standing, innovation, productivity, physical and financial resources, profitability, managerial
performance and development, worker performance and attitude, and public responsibility.
3. Organisation Structure
Drucker has decried bureaucratic structure because of its too many dysfunctional
effects. Therefore, it should be replaced. He has emphasised three basic characteristics of an
effective organisation structure.
These are:
(i) Enterprise should be organised for performance;
(ii) it should contain the least possible number of managerial levels;
(iii) it must make possible the training and testing of tomorrow’s top managers—
responsibility to a manager while still he is young.
He has identified three basic aspects in organising activity analysis, decision analysis, and
relation analysis. An activity analysis shows what work has to be performed, what kind of work
should be put together, and what emphasis is to be given to each activity in the organisation
structure.
Decision analysis takes into account the four aspects of a decision: the degree of futurity In
the decision, the impact of decision over other functions, number of qualitative factors that enter
into it, and whether the decision is periodically recurrent or rare. Such an analysis will

Page 26 of 30
determine the level at which the decision can be made. Relation analysis helps in defining
the structure and also to give guidance in manning the structure.
4. Federalism:
Drucker has advocated the concept of federalism. Federalism refers to centralised
control in decentralised structure Decentralised structure goes far beyond the delegation of
authority. It creates a new constitution and new ordering principle. He has emphasised the close
links between the decisions adopted by the top management on the one hand and by the
autonomous unit on the other.
This is just like a relationship between federal government and state governments. In a
federal organisation, local managements should participate in the decision that set the limits of
their own authority. Federalism has certain positive values over other methods of organising.
These are as follows:
(i) It sets the top management free to devote itself to its proper functions;
(ii) It defines the functions and responsibilities of the operating people;
(iii) It creates a yardstick to measure their success and effectiveness in operating jobs; and
(iv)It helps to resolve the problem of continuity through giving the managers of various
units education in top management problems and functions while in an operating
position.
5. Management by Objectives:
Management by objectives (MBO) is regarded as one of the important contributions of
Drucker to the discipline of management. He introduced this concept in 1954. MBO has
further been modified by Schleh which has been termed as management by results’. MBO
includes method of planning, setting standards, performance appraisal, and motivation.
According to Drucker, MBO is not only a technique of management but it is a philosophy
of managing. It transforms the basic assumptions of managing from exercising cattalo to self-
control. Therefore, in order to practice MBO, the organisation must change itself MBO has
become such a popular way of managing that today t is regarded as He most modern
management approach. In fact, it has revolutionalised the management process.
6. Organizational Changes:
Drucker has visualised rapid changes in the society because of rapid technological
development. Though he is not resistant to change, he feels concerned for the rapid changes and
their impact on human life. Normally, some changes can be absorbed by the organisation but not
the rapid changes.
Since rapid changes are occurring in the society, human beings should develop
philosophy to face the changes and take them as challenges for making the society better. This
can be done by developing dynamic organizations which are able to absorb changes much faster
than static ones. Drucker’s contributions have made tremendous impact on the management
Page 27 of 30
practices. His contributions have been recognised even by the management thinkers of
Socialist Bloc.
For example, Vishiani a USSR management thinker writes about Drucker as follows:
“Drucker shows certain foresightedness and understanding of the development
prospects of modern production when he opposes the view that worker is no more than an
appendage of machine. Moved by a desire to strengthen the position of capitalism, he endeavors
to give due consideration also to some objective trends in production management.
Drucker, therefore, tells the industrialists not to fear a limited participation of the workers
in the management of production process. He warns them that if they do not abandon that fear,
the consequences may be fatal to them.” Drucker is perhaps the only Western management
thinker who has attracted so much attention of the communist world.
K. Victor Harold Vroom (born August 9, 1932)

from University
is a business school professor at the Yale School of Management. He holds a PhD
of Michigan and an MS and BS from McGill University.
 Vroom's primary research was on the expectancy theory of motivation, which

attempts to explain why individuals choose to follow certain courses of action in
organizations, particularly in decision-making and leadership. His most well-known
books are Work and Motivation, Leadership and Decision Making and The New
Leadership. Vroom has also been a consultant to a number of corporations such as GE
and American Express.
Contribution to Management Thought:

EXPECTANCY THEORY
-Expectancy theory proposes that a individual will decide to behave or act in a certain
way because they are motivated to select a specific behaviour over other behaviours
due to what they expect the result of that selected behaviour will be.

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-In essence, the motivation of the behaviour selection is determined by the desirability of
the outcome. However, at the core of the theory is the cognitive process of how an
individual processes the different motivational elements. This is done before making the
ultimate choice. The outcome is not the sole determining factor in making the decision of
how to behave.
-Expectancy theory is about the mental processes regarding choice, or choosing. It
explains the processes that an individual undergoes to make choices. In the study of
organizational behavior, expectancy theory is a motivation theory first proposed by
Victor Vroom of the Yale School of Management.
-This theory emphasizes the needs for organizations to relate rewards directly to
performance and to ensure that the rewards provided are those rewards deserved and
wanted by the recipients.
Victor H. Vroom defines motivation as a process governing choices among alternative
forms of voluntary activities, a process controlled by the individual. The individual
makes choices based on estimates of how well the expected results of a given behaviour
are going to match up with or eventually lead to the desired results. Motivation is a
product of the individual’s expectancy that a certain effort will lead to the intended
performance, the instrumentality of this performance to achieving a certain result, and
the desirability of this result for the individual, known as valence.
DIFFERENCE FROM THE CONTENT THEORIES OF MASLOW, ALDERFER,
HERZBERG AND MCCLELLAND
Vroom’s expectancy theory differs from the content theories of Maslow, Alderfer,
Herzberg, and McClelland in that Vroom’s expectancy theory does not provide specific
suggestions on what motivates organization members. Instead, Vroom’s theory provides
a process of cognitive variables that reflects individual differences in work motivation.
Need theories of motivation (Alderfer, 1972; Herzberg, 1968; Maslow, 1970;
McClelland, 1976) attempt to explain what motivates people in the workplace.
Expectancy theory is more concerned with the cognitive antecedents that go into
motivation and the way they relate to each other.
ASSUMPTIONS ON WHICH EXPECTANCY THEORY IS BUILT
Expectancy theory is based on four assumptions
One assumption is that people join organizations with expectations about their needs,
motivations, and past experiences. These influence how individuals react to the
organization.
A second assumption is that an individual’s behaviour is a result of conscious choice.
That is, people are free to choose those behaviours suggested by their own expectancy
calculations.
A third assumption is that people want different things from the organization (e.g., good
salary, job security, advancement, and challenge).

Page 29 of 30
A fourth assumption is that people will choose among alternatives so as to optimize

outcomes for them personally.
KEY ELEMENTS OF EXPECTANCY THEORY
Expectancy, instrumentality, and valence. A person is motivated to the degree that he or she
believes that (a) effort will lead to acceptable performance (expectancy), (b) will be
rewarded (instrumentality), and (c) the value of the rewards is highly positive (valence).
 Vroom suggests that motivation, expectancy, instrumentality, and valence are

related to one another by the equation Motivation = Expectancy x Instrumentality x
Valence. The multiplier effect in the equation is significant. It means that higher levels
of motivation will result when expectancy, instrumentality, and valence are all high than
when they are all low. The multiplier assumption of the theory also implies that if any
one of the three factors is zero, the overall level of motivation is zero. Therefore, for
example, even if an employee believes that his/her effort will result in performance,
which will result in reward, motivation will be zero if the valence of the reward he/she
expects to receive is zero (i.e. if he/she believes that the reward he/she will receive for
his/her effort has no value to him/her.
ADVANTAGES AND DISADVANTAGES OF BEHAVIORAL SCIENCE APPROACH

ADVANTAGES DISADVANTAGES
 
This approach focuses on the legal The approach only focuses on the
rights of workers by keeping good surface of people's issues such as their
relation with them. behaviour. It fails to look at

It helps to motivate the workers underlying causes such as what occurs
helping them in every aspects. in the human mind.
 
Builds good relationship with workers Some describe the approach as being
and manager. very narrow and deterministic. For

Behavioral approach help workers to example it assumes that all behaviour
fulfill their demand. is learned when in fact some peoples

Workers are satisfied with their job by actions are a result of what they have
motivating them when their demands experienced in the past.

are being achieved. Social scientists argue about the

As the employees are highly validity of his definition of 'job
motivated through behavioral satisfaction'.
approaches , the overall productivity 
criticised for being based more on
of the company increases.

Since the inputs or feedback comes
theory than empirical practice.
from people who are part of the Therefore not widely accepted by
processes at the lowest or execution practising managers.
level. Quality control is thus begins and
is ensured at the lowest level.

Page 30 of 30
COMPARISON BETWEEN HUMAN RELATIONS AND BEHAVIORAL SCIENCE APPROACHES

BEHAVIORAL SCIENCES APPROACH
HUMAN RELATIONS APPROACH  Focused on group relations.
 Focused on interpersonal  Emphasis on group behavior.
relationships.
 Conflict in organization taken to be a part
 Lays emphasis on individual needs of modern organization.
and behavior.
 Itandrefined Human Relations approach
 Conflict in organization is taken as has a wide scope.
negative.
 Itexperiments,
was based on hawthorne
so its scope is limited.
Republic of the Philippines
Eastern Visayas State University

Tacloban City
ASSIGNMENT No. 2
IN
Engineering Management
(MGT 102)
PREPARED BY:
Group 3
Leader: PADUHILAO, JOY SAMILLE E.
Group Members:
Advincula, Carl Don
Ardivilla, Alex
Caiyas, Lyn
Celedio, Antonette
Curay, Alyssa
Fabillo, Neil
Gerilla, Robert Joseph
Itable, Mirelou
Manito, Jey-jebb
Nogadas, Vergel
Pontica, Jason
Sosing Jr., Giovanni
MODERN APPROACHES
(GROUP 3)
“System Approach”
- A system approach is set of interrelated and inter dependent parts arranged in a manner
that produces a unified whole.
- A system is a set of interrelated but separate parts working towards a common purpose.
- A system may be defined as a goal-oriented organism that is composed of interrelated in
such a way that the total system is greater than the sum of its parts.
Key Concepts:
Subsystem-parts of system that depends on each other.

14. Internal subsystem.
15. External subsystem.
Open System- open systems theory refers simply to the concept that organizations are
strongly influenced by their environment.
Closed System- closed systems are not influenced by and not interact with their
environment Synergy- cooperation between subsystems.
System Flows- this system defines different work flows for different process types or tasks.
System Boundary- separation between internal and external subsystems. Feedback-process in
which the effect or output of an action is 'returned' (fed-back) to modify the next action.
Characteristics of System Approach:
9. Systems have structure, defined by parts and their composition;
10. Systems have behavior, which involves inputs, processing and outputs of material,
energy or information;
11. Systems have interconnectivity : the various parts of a system have functional as
well as structural relationships between each other.
12. System(s) have by itself function(s) or group of functions .
Model of System Approach to Management
Environment
Types of System Level for Management:
DIS
MIS
TPS
(Transaction Processing Style) TPS -Transaction processing is a style of computing that

divides work into individual, indivisible operations, called transactions.[1] A transaction
processing system (TPS) or transaction server is a software system, or software/hardware
combination, that supports transaction processing.
(Management Information System) MIS - provides information that organizations require
to manage themselves efficiently and effectively. Management information systems are
typically computer systems used for managing An organized approach to the study of the
information needs of an organization's management at every level in making operational,
tactical, and strategic decisions.
(Decision Support System) TSS -is a computer-based information system that supports business
or organizational decision-making activities. DSSs serve the management, operations, and
planning levels of an organization (usually mid higher management) helps in making decision.
Advantages of System Approach:
8. Under system approach, manager have a good view of the organization.
9. Closeness to reality
10. It gives importance to interdependent of the different parts of an organization and
its environment.
11. It forecast consequences and plans action.
12. Goal oriented.
Disadvantages of System Approach:

7. Does not offer specific tools and techniques for practicing manager.
8. In smaller organization it is not relevant.
9. Activity of any part affect activity of other parts.
10. Unpractical: It cannot be easily and directly applied to practical problem.
“Contingency Approach”
7. sometimes called as the situational approach.
8. wide range of external and internal factors to be considered and the focus should
be on the action that best fits for the situation.
9. there is no one best way of organizing / leading and that an
organizational / leadership style that is effective in some situations may not be
successful in others. (Fred Fiedler,1964)
Characteristics of Contingency Approach
7. Management is entirely situational. The application and effectiveness of any tech-

nique is contingent on the situation.
8. Management should match its approach to the requirements of the particular situa-tion.
To be effective, management policies and practices must respond to environmental
changes. The organisation structure, the leadership style, the control system all should
be designed to fit the particular situation.
9. As management’s success depends on its ability to cope with its environment, it

should sharpen its diagnostic skills so as to anticipate and comprehend
environmental changes.
11. The managers should understand that there is no one best way to manage.
12. Because of the specific organisation-environment relationship, no action can be uni-

versal. It varies from situation to situation.
Internal factors in Contingency Approach:
TECHNOLOGY
STRUCTURE
PEOPLE
PURPOSE
SIZE
Internal Factors:
Technology-can also be defined as the integrated planning, design, optimization, operation and
control of technological products, processes and services, a better definition would be
the management of the use of technology for human advantage.
Structure-determines how the roles, power and responsibilities are assigned, controlled, and
coordinated, and how information flows between the different levels of management.
People- is one of the resources to perform and support the result in the success or failure
of your business.
Purpose-a specific result that a person or system aims to achieve within a time frame and
with available resources.
Size-a determining factor of "process scope", most simply defined as the degree and extent to
which project management practices are formally appl
External Factors in Contingency Approach:
Application of Contingency Approach:
10. will enable the manager to examine the situation and to determine
the cause of decreased profits before a new procedure or program is
implemented.
11. is designed to provide the manager with the capabilities to examine
numerous possible solutions to a problem
Limitations of Contingency Approach:

9. Difficulty in determining all relevant contingency factors and
showing relationship between them may be complex.
10. It is totally practical approach without support of theoretical
and conceptual frame work.
11. Sometimes manager finds difficulties in analysing
the situation and discovering appropriate management technique in
absence of proper research and lack of proper understanding of the
situation.
Advantages of Contingency Approach:
7. More complete information

8. More alternatives are generated
9. Acceptance of solutions are increased
10. The legitimacy of the solution is increased.
Disadvantages of Contingency Approach:
9. Minorities can dominate (more powerful)

10. Pressures to conform are applied by more powerful members
11. Time consuming
12. Responsibility for the solution is ambiguous.
DIFFERENCE BETWEEN SYSTEM APPROACH AND CONTINGENCY APPROACH
Systems Approach
F. The emphasis is on interdepen-dence and interaction among sub-systems.

G.The focus is on the internal environment and sub-systems of the organization.
H. It treats all organizations alike and the background of the organization is not taken into account.
I. The organization interacts with the environment and adjusts as per the changes.
J. It provides a theoretical model of understanding the organization and its sub-systems.
K.It is silent on the validity of classical principles of management.
Contingency Approach:
8. It emphasizes the impact of environ-ment on organizational design and managerial style.

9. The focus is on external environment of the organization.
10. Each organization is taken as unique entity. Different organizations have different nature and face different situations.
11. The impact of the environment on organization structure and mana-gerial style is the major concern of contingency approach.
12. It suggests practical solutions to organizational problems.
13. It rejects the blind application of classical principles of management.
MODERN
APPROACHES
PREPARED BY:
GROUP 3
INTRODUCTION
The Modern Period (1960 to present). After, 1960

management thought has been turning somewhat
away from the extreme human relations ideas
particularly regarding the direct relation between
morale and productivity. Present management
thinking wishes equal emphasis on man and
machine.
SOME MODEM APPROACHES ALSO PLAYED A
SIGNIFICANT ROLE IN THE EVOLUTION OF
MANAGEMENT THEORIES.
- System Approach
- Contingency Approach
SYSTEM APPROACH
16. A SYSTEM is a set of detailed methods, procedures and routines
created to carry out a specific activity, perform a duty, or solve a
problem.
17. The system approach is to look upon management as a system or
as “an organised whole” made up of subsystems integrated into a
unity or orderly totality.
18. The arrangement must be orderly and there must be proper
communication facilitating interaction between the elements and
finally this interaction should lead to achieve a common goal
SYSTEM APPROACH
13. System approach to management views the
organization as a unified, purposeful system composed
of interrelated parts.
14. This approach also gives the manager to see the
organization as a whole and as a part of the larger
external environment. They have to operate in an
open system, interacting with their environment.
Whether it is the issue relating to development of a
new product or selection of a new employee, an
organization has to decide on it as an open system
because its decisions are interrelated and inter-
dependent on the environmental situation.
SUBSYSTEM
13. A subsystem, is where work is processed on the system. A
subsystem is a single, predefined operating environment through
which the system coordinates the work flow and resource use. The
system can contain several subsystems, all operating independently of
each other. Subsystems manage resources
14. All jobs, with the exception of system jobs, run within subsystems.
Each subsystem can run unique operations. For instance, one
subsystem may be set up to handle only interactive jobs, while another
subsystem handles only batch jobs. Subsystems can also be designed to
handle many types of work. The system allows you to decide the
number of subsystems and what types of work each subsystem handles.
The systems approach takes the viewpoint that a
company is really an interconnected group of systems that
all work together (or should work together). The best way to
view this system is by thinking of a company as a
machine.You have:
11. Inputs: Material, information or data that goes into the
machine
12.Processes: Work that is done to the material, information
or data while it's in the machine
13.Outputs:The final product that comes out of the machine
SYSTEMS ARE DIVIDED INTO TWO CATEGORIES :
10. Closed systems: theoretical systems that do not
(1)
interact with the environment and are not influenced by its
surroundings. Only the components within the system are
significant. Example: a sealed jar--nothing enters or exits the
jar, but whatever is inside can interact.
11. (2) Open systems: real-world systems whose boundaries

allow exchanges of energy, material and information with the
larger external environment or system in which they exist.
Example: a company--even if there are separate departments
in one organization, the workers share data and interact with
each other on a daily basis.
10. Synergy is the phenomenon of open systems of
management by which the total system is more than a
simple sum of its parts. It means, if a manager effectively
coordinates the efforts of related sub-systems, the result
would be greater than the sum total of such independent
efforts, i.e., 2 + 2 would be greater than 4.
11. Systems Approach to management is also important
because it helps in avoiding entropy.
13. Entropy is a syndrome, where systems and
processes eventually decay. By relating organization to
environment, following the Systems Approach, such
situation can be averted.
PROPONENT
In the 1960, an approach to management appeared which tried to unify

the prior schools of thought. This approach is commonly known as
‘Systems Approach’. Its early contributors include Ludwing Von
Bertalanffy, Deniel Katz, Robert L. Kahn, W. Buckley , J.D. Thompson and
Chester Barnard.
PROPONENT
Chester I. Barnard
12.a successful and respected business
executive to the Rockefeller Foundation
(RF) when he was named president in
1948.
13. was the first person to utilize the
systems approach in the field of
management.
14. He feete that the executive must steer
through by keeping a balance between
conflicting forces and events. A high order
of responsible leadership makes the
executives effective.
PROPONENT
Ludwig von Bertalanffy

12. the founding father of the General
System Theory was born on September
19, 1901, in Atzgersdorf.
13. The Bertalanffian rationale for building
a science of social systems is based on
the assumption that social organizations
are like living organisms in the sense that
both display wholeness, interact with
their environment, exhibit strategies of
self-maintenance, and experience cycles
of birth, growth, maturity and decline.
PROPONENT
Robert L. Kahn
11. Having been considered a
“founding father” of the modern
approach to management.
12. An American psychologist and
social scientist specializing in
organizational theory and survey
research.
PROPONENT
Daniel Katz
13. A social scientist wish to
understand human organization, to
describe what is essential in their
form, aspects, and functions,
PROPONENT
Walter F. Buckley
L. An American sociologist, and
Professor of sociology, who was
among the first to apply concept
from General System Theory, based
on the work of Bertalanffy, to
sociology.
FEATURES OF SYSTEM APPROACH
FEATURES OF SYSTEMS APPROACH
14. A system consists of interacting elements. It is set of inter-related
and inter-dependent parts arranged in a manner that produces a
unified whole.
15. The various sub-systems should be studied in their inter-
relationships rather, than in isolation from each other.
16. An organizational system has a boundary that determines which
parts are internal and which are external.
17. A system does not exist in a vacuum. It receives information,
material and energy from other systems as inputs. These inputs
undergo a transformation process within a system and leave the
system as output to other systems.
18. An organization is a dynamic system as it is responsive to its
environment. It is vulnerable to change in its environment.
EVALUATION OF SYSTEM APPROACH:
9.The systems approach assists in studying the functions of complex

organisations and has been utilized as the base for the new kinds of
organisations like project management organisation. It is possible to
bring out the inter-relations in various functions like planning,
organising, directing and controlling. This approach has an edge over
the other approaches because it is very close to reality. This approach
is called abstract and vague. It cannot be easily applied to large and
complex organisations. Moreover, it does not provide any tool and
technique for managers
CONTINGENCY APPROACH
13.The contingency approach to management is based on

the idea that there is no one best way to manage and that
to be effective, planning, organizing, leading, and
controlling must be tailored to the particular circumstances
faced by an organization.
14.The contingency approach to management (also called
the situational approach) assumes that there is no
universal answer to such questions because organizations,
people, and situations vary and change over time.
13.suggests the most appropriate style of management is
dependent on the context of the situation and that
adopting a single, rigid style is inefficient in the long term.
Contingency managers typically pay attention to both the
situation and their own styles and make efforts to ensure
both interact efficiently.
14.The task of a manager, according to this theory, is to
identify which technique will, in a particular situation and at
a particular point of time, contribute best to achieving
organizational goals. The theory contends that
organizational phenomena exist in a logical pattern, which
managers can understand gradually by interpreting the
various situations. They can thereby frame their managerial
styles, which may vary from situation to situation.
PROPONENT
Fred Fiedler
6.An Austrian descent, Emeritus Professor and
one of the
leading researchers in the field of leadership
and organizational performance.
4. The founder of the contingency theory that
shows the
relationship (contingency) between leadership
effectiveness and situational circumstances.
5.The contingency theory emphasizes the
importance of both the leader's personality
and the situation in which that leader
operates. Fiedler and his associates studied
leaders in a variety of contexts but mostly in
military context and their model is based on
their research findings.
PROPONENT
Joan Woodward
•was a leading academic and commentator in the
field of Organization Theory, particularly
Contingency Theory.
•found that financially successful manufacturing
organizations with different types of work
technologies (such as unit or small batch; large-
batch or mass-production; or continuous-process)
differed in the number of management levels, span
of management, and the degree of worker
specialization. She linked differences in organization
to firm performance and suggested that certain
organizational forms were appropriate for certain
types of work technologies
PROPONENT
Paul Lawrence
7. an American sociologist, Professor of
Organizational Behavior at the Harvard Business
School, and consultant, known from his work with
Jay W. Lorsch on "Differentiation and integration in
complex organizations.
8. they suggest that organizational units operating
in differing environments develop different internal
unit characteristics, and that the greater the
internal differences, the greater the need for
coordination between units.
FEATURES OF CONTINGENCY
APPROACH:
5.Firstly, the contingency approach does
not accept the universality of
management theory. It stresses that there
is no one best way of doing things.
Management is situation, and managers
should explain objectives, design
organisations and prepare strategies,
policies and plans according to prevailing
circumstances. Secondly, managerial
policies and practices to be effective, must
adjust to changes in environment.
6.Thirdly, it should improve diagnostic
skills so as to anticipate and ready
for environmental changes. Fourthly,
managers should have sufficient
human relations skill to
accommodate and stabilise change.
7.Finally, it should apply the contingency
model in designing the organization,
developing its information and
communication system, following proper
leadership styles and preparing suitable
objectives, policies, strategies,
programmes and practices. Thus,
contingency approach looks to hold a
great deal of promise for the future
development of management theory and
practice.
- PROJECT PLANNING AND SCHEDULING
Planning is the process of breaking a project down into specific tasks, and defining the sequences in
which those tasks can or must be performed. Planning is interestingly not the same as scheduling.
Scheduling is the process of defining the timeframe in which each task will be performed and thereby
determining the start and completion dates for each project.
It is therefor appropriate to say that planning defines “what” is to be done while scheduling defines
“when” it is to be done. The resource plan describes “how” the work is done.
Project Management begins with planning. Unless planning is effective other management functions
cannot be effective. Unfortunately, construction projects vary so much that no single plan can be developed,
each project must be planned individually.
Planning is a means of:
19. Organizing the work on the project.
20. Deciding who does what, when, how and for how much.
21. Determining the resources required.
22. Allocating these resources on a time-phased basis.
23. Allocating and defining responsibility.
24. Communicating between all those involved on a project.
25. Coordinating all the activities and people involved.
26. Controlling progress.
27. Estimating time to completion.
28. Handling unexpected events and changes.
It is also a:
15. Basis for the authority of the project manager.
16. Basis for the budgeting and financial control of the project.
17. Basis for self analysis and learning, i.e. real experience.
18. Means of orienting people to look ahead, and
19. Way of initiating and maintaining a sense of urgency that is time consciousness
The Potential Advantages of Planning

Planning pre-supposes a willingness by management to; Spent a Time, Energy, and Money
The planning process is utilized to reach distant goals that will assure both survival and
optimization of long-term profits.
Planning can be used to organize the project task and resources within realistic time frames.
The Project Planning System

The flowchart below shows the project planning system which consist basically of three phases namely;
Planning Phase, Scheduling Phase and Control-Monitor Phase.
Planning Phase:
The flowchart starts with the establishment of the baseline or the basic input data. Project
documents such as bid document, technical specifications, drawing, etc. are reviewed to gather
relevant data needed in planning and estimating. A meeting of the project management team from
project manager and other key personnel who have something to do with the project shall be held
to discuss methods and techniques and other matters that will affect project execution.
Work Breakdown Structure shall be established and each component activity shall be properly
defined indicating the activity codes, cost center, responsibility codes, etc. to permit proper costing
and work assignment during implementation. Network diagram shall be developed following the
principles and procedures of networking techniques.
Scheduling Phase:
Once the network and estimate are completed, scheduling tables, charts, graphs, cash flow are
prepared in the desired sequences which will be presented to project management for further
review and evaluation.
Control-Monitor Phase:
After the plan and schedule have been fully developed, the project management team can now
start the implementation of the project. Activities are monitored and status data are gathered and
compiled. Deviations are computed and different types of reports are prepared to give top
management, the project management team and other concerned groups, accurate and timely
information regarding the actual progress of the project. If the deviation is beyond the tolerable
limit which may result into chaos and delay, then the management will immediately make
necessary steps to improve performance or update the plan to bring back the remaining work on
schedule.
List of the Typical Activities which Occur as a Result of Poor Planning

15. Wild Enthusiasm
16. Disillusionment
17. Chaos
18. Search for the guilty
19. Punishment of the innocent
20. Promotion of the non-participant
21. Definition of the requirements
The Work Breakdown Structure

Once the project objective has been defined, the next step is to determine what work elements, or
activities, need to be performed to accomplish it. One of the project management tools that can help PM in
attaining this task is the Work Breakdown Structure (WBS). The WBS provides a way for identifying what
must be done, who will do it, how long it will take, and how much it will cost. Thus, WBS ties the entire
project together.
In any project, whether large or small, it is necessary to develop a well-defined Work Breakdown
Structure (WBS) that divides the project into identifiable parts that can be managed. The concept of the
WBS is simple. In order to manage a whole project, one must manage and control each of its parts. The
WBS is the cornerstone of the project work plan. It defines the work to be performed, identifies the needed
expertise, assists in selection of the project team, and establishes a base for project scheduling and control.
A WBS is a graphical display of the project that shows the division of work in a multilevel system. Its
development is a continuing process that usually starts when the project is first assigned to the designer and
continues until all work packages have been defined. The designer starts the process of developing the
WBS by identifying major areas of the project. As members of his project team define the work to be
performed in more detail, the WBS is adjusted accordingly. Thus, the WBS is used from the start to the
finish of the project for planning and controlling. It is an effective means of defining the whole project by
parts, and providing effective communication channels for exchange of information that is necessary for
management of the project by the contractor.
WBS is also the foundation of a project management system. Code numbers can be used to relate the
WBS to the Organizational Breakdown Structure (OBS) for management of people. Code numbers can also
be used to relate the WBS to the Cost Breakdown Structure (CBS) for management of costs. Similarly,
code numbers can relate the WBS to the Critical Path Method (CPM) schedule to manage time. Thus, the
WBS provides a systematic approach for identifying work, compiling the budget and developing an
integrated schedule. Since the WBS is developed jointly by the project team, the people that will actually
perform the work, it is an effective tool for relating work activities to ensure that all work is included and
that work is not duplicated. Most importantly, it provides a basis for measurement of performance.
4
Format of the Work Breakdown Structure
There are two popular formats for the Work Breakdown Structure. The Standard Work Breakdown
Structure looks similar to an organization chart and may even be thought of as such, except that the boxes
represent work activities rather than reporting structures as shown below.
PROJECT
TASK 1 TASK 2 TASK 3
Figure 1. Standard Work Breakdown Structure
The second WBS format is Line-Indented as shown in figure 2. It is a straightforward listing of

project activities, with each new indentation being a lower of detail (smaller unit of work to be performed).
This is a convenient format to use, in that it can be produced entirely in text format on a computer,
complete with line numbering. However, it does not visually show the scope of the project.
Write Project Management Book

14. Develop Proposal
1.1 Survey competition
1.2 Estimate market potential
1.3 Identify publishers
15. Do Research
2.1 Review literature
2.2 Interview experts
2.3 Interview project managers
16. Write Text
3.1 Develop first draft
3.2 Revise
3.3 Submit to publisher
3.4 Approve edited copy
17. Develop Illustrations
4.1 Roughs
4.2 Final drafts
4.3 Camera-ready copy
18. Index
5.1 Make word list
5.2 Master document
5.3 Generate
Figure 2. Line-Indented Work Breakdown Structure
Typical WBS Level Names
A typical work breakdown structure has six levels, named as shown in figure 3. It is
perfectly acceptable to use more than six levels, but it is almost impossible to devise names for
the lower ones. After the sixth level, most people just use the word "task" or "activity" to
designate the work. The main reason for using names is for communication purposes. If everyone
uses common terminology, then you can inquire about a work package, and everyone will know
that you are referring to level 5 of the structure.
1. Program
2. Project
3. Task
4. Subtask
5. Work Package
6. Level of Effort or Activity
Figure 3. WBS Level Names

General Aspects of WBS
Following are some general aspects of the WBS that must be kept in mind:
Up to 20 levels can be used. More than 20 is considered overkill. For smaller projects, four to six
levels will generally be adequate.
All paths on a WBS do not have to go down to the same level. That is, you don't have to force the
structure to be symmetrical. On any given branch, when you arrive at a level that will produce an
estimate of the required accuracy, you stop.
The WBS does not show sequencing of work except in the sense that all level 5 work packages
hanging below a given subtask must be complete for the subtask to be complete, and so on.
However, work packages below that subtask might be performed in series or parallel. Sequencing
is determined when schedules are developed.
A WBS should be developed before tasks are scheduled and resources allocated. The objective is
to identify all the work to be done first, then think about who will do it, how long it will take, and
how much it will cost.
The WBS should be developed by individuals knowledgeable about the work. This rule applies to
projects that involve a lot of disciplines.
PARKINSON’S LAW: “LAW OF DELAY”
“WORK EXPANDS TO FILL THE TIME

AVAILABLE FOR IT”
MURPHY’S LAW:
“IF ANYTHING CAN GO WRONG, IT WILL

What I Hear, I Forgot
GO WRONG”
What I See, I Remember
What I do, I Understand ...
Confucius
ILLUSTRATIVE WORK BREAKDOWN STRUCTURE (WBS)
Project
Site Work On Site Utilities Buildings Level I

Major Facilities
Grading & Paving Office Maintenance Warehouse Level II

Drainage Surfaces Bldg. Bldg. Bldg. Sub Facilities
Drives Parking Architectural Structural Mechanical Electrical Level III

Work Item
Level IV
Foundation Shell
Tasks
Work Work Work

Package Package Package Level V
Work Package
Legend:
- denotes continued breakdown

ASSIGNMENT:
Develop a WBS of at least four levels deep for a project familiar to you. (ex. To Construct a
Residential House, To Construct a Warehouse for Light Industry, etc.)
___________________________________________________________________Prepared by: DBPulma

10
THE DIFFERENT NETWORK NOTATION SYSTEMS
Several network systems have emerged during the second half of the twentieth century, but these all fit
within one or other of two principal groups, determined by the method of notation:
14. The Activity-On-Arrow (AOA) System (often simply called arrow networks). The names used within
this group include:
ADM (Arrow Diagram Method), CPM (Critical Path Method) or CPA (Critical Path Analysis). All
of these are practically synonymous.
PERT (Program Evaluation Review Technique)
15. The Activity-On-Node (AON) networks. These include
PDM (Precedence Diagram Method), which are by far the most common
The Roy Method (named after its Inventor), otherwise known as the method of potentials (MOM
or MPM). This is an early activity-on-node system, very similar to precedence notation, now
rarely used.
CRITICAL PATH METHOD (CPM)
CPM was developed by J. E. Kelly of Remington Rand and M. R. Walker of Du Pont to help schedule
maintenance in chemical plants. It is a systematic approach of planning, analyzing and controlling projects.
It offers additional information’s for project control and other purposes which are not provided by other
project scheduling.
The fundamental departure of CPM from PERT is that CPM brings the concept of cost more
prominently into the planning and control process. Under the CPM system, two time and cost estimates are
indicated for each activity in the network; these two are normal estimate and crash estimate. The normal
estimate of time approximates the most likely time estimate in PERT. Normal cost is that associated with
finishing the project in the normal time. The crash time estimate is the time that would be required if no
costs were spared in reducing the project time. Crash cost is the cost associated with doing the job on a
crash basis so as to minimize completion time.
PROGRAM EVALUATION REVIEW TECHNIQUE (PERT)
PERT was developed by the Navy Special Projects Office in cooperation with Booz, Allen and
Hamilton, a management consulting firm. It was specifically directed at planning and controlling the
Polaris Missile Program, a massive project which had 250 prime contractors and over 9,000 subcontractors.
This is actually a management tool that is suited for research and development projects which are generally
non-repetitious in nature and are therefore sometimes called “once-through” projects. Duration time for
activities in research and development projects are subject to uncertainty. PERT handles the uncertainty
problem by the use of three time estimates, the optimistic time estimate, the most likely time estimate and
the pessimistic time estimate.
M. Optimistic Time Estimate, a - is the estimated minimum time an activity will take place.
This is the expected activity duration when all the breaks are right. A rule of thumb is that
there should be only one chance in ten of completing the activity in less than the optimistic
time estimate.
N. Most Likely Time, m - is the estimated normal length of time an activity takes. This is the
time, it is believed, that will most frequently be required for an activity, if it were done again
and again under identical conditions.
O. Pessimistic Time, b - is the estimated maximum time an activity would take, barring a
catastrophe. This is the expected activity duration when there is an abnormal run of bad
breaks.
a 4m b
Expected time, t
6
Advantages of PERT/CPM
19. Illustrating task relationships. By providing a graphic representation of how the performance of each
task is dependent on others, networks offer a distinct advantage over simpler graphs such as bar charts.
20. Encouraging Effective Planning. Drawing up a network requires that the project manager plan the
project from start to finish in considerable detail.
21. Pinpointing problem areas. Bottlenecks and potential trouble spots are discovered early enough for
preventive measures or corrective action to be taken.
22. Improving Communications. The network diagram provides a common frame of reference for all
parties involved in a project, such as designers, managers, contractors and other employees.
23. Comparing Alternative Actions. Managers are provided with an opportunity to compare the impact
on time and cost of different methods for reaching the project goal.
24. Allowing Concentration on Key Jobs. By identifying critical tasks, PERT/CPM allow managers to
apply their attention where it is most needed. At the same time, the network will indicate when other
tasks are falling behind schedule. This will allow managers to take immediate action.
25. Creating Flexibility. In a complex project, the critical path may change a number of times, as time
estimates prove inaccurate. PERT/CPM provide managers with the ability to identify the current
critical path on a continuing basis.
BASIC ELEMENTS and TERMS OF A NETWORK DIAGRAM
10. ACTIVITY - an activity is the effort, work or operation required to complete a task or a project, or in
some cases, a segment of that task. It is the actual work between events.
11. EVENT - an event represents the completion of an activity. It denotes the completion of all preceding
activities and the beginning of one or more succeeding activities. The event is shown on the network as
a circle, an ellipse, a square or other geometrical symbols and a number written therein for
identification.
12. ARROW - an arrow is drawn to represent each activity included in the network for a project, joining
two events. An arrow is designated by two numbers, one at the tail and one at the head, with the
number at the head always larger than the number at the tail.
13. NETWORK - this is an arrow diagram drawn to represent the relations of the activities and events. It is
a common practice to start time and the first arrow or arrows at the left end of the network and to
proceed to the right.
14. DUMMY - a dummy is an artificial activity, represented on the arrow diagram by a dotted line, which
indicates that an activity following the dummy cannot be started until the activity or activities
preceding the dummy are completed. A dummy activity does not consume time.
15. DURATION - this is the estimated time it takes an activity to be finished
16. EARLIEST START ( ES ) - this is the earliest time that an activity can be started.
17. EARLIEST FINISH ( EF ) - this is the earliest time that an activity can be finished. It is the earliest
starting time plus the duration of an activity. EF = ES + D
18. LATEST START ( LS ) - this is the latest time that an activity may be started without delaying the
completion of a project. LS = LF - D
19. LATEST FINISH ( LF ) - this is the latest time that an activity can be finished without delaying the
completion of the project.
20. TOTAL FLOAT ( TF ) - this is the amount of time that the start or finish of an activity can be delayed
without delaying the completion of a project. TF = LF - EF or TF = LS - ES
21. FREE FLOAT ( FF ) - this is the amount of time that the finish of an activity can be delayed without
delaying the earliest starting time for a following activity; FF = ES ( following activity ) - EF ( of this
activity ).
22. CRITICAL PATH - is the longest path in the network of activities representing a project. The critical
path is the series of interconnected activities through the network for which each activity has zero float
time, the critical path determines the minimum time required to complete a project.
23. CRITICAL ACTIVITY - these are the activities along the critical path, any delay in their completion
would result in a delay of a project completion.
CRITICAL PATH SCHEDULING
For preparing critical path method of scheduling for any construction project, it is suggested that the
following steps be used:
1. Prepare a list of all the activities of the project.
2. Estimate the duration of each activity.
3. Determine which activity or activities immediately precede each activity.
4. Determine which activity or activities immediately follow each activity.
5. Draw a network with the activities and events properly interconnected.
6. Assign numbers to the events, being sure that the number at the head of each arrow is larger
than the number at the tail of the arrow.
7. Prepare a chart with vertical columns and horizontal lines on which to list each activity with
an appropriate designation, duration, earliest start, earliest finish, latest start, latest finish
and total float. A column for free float may be included, if this information is desired.
8. Determine which activities lie on the critical path.
SAMPLE PROBLEM :
Given:
ACTIVITIES THAT IMMEDIATELY
ACTIVITY DURATION
PRECEDE FOLLOW
A 2 None D
B 4 None F, G, H
C 1 None E
D 3 A I
E 2 C J
F 5 B I
G 2 B J
H 1 B None
I 4 D, F None
J 3 E, G None
Required: Draw the network diagram for the above project.

1. Prepare a chart indicating the activities, events, D, ES, EF, LS, LF, TF, and FF.
2.
Solution:
a)
1
D 5
2 3
I
4
A F
2 4 5
B H
4 34 1 7
G
C 2
J
1
E 3
4 6
2
b) The Forward Pass: Beginning at the start of the network, earliest event times are calculated
using the equation:
Dj = Max (Di + Cij) where:Dj = is the earliest event time at the head event
Dj = is the earliest event time at the tail event
Cij = is the time of moving from event i to j.
This is done for all events. Di for the starting event is 0.
9
2
D 5
2 3
I
4
A F
0 2 5
B 4 H 13
1
3 7
4 1
G
C 2
J
1 1 6
E 3
4 6
2
c) The Backward Pass: To start with, the last event is assigned the same value for earliest and latest
times.
Then starting from the last event, the latest event times are calculated using the
equation:
Di = Min (Dj - Cji) where: Dj = is the latest event time at the head event Di
= is the latest event time at the tail event
Cij = is the time of moving from event j to i.
Two checks at this time are good for manual calculations. First, the two times at the
start event must be zero. The second is that there should be at least one route through
the network for which the earliest and latest event times are equal.
2 D 5
2 3 9 I
6 4
A F
0
2 5
B 4 H 13
1
3 7
0 4 1
4 G 13
C 2
J
1 1 6
E 3
4 6
2
8 10
d) Computation of the Critical Path

The critical path is the longest (most time consuming) path of the network diagram.
Path A-D-I = 2 + 3 + 4 = 9 wks

Path B-F-I = 4 + 5 + 4 = 13 wks (critical path or the longest path)
Path B-H = 4 + 1 = 5 wks
Path B-G-J = 4 + 2 + 3 = 9 wks
Path C-E-J = 1 + 2 + 3 = 6 wks
9
2 D 5
2 3 Critical path = B-F-I
9 I
6 4
A F
0
2 5
B 4 H 13
1
3 7
0 4 1
4 G 13
C 2
J
1 1 6
E 3
4 6
2
8 10
9. The Table of Starts, Finishes and Floats of the Project
ACTIVITY DURATION ES EF LS LF TF FF REMARKS

A 2 0 2 4 6 4 0
B 4 0 4 0 4 0 0 critical
C 1 0 1 7 8 7 0
D 3 2 5 6 9 4 4
E 2 1 3 8 10 7 3
F 5 4 9 4 9 0 0 critical
G 2 4 6 8 10 4 0
H 1 4 5 12 13 8 8
I 4 9 13 9 13 0 0 critical
J 3 6 9 10 13 4 4
SEAT WORK/BOARD WORK/ASSIGNMENT
Problem No. 1:
Draw a network diagram representing the following logic:
G follows F but precedes H
G follows D but precedes J
M follows H but precedes L
K follows A but precedes L
F follows A
A and D start at the same time
J and L terminate at the same time
Problem No. 2
Draw a network diagram representing the following informations: The project starts with three
activities namely A, B, and C, which can be done concurrently. When A is finished, D can start; when B is
finished, F can start: when B and D are finished, E can start. The project is complete when activities C, E
and F are finished.
Problem No. 3:
Draw a network diagram representing the following logic:
1. A is the first job on the project
2. O and N are the two final jobs for project completion
3. K precedes O
4. N follows L & M
5. J restricts the start of K & M
6. C and B depend on the completion of A
7. D follows B and may go on in parallel with C & E
8. E follows C
9. I restricts the start of J and L
10. H and G also restrict K and M
11. F must precede G and may go in parallel with H
12. E and D restrict H and I
13. C must precede F
Problem No. 4
Given:
ACTIVITIES THAT IMMEDIATELY

ACTIVITY DURATION
PRECEDE FOLLOW
A. Design Frame 4 wks None H, E, F

B. Design Wheels 3 None H, E, F
C. Design Gears 3 None D
D. Design Handlebars 2 C H, E, F
E. Test Steering 1 A, B, D G
F. Test Gears 2 A, B, D G
G. Performance Test 3 E, F J, K
H. Manufacturing Layout 3 A, B, D I
I. Manufacture Demonstrators 5 H L
J. Prepare Advertising 2 G L
K. Prepare User’s Manual 4 G L
L. Distribute to Dealers 2 I, J, K None
Required:
3. Draw the network diagram for the above project.
4. Prepare a chart indicating the activities, events, D, ES, EF, LS, LF, TF, and FF.
SUPPLEMENTARY PROBLEMS
Problem No. 1
Prepare an arrow diagram and a list of starts, finishes, and floats for a project involving the listed activities.
Activities w/c
DURATION
STARTS FINISHES FLOATS

ACTIVITY
immediately
PRECEDE FOLLOW ES LS EF LF TF FF
A 3 None B, C
B 5 A D, E
C 4 A F, I
D 7 B G
E 6 B H
F 11 C H
G 6 D J
H 4 E, F K
I 3 C K, L
J 6 G M
K 5 H, I N
L 7 I O
M 5 J P
N 3 K P
O 2 L P
P 4 M, N, O None
DURATION COMPRESSION
There are instances where the owner wants a project completed sooner than planned or where the
contractor must recover load time due to delays in order to catch up with schedules. For these reasons, the
project manager finds himself faced with the situation of having to expedite work. The Critical Path
Method (CPM) offers a solution for crashing work by trading time for cost.
Crashing is the process of determining shortest time, called crash time, within which an activity can
be accomplished using additional crew or equipment, overtime or extra shifts, or special techniques such as
high early strenght concrete and prefabricated components. Crashing, however, leads to increased cost
arising from, among others, the application of additional resources, increased material cost, and
inefficiency of larger crews. The cost associated with the crash time is called crash-cost.
Time-cost Trade-off
The total cost of a project is the sum of its direct and indirect costs. The direct cost, which is usually
calculated by activity, includes expense of materials, labor, equipment and subcontract. Indirect cost
includes project overhead expenses, contingency and miscellaneous expenses as well as contractor's tax.
Since it is difficult to identify which portion of the indirect cost is associated with an individual activity, it
is usually computed as a percentage of total direct cost.
For each activity, duration and cost are estimated under the assumption that resource loading are
normal. In CPM parlance, these are called the normal time and normal cost. The normal time is the activity
duration estimated during the network scheduling phase. It is based on formulated construction work
standards which are usually adjusted to reflect labor and equipment productivity, weather and actual site
conditions, crew and equipment fleet sizes, and construction methods to be employed. The normal cost is
the least direct cost necessary to accomplish the activity. It is taken from the detailed estimates of direct
costs. The minimum time to which an activity can be realistically reduced is called its crash time and the
corresponding cost is called the crash cost.
For each activity, the direct cost is related to its duration. As the pace of the activity is accelerated,
its direct cost will rise. Conversely, if it is dragged out, the cost will likewise rise. The coordinates of this
optimum point are referred to as the normal time and normal cost of the activity.
In general, a linear relationship may be assumed between indirect cost and project duration. As the
project duration is compressed, indirect cost decreases. This means that while direct cost increase as an
activity is compressed, indirect cost decreases as the project is shortened.
Crashing Procedure
In order to shorten the duration of a project, the longest path in the network, the critical path, is
compressed. It should be stressed however, that when this is crashed, it may not be necessary to crash all
the critical activities, partially or fully. Crashing should be carried out only to the desired crash duration of
the project.
When crashing the critical path, critical activities are ranked in accordance with the job-cost slope,
which is the unit change in cost for a reduction in the activity time duration. The job-cost slope can be
determined from the following formula:
Crash cost - Normal cost

Job-cost Slope =
Normal time - Crash time
Each critical activity is then crashed in the order of the job-cost slope, starting with the one having the
lowest job-cost slope, until the desired project duration is attained
The network is then examined to determine the effect of the charges on the con-critical activities.
In general, crashing the critical path reduces the float of other activities.
Thus, the shifting of the critical paths to a non-critical one is highly possible. In such cases, the
normal duration of the affected non-critical activity is compressed. Finally, the costs resulting from
crashing the critical and non-critical activities are compressed.
The foregoing, detailed procedures for crashing the single and multiple
procedures generally apply in critical path project cases.
projects having only one critical
path. In a where the projects has Example 1.
two or more critical paths, it
would be necessary to identify all
Given the following data for a project, find the least cost
crashing alternatives and to
schedule if the project has to be completed in 12 weeks.
calculate the incremental costs
corresponding to each alternative
before the before the most Activity Predecessors Duration Cost
sophisticated alternative is chosen. Normal Crash Normal Cras
In some cases, even if the project A - 6 4 10,000.00 14,00
has only one critical path,
B - 4 3 5,000.00 8,000
complexities in the network logic
may require the use of the latter C A 3 2 4,000.00 5,000
approach to get the least-cost D B 8 6 9,000.00 12,00
solution. E C 7 4 7,000.00 8,000
In the succeeding
sections, two examples problems
will be discussed to illustrate the Solution: (Normal Time)
Determine the project duration
and critical activities using the Cost Slope of Activity C =
normal time.
A
0 6
0 B
Compute for the Cost Slope of

each activity:
Cost Slope of Activity

14000
A=
10000
2000
6
4
Cost Slope of Activity B
8000
=
5000
3000
4
3
50004000 1000 32
12000 9000
Cost Slope of Activity D = 1500
8 6
8000 7000
Cost Slope of Activity E = 333.33
7 4
Activity Cost to Reduce per week Order of Crashing
A 2,000 4*
B 3,000 5
C 1,000 2*
D 1,500 3
E 333.33 1*
Note: In order to arrive with the least cost schedule, we begin crashing the activities with the least
expensive activity on the critical path.
Crash Time:
6 8
C
2 4
2
A 6 8 E
0 6
4 12
1
5
0 B 4 D
12
4
8
3
Project Cost = Normal Cost + Crash Cost of Activity C & E

Project Cost = 35000 + {(1 x 1000) + (3 x 333.33)} Project
Cost = 37,000.00
Example No 2.
Given the following data for a program, determine the least - cost schedule if the project is to
be completed in 15 weeks.
Duration Cost
Activity Predecessors Cost to Reduce/ week
Normal Crash Normal Crash
A - 8 6 8,000.00 10,000.00
B - 7 5 6,000.00 8,400.00
C A 5 4 7,000.00 8,500.00
D B 4 3 3,000.00 3,800.00
E A 3 2 2,000.00 2,600.00
F D, E 5 3 5,000.00 6,600.00
G C 4 3 6,000.00 7,000.00
Solution: (Normal Time)
G
C
F
6
5
1 A 2 E
B D
3
DEVELOPING THE PERT NETWORK DIAGRAM
PERT is very similar to critical path analysis and the two methods are often confused with each other.
PERT it is commonly used in projects that have never been done before or in research and development
projects. Construction of the network diagram is carried out in the same as the CPM. There main difference
only is on the estimate of the activity duration. The duration of this type of projects are subject to
uncertainty so the estimated time will be much better described by a probability distribution than by a
single estimate.
PERT handles the uncertainty problem by the use of three time estimates, the optimistic time estimate,
the most likely time estimate and the pessimistic time estimate.
a 4m c
t
Expected time, 6
Studies have been made of the accuracy and validity of “t” computed by the formula above. The
procedure and calculations of Early Start, Early Finish, Late Start, Late Finish, Total Float and Free Float
are the same as those made using single estimate duration.
To describe the variation or dispersion in the uncertain activity times in a PERT network, we use the
standard deviation of the activity times. This can be done because we have three time estimates for each
activity.
ba
Standard deviation of an activity, S.D. = 6
Using the Standard Deviation of each task along the critical path, we can calculate the SD of the
duration of the project. This can help us learn more about our project especially on estimating the chance of
finishing the project earlier than the target duration. This information is important in the management of the
project and when discussing with the owner or stakeholders. The SD of other paths must also be computed
to identify any dangers that might change them to critical.
The SD of the project duration is readily calculated by taking the square root of the sum of the
squared standard deviation of the individual activities on the critical path of the network.
S.D. =
(SD ) 2 (SD ) 2 (SD )2
1stactivity 2ndActivity 3rdaActivity
The Standard Deviation of the critical path coupled with the table of The Standard Normal Probability
Distribution can help us forecast the chance for finishing earlier or later than the expected duration of the
project. Only three steps are needed:
1. Determine the deviation of your target duration from the project’s expected duration:
D = TT – Te
2. Convert this deviation into the number of SD’s:
D
z
SD
3. Read the probability from the Standard Normal Probability Distribution table.
For example you have a project whose expected duration is 18.5 weeks and the SD of the critical path
is 1.53 weeks. Statistical theory tells us that the t e durations have a 50 percent chance of being realized.
Therefore, there is a 50 percent chance of the project being finished in the expected time of 18.5 weeks. If
we wanted to complete the project one SD (1.53 wks) sooner than the expected duration (18.5 – 1.53 =
16.97 wks), by following the three steps discussed above, the result shows that we have only 16 % chance
of doing it. While if we determine the probability of finishing the project in 20 weeks ( z (20 18.5) 1.53
0.98 ), there is an 84% chance.
Sample Problem
Problem No. 1
A project has the following characteristics:
Optimistic time, Most likely time, Pessimistic time,

Activity Predecessors
a m b
A None 2 3 4
B A 2 3 8
C A 3 4 5
D C 2 6 7
E B 3 5 17
F D 1 2 5
G E, F 2 3 8
Construct a PERT network and compute the probability that the project will be completed in 17 weeks and
22 weeks. Round off the computed expected time values.
Solution:
Computation of the Expected time for each activity;

a 4m b 2 (4)(3) 4 3.0 wks
Activity A =
6 6
a 4m b 2 (4)(3) 8 3.67 wks say 4.0 wks

Activity B = 6 6
a 4m b 3 (4)(4) 5 4.0 wks
Activity C = 6 6
a 4m b 2 (4)(6) 7 6 5.
5 wks say 6.0 wks
Activity D = 6
a 4m b 3 (4)(5) 17 6 6.67 wks say 7.0 wks

Activity E = 6
a 4m b 1 (4)(2) 5
Activity F = 2.33wks say 2.0 wks
6 6
a 4m b 2 (4)(3) 8
Activity G = 3.67 wks say 4.0 wks
6 6
THE PERT NETWORK DIAGRAM
7
B E
4
4 7
8
0 3 7 13 15 19
A C D F G
1 2 3 5 6 7
3 4 6 2 4
0 3 7 13 15 19
The Standard Deviation of each activity;

b a 7 2
SD of each activity = SD of D = 0.83
6
6 17 3
4 2 SD of E = 2.33
SD of A = 0.33 6
6
5 1
8 2 SD of F =
SD of B = 1.00 0.67
6 6
53 SD of G = 8 2
SD of C = 0.33 1.00
6 6
Optimistic Most likely Pessimistic Expected

Standard Deviation,
Activity time, time, time, Time
a m b te SD
A* 2 3 4 3.0 0.33
B 2 3 8 4.0 1.00
C* 3 4 5 4.0 0.33
D* 2 6 7 6.0 0.83
E 3 5 17 7.0 2.33
F* 1 2 5 2.0 0.67
G* 2 3 8 4.0 1.00
Standard Deviation of the Critical Path = (SD )2 (SD )2 (SD )2 (SD )2 (SD )2
A C D F G
Standard Deviation of the Critical Path =

(0.33) 2 (0.33) 2
(0.83) 2
(0.67) 2
(1.0) 2
Standard Deviation of the Critical Path = 1.53
Probability of Finishing the Project in 17 weeks:
D = TT – Te = 17 – 19 = - 2
D 2
z 1.31
SD 1.53
from the Normal Probability Distribution table, a value of z = -1.31 means the project has only
9.51% chance that it will be completed in 17 weeks.
Probability of Finishing the Project in 22 weeks:
D = TT – Te = 22 – 19 = 3
D 3
z 1.96
SD 1.53
from the Normal Probability Distribution table, a value of z = 1.96 means the project has
97.50% chance that it will be completed in 22 weeks.
Problem No. 2
Pioneer Audio has completed the design and testing of a new type of miniature speaker, the Response 1000,
which Pioneers thinks can be produced and distributed at a price that will give it the strongest market
position in the industry. Rollie Tillman, Pioneer’s promotion and advertising director, plans an extensive
promotion campaign. So, Rollie put together a careful list of all the different activities involved in the
promotional campaign. The table below is a list of activities necessary in the promotion campaign together
with the corresponding estimated duration.

a m b
A None 1 2 3
B None 1 2 3
C None 1 2 3
D A 1 2 9
E A 2 3 10
G B 3 6 15
H B 2 5 14
I D, E 1 4 7
J C 4 9 20
K H, J 1 2 9
L G, I, K 4 4 4
Using the information above, construct a PERT network; a table of starts, finishes and floats; compute the
probability that the project will be completed 1 day ahead of schedule; and what is the chances of finishing
the project 2 days behind the original schedule. Round off the computed expected time values.
ASSIGNMENT
Problem No. 1
Ottawa Construction, Ltd., is preparing a PERT network for laying the foundation for a new art museum.
They have the following activities to perform, with time estimates in weeks:

a m b
A. Survey Site None 2 3 4
B. Excavation A 9 12 15
C. Prepare Drawings None 4 6 7
D. Soil Study B 1 1 1
E. Preliminary Report C, D 1 2 3
F. Approve Plans E 1 1 1
G. Concrete Forms F 5 6 9
H. Procure Steel F 2 3 4
I. Order Cement F 1 1 1
J. Deliver Gravel G 2 3 5
K Pour concrete. H, I, J 8 10 14
L. Cure Concrete K 2 2 2
M. Strength Test L 2 2 2
Construct the PERT network for the project and determine the critical path as well as the slack for each
activity.
1. If Ottawa plans to include a completion date in their bid for this work, what completion time
should they quote if it is their policy to ensure a 90% probability of being completed?
2. If the Canadian Ministry of Art desires to have the work completed within 41 weeks, determine
the probability of meeting this objective.
3. The contract specifies a $10,000 per week penalty for each week the completion of the project
extends past week 43. What is the probability they will have to pay a $20,000 penalty.
Problem No. 2
A project has the following characteristics:

a m b
A None 0.5 1 2
B A 1 2 3
C A 1 3 5
D B 3 4 5
E C 2 3 4
F C 3 5 7
G D, E 4 5 6
H F 6 7 8
I G, H 2 4 6
J G, H 5 6 8
K I 1 2 3
L J 3 5 7
Construct a PERT network and compute the probability that the project will be completed within 30 weeks.
Round off the computed expected times.
Standard Normal Cumulative Probability Table
Cumulative probabilities for NEGATIVE z-values are shown in the following table:
z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
-3.4 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0002
-3.3 0.0005 0.0005 0.0005 0.0004 0.0004 0.0004 0.0004 0.0004 0.0004 0.0003
-3.2 0.0007 0.0007 0.0006 0.0006 0.0006 0.0006 0.0006 0.0005 0.0005 0.0005
-3.1 0.0010 0.0009 0.0009 0.0009 0.0008 0.0008 0.0008 0.0008 0.0007 0.0007
-3.0 0.0013 0.0013 0.0013 0.0012 0.0012 0.0011 0.0011 0.0011 0.0010 0.0010
-2.9 0.0019 0.0018 0.0018 0.0017 0.0016 0.0016 0.0015 0.0015 0.0014 0.0014
-2.8 0.0026 0.0025 0.0024 0.0023 0.0023 0.0022 0.0021 0.0021 0.0020 0.0019
-2.7 0.0035 0.0034 0.0033 0.0032 0.0031 0.0030 0.0029 0.0028 0.0027 0.0026
-2.6 0.0047 0.0045 0.0044 0.0043 0.0041 0.0040 0.0039 0.0038 0.0037 0.0036
-2.5 0.0062 0.0060 0.0059 0.0057 0.0055 0.0054 0.0052 0.0051 0.0049 0.0048
-2.4 0.0082 0.0080 0.0078 0.0075 0.0073 0.0071 0.0069 0.0068 0.0066 0.0064
-2.3 0.0107 0.0104 0.0102 0.0099 0.0096 0.0094 0.0091 0.0089 0.0087 0.0084
-2.2 0.0139 0.0136 0.0132 0.0129 0.0125 0.0122 0.0119 0.0116 0.0113 0.0110
-2.1 0.0179 0.0174 0.0170 0.0166 0.0162 0.0158 0.0154 0.0150 0.0146 0.0143
-2.0 0.0228 0.0222 0.0217 0.0212 0.0207 0.0202 0.0197 0.0192 0.0188 0.0183
-1.9 0.0287 0.0281 0.0274 0.0268 0.0262 0.0256 0.0250 0.0244 0.0239 0.0233
-1.8 0.0359 0.0351 0.0344 0.0336 0.0329 0.0322 0.0314 0.0307 0.0301 0.0294
-1.7 0.0446 0.0436 0.0427 0.0418 0.0409 0.0401 0.0392 0.0384 0.0375 0.0367
-1.6 0.0548 0.0537 0.0526 0.0516 0.0505 0.0495 0.0485 0.0475 0.0465 0.0455
-1.5 0.0668 0.0655 0.0643 0.0630 0.0618 0.0606 0.0594 0.0582 0.0571 0.0559
-1.4 0.0808 0.0793 0.0778 0.0764 0.0749 0.0735 0.0721 0.0708 0.0694 0.0681
-1.3 0.0968 0.0951 0.0934 0.0918 0.0901 0.0885 0.0869 0.0853 0.0838 0.0823
-1.2 0.1151 0.1131 0.1112 0.1093 0.1075 0.1056 0.1038 0.1020 0.1003 0.0985
-1.1 0.1357 0.1335 0.1314 0.1292 0.1271 0.1251 0.1230 0.1210 0.1190 0.1170
-1.0 0.1587 0.1562 0.1539 0.1515 0.1492 0.1469 0.1446 0.1423 0.1401 0.1379
-0.9 0.1841 0.1814 0.1788 0.1762 0.1736 0.1711 0.1685 0.1660 0.1635 0.1611
-0.8 0.2119 0.2090 0.2061 0.2033 0.2005 0.1977 0.1949 0.1922 0.1894 0.1867
-0.7 0.2420 0.2389 0.2358 0.2327 0.2296 0.2266 0.2236 0.2206 0.2177 0.2148
-0.6 0.2743 0.2709 0.2676 0.2643 0.2611 0.2578 0.2546 0.2514 0.2483 0.2451
-0.5 0.3085 0.3050 0.3015 0.2981 0.2946 0.2912 0.2877 0.2843 0.2810 0.2776
-0.4 0.3446 0.3409 0.3372 0.3336 0.3300 0.3264 0.3228 0.3192 0.3156 0.3121
-0.3 0.3821 0.3783 0.3745 0.3707 0.3669 0.3632 0.3594 0.3557 0.3520 0.3483
-0.2 0.4207 0.4168 0.4129 0.4090 0.4052 0.4013 0.3974 0.3936 0.3897 0.3859
-0.1 0.4602 0.4562 0.4522 0.4483 0.4443 0.4404 0.4364 0.4325 0.4286 0.4247
0.0 0.5000 0.4960 0.4920 0.4880 0.4840 0.4801 0.4761 0.4721 0.4681 0.4641
Standard Normal Cumulative Probability Table
Cumulative probabilities for POSITIVE z-values are shown in the following table:
z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359
0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5753
0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141
0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517
0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879
0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224
0.6 0.7257 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7517 0.7549
0.7 0.7580 0.7611 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852
0.8 0.7881 0.7910 0.7939 0.7967 0.7995 0.8023 0.8051 0.8078 0.8106 0.8133
0.9 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389
1.0 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621
1.1 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.8790 0.8810 0.8830
1.2 0.8849 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015
1.3 0.9032 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177
1.4 0.9192 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319
1.5 0.9332 0.9345 0.9357 0.9370 0.9382 0.9394 0.9406 0.9418 0.9429 0.9441
1.6 0.9452 0.9463 0.9474 0.9484 0.9495 0.9505 0.9515 0.9525 0.9535 0.9545
1.7 0.9554 0.9564 0.9573 0.9582 0.9591 0.9599 0.9608 0.9616 0.9625 0.9633
1.8 0.9641 0.9649 0.9656 0.9664 0.9671 0.9678 0.9686 0.9693 0.9699 0.9706
1.9 0.9713 0.9719 0.9726 0.9732 0.9738 0.9744 0.9750 0.9756 0.9761 0.9767
2.0 0.9772 0.9778 0.9783 0.9788 0.9793 0.9798 0.9803 0.9808 0.9812 0.9817
2.1 0.9821 0.9826 0.9830 0.9834 0.9838 0.9842 0.9846 0.9850 0.9854 0.9857
2.2 0.9861 0.9864 0.9868 0.9871 0.9875 0.9878 0.9881 0.9884 0.9887 0.9890
2.3 0.9893 0.9896 0.9898 0.9901 0.9904 0.9906 0.9909 0.9911 0.9913 0.9916
2.4 0.9918 0.9920 0.9922 0.9925 0.9927 0.9929 0.9931 0.9932 0.9934 0.9936
2.5 0.9938 0.9940 0.9941 0.9943 0.9945 0.9946 0.9948 0.9949 0.9951 0.9952
2.6 0.9953 0.9955 0.9956 0.9957 0.9959 0.9960 0.9961 0.9962 0.9963 0.9964
2.7 0.9965 0.9966 0.9967 0.9968 0.9969 0.9970 0.9971 0.9972 0.9973 0.9974
2.8 0.9974 0.9975 0.9976 0.9977 0.9977 0.9978 0.9979 0.9979 0.9980 0.9981
2.9 0.9981 0.9982 0.9982 0.9983 0.9984 0.9984 0.9985 0.9985 0.9986 0.9986
3.0 0.9987 0.9987 0.9987 0.9988 0.9988 0.9989 0.9989 0.9989 0.9990 0.9990
3.1 0.9990 0.9991 0.9991 0.9991 0.9992 0.9992 0.9992 0.9992 0.9993 0.9993
3.2 0.9993 0.9993 0.9994 0.9994 0.9994 0.9994 0.9994 0.9995 0.9995 0.9995
3.3 0.9995 0.9995 0.9995 0.9996 0.9996 0.9996 0.9996 0.9996 0.9996 0.9997
3.4 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9998
B
Transportation and
Assignment Solution
Methods
B-
1
B-2 MODULE B TRANSPORTATION AND ASSIGNMENT SOLUTION METHODS
Solution of the Transportation Model

The following example was used in chapter 6 of the text to demonstrate the formulation
of the transportation model. Wheat is harvested in the Midwest and stored in grain
elevators in three different cities—Kansas City, Omaha, and Des Moines. These grain
elevators sup-ply three flour mills, located in Chicago, St. Louis, and Cincinnati. Grain is
shipped to the mills in railroad cars, each car capable of holding one ton of wheat. Each
grain elevator is able to supply the following number of tons (i.e., railroad cars) of wheat
to the mills on a monthly basis.
Grain Elevator Supply

1. Kansas City 150
2. Omaha 175
3. Des Moines 275
Total 600 tons
Each mill demands the following number of tons of wheat per month.
Mill Demand
A. Chicago 200
B. St. Louis 100
C. Cincinnati 300
Total 600 tons
The cost of transporting one ton of wheat from each grain elevator (source) to each
mill (destination) differs according to the distance and rail system. These costs are shown
in the following table. For example, the cost of shipping one ton of wheat from the grain
elevator at Omaha to the mill at Chicago is $7.
Mill
Grain Elevator A. Chicago B. St. Louis C. Cincinnati

1. Kansas City $6 $8 $10
2. Omaha 7 11 11
3. Des Moines 4 5 12
The problem is to determine how many tons of wheat to transport from each grain eleva-
tor to each mill on a monthly basis in order to minimize the total cost of transportation.
The linear programming model for this problem is formulated in the equations that follow.
SOLUTION OF THE TRANSPORTATION MODEL B-3
minimize Z $6x1A 8x1B 10x1C 7x2A 11x2B 11x2C 4x3A 5x3B 12x3C subject to
x1A x1B x1C 150

x2A x2B x2C 175
x3A x3B x3C 275
x1A x2A x3A 200
x1B x2B x3B 100
x1C x2C x3C 300
xij 0
In this model the decision variables, xij, represent the number of tons of wheat trans-
ported from each grain elevator, i (where i 1, 2, 3), to each mill, j (where j A, B, C). The
objective function represents the total transportation cost for each route. Each term in the
objective function reflects the cost of the tonnage transported for one route. For exam-ple,
if 20 tons are transported from elevator 1 to mill A, the cost of $6 is multiplied by x1A
( 20), which equals $120.
The first three constraints in the linear programming model represent the supply at
each elevator; the last three constraints represent the demand at each mill. As an example,
con-sider the first supply constraint, x1A x1B x 1C 150. This constraint represents the tons
of wheat transported from Kansas City to all three mills: Chicago (x1A), St. Louis (x1B),
and Cincinnati (x1C). The amount transported from Kansas City is limited to the 150 tons
Transportation problems are
solved manually within a
available. Note that this constraint (as well as all others) is an equation ( ) rather than a
tableau format. inequality because all of the tons of wheat available will be needed to meet the total
demand of 600 tons. In other words, the three mills demand 600 total tons, which is the
Table B-1 exact amount that can be supplied by the three grain elevators. Thus, all that can be
The Transportation Tableau supplied will be, in order to meet demand. This type of model, in which supply exactly
equals demand, is referred to as a balanced transportation model. The balanced model
will be used to demon-strate the solution of a transportation problem.
Transportation models are solved manually within the context of a tableau, as in the
simplex method. The tableau for our wheat transportation model is shown in Table B-1.
To
From A B C Supply
6 8 10
1 150
7 11 11
2 175
4 5 12
3 275
Demand 200 100 300 600
Each cell in the tableau represents the amount transported from one source to one des-
Each cell in a transportation tableau tination. Thus, the amount placed in each cell is the value of a decision variable for that
is analogous to a decision variable cell. For example, the cell at the intersection of row 1 and column A represents the
that indicates the amount allocated
from a source to a destination.
decision vari-able x1A. The smaller box within each cell contains the unit transportation
cost for that route. For example, in cell 1A the value, $6, is the cost of transporting one
The supply and demand values ton of wheat from Kansas City to Chicago. Along the outer rim of the tableau are the
along the outside rim of a tableau supply and demand constraint quantity values, which are referred to as rim requirements.
are called rim requirements.
The two methods for solving a transportation model are the stepping-stone method and the
modified distribution method (also known as MODI). In applying the simplex method, an
initial solution had to be established in the initial simplex tableau. This same condition must
be met in solving a transportation model. In a transportation model, an initial feasi-ble
Transportation models do not start solution can be found by several alternative methods, including the northwest corner method,
at the origin where all decision the minimum cell cost method, and Vogel’s approximation model.
variables equal zero; they must be
given an initial feasible solution.
With the northwest corner method, an initial allocation is made to the cell in the upper left-
The Northwest hand corner of the tableau (i.e., the “northwest corner”). The amount allocated is the most
Corner Method possible, subject to the supply and demand constraints for that cell. In our example, we first
allocate as much as possible to cell 1A (the northwest corner). This amount is 150 tons, since
In the northwest corner that is the maximum that can be supplied by grain elevator 1 at Kansas City, even though 200
method the largest possible tons are demanded by mill A at Chicago. This initial allocation is shown in Table B-2.
allocation is made to the cell
We next allocate to a cell adjacent to cell 1A, in this case either cell 2A or cell 1B.
in the upper left-hand corner
of the tableau, followed by However, cell 1B no longer represents a feasible allocation, because the total tonnage of
allocations to adjacent wheat available at source 1 (i.e., 150 tons) has already been allocated. Thus, cell 2A
feasible cells. repre-sents the only feasible alternative, and as much as possible is allocated to this cell.
The amount allocated at 2A can be either 175 tons, the supply available from source 2
(Omaha), or 50 tons, the amount now demanded at destination A. (Recall that 150 of the
200 tons demanded at A have already been supplied.) Because 50 tons is the most
constrained amount, it is allocated to cell 2A, as shown in Table B-2.
Table B-2 To
The Initial NW Corner SolutionFrom A B C Supply
6 8 10
1 150 150
7 11 11
2 50 100 25 175
4 5 12
3 275 275
Demand 200 100 300 600
The third allocation is made in the same way as the second allocation. The only feasible cell
adjacent to cell 2A is cell 2B. The most that can be allocated is either 100 tons (the amount
demanded at mill B) or 125 tons (175 tons minus the 50 tons allocated to cell 2A). The smaller
(most constrained) amount, 100 tons, is allocated to cell 2B, as shown in Table B-2.
The fourth allocation is 25 tons to cell 2C, and the fifth allocation is 275 tons to cell
The initial solution is 3C, both of which are shown in Table B-2. Notice that all of the row and column
complete when all rim allocations add up to the appropriate rim requirements.
requirements are satisfied.
The transportation cost of this solution is computed by substituting the cell allocations
(i.e., the amounts transported),
x1A 150
x2A 50
x2B 100
x2C 25
x3C 275
into the objective function.
Z $6x1A 8x1B 10x1C 7x2A 11x2B 11x2C 4x3A 5x3B 12x3C
6(150) 8(0) 10(0) 7(50) 11(100) 11(25) 4(0) 5(0) 12(275) $5,925
The steps of the northwest corner method are summarized here.

29. Allocate as much as possible to the cell in the upper left-hand corner,
subject to the supply and demand constraints.
30. Allocate as much as possible to the next adjacent feasible cell.
31. Repeat step 2 until all rim requirements have been met.
The Minimum Cell With the minimum cell cost method, the basic logic is to allocate to the cells with the low-
Cost Method est costs. The initial allocation is made to the cell in the tableau having the lowest cost. In
the transportation tableau for our example problem, cell 3A has the minimum cost of $4.
In the minimum cell cost method As much as possible is allocated to this cell; the choice is either 200 tons or 275 tons. Even
as much as possible is allocated to though 275 tons could be supplied to cell 3A, the most we can allocate is 200 tons, since
the cell with the minimum cost. only 200 tons are demanded. This allocation is shown in Table B-3.
Table B-3
To
The Initial Minimum Cell From A B C Supply
Cost Allocation
6 8 10
1 150
7 11 11
2 175
4 5 12
3 200 275
Demand 200 100 300 600
Notice that all of the remaining cells in column A have now been eliminated, because
all of the wheat was demanded at destination A, Chicago, has now been supplied by
source 3, Des Moines.
The next allocation is made to the cell that has the minimum cost and also is feasible.
This is cell 3B which has a cost of $5. The most that can be allocated is 75 tons (275 tons
minus the 200 tons already supplied). This allocation is shown in Table B-4.
The third allocation is made to cell 1B, which has the minimum cost of $8. (Notice
that cells with lower costs, such as 1A and 2A, are not considered because they were pre-
viously ruled out as infeasible.) The amount allocated is 25 tons. The fourth allocation of
125 tons is made to cell 1C, and the last allocation of 175 tons is made to cell 2C. These
allocations, which complete the initial minimum cell cost solution, are shown in Table B-
5.
Table B-4 To
The Second Minimum CellFrom A B C Supply
Cost Allocation
6 8 10
1 150
7 11 11
2 175
4 5 12
3 200 75 275
Demand 200 100 300 600
Table B-5
To
The Initial Solution From A B C Supply
6 8 10
1 25 125 150
7 11 11
2 175 175
4 5 12
3 200 75 275
Demand 200 100 300 600
The minimum cell cost method The total cost of this initial solution is $4,550, as compared to a total cost of $5,925 for
will provide a solution with the initial northwest corner solution. It is not a coincidence that a lower total cost is derived
a lower cost than the northwest using the minimum cell cost method; it is a logical occurrence. The northwest corner
corner solution because it
method does not consider cost at all in making allocations—the minimum cell cost
considers cost in the
allocation process.
method does. It is therefore quite natural that a lower initial cost will be attained using the
latter method. Thus, the initial solution achieved by using the minimum cell cost method is
usually better in that, because it has a lower cost, it is closer to the optimal solution; fewer
subsequent iterations will be required to achieve the optimal solution.
The specific steps of the minimum cell cost method are summarized next.
1. Allocate as much as possible to the feasible cell with the minimum transportation
cost, and adjust the rim requirements.
2. Repeat step 1 until all rim requirements have been met.
Vogel’s Approximation The third method for determining an initial solution, Vogel’s approximation model (also
Model called VAM), is based on the concept of penalty cost or regret. If a decision maker incor-
rectly chooses from several alternative courses of action, a penalty may be suffered (and the
A penalty cost is the difference decision maker may regret the decision that was made). In a transportation problem, the
between the largest and courses of action are the alternative routes, and a wrong decision is allocating to a cell that
next largest cell cost in a row does not contain the lowest cost.
(or column).
In the VAM method, the first step is to develop a penalty cost for each source and desti-
nation. For example, consider column A in Table B-6. Destination A, Chicago, can be
VAM allocates as much as

possible to the minimum cost supplied by Kansas City, Omaha, and Des Moines. The best decision would be to supply
cell in the row or column with Chicago from source 3 because cell 3A has the minimum cost of $4. If a wrong decision
the largest penalty cost. were made and the next higher cost of $6 were selected at cell 1A, a “penalty” of $2 per
ton would result (i.e., $6 4 $2). This demonstrates how the penalty cost is determined for
each row and column of the tableau. The general rule for computing a penalty cost is to
subtract the minimum cell cost from the next higher cell cost in each row and column.
The penalty costs for our example are shown at the right and at the bottom of Table B-6.
To
Table B-6
From A B C Supply
The VAM Penalty Costs
6 8 10
2
1 150
7 11 11
4
2 175
4 5 12
1
3 275
Demand 200 100 300 600
2 3 1
The initial allocation in the VAM method is made in the row or column that has the
highest penalty cost. In Table B-6, row 2 has the highest penalty cost of $4. We allocate as
much as possible to the feasible cell in this row with the minimum cost. In row 2, cell 2A
has the lowest cost of $7, and the most that can be allocated to cell 2A is 175 tons. With
this allocation the greatest penalty cost of $4 has been avoided because the best course of
action has been selected. The allocation is shown in Table B-7.
Table B-7 To
The Initial VAM AllocationFrom A B C Supply
6 8 10
2
1 150
7 11 11
2 175 175
4 5 12
1
3 275
Demand 200 100 300 600
2 3 1
After the initial allocation is made, all of the penalty costs must be recomputed. In
After each VAM cell some cases the penalty costs will change; in other cases they will not change. For
allocation, all row and column example, the penalty cost for column C in Table B-7 changed from $1 to $2 (because cell
penalty costs are recomputed.
2C is no longer considered in computing penalty cost), and the penalty cost in row 2 was
eliminated alto-gether (because no more allocations are possible for that row).
Next, we repeat the previous step and allocate to the row or column with the highest
penalty cost, which is now column B with a penalty cost of $3 (see Table B-7). The cell
in column B with the lowest cost is 3B, and we allocate as much as possible to this cell,
100 tons. This allocation is shown in Table B-8.
Table B-8 To
The Second VAM AllocationFrom A B C Supply
6 8 10
4
1 150
7 11 11
2 175 175
4 5 12
8
3 100 275
Demand 200 100 300 600
2 2
Note that all penalty costs have been recomputed in Table B-8. Since the highest
penalty cost is now $8 for row 3 and since cell 3A has the minimum cost of $4, we
allocate 25 tons to this cell, as shown in Table B-9.
Table B-9 To
The Third VAM AllocationFrom A B C Supply
6 8 10
1 150
7 11 11
2 175 175
4 5 12
3 25 100 275
Demand 200 100 300 600
2
Table B-9 also shows the recomputed penalty costs after the third allocation. Notice
that by now only column C has a penalty cost. Rows 1 and 3 have only one feasible cell,
so a penalty does not exist for these rows. Thus, the last two allocations are made to
column C. First, 150 tons are allocated to cell 1C because it has the lowest cell cost. This
leaves only cell 3C as a feasible possibility, so 150 tons are allocated to this cell. Both of
these allocations are shown in Table B-10.
The total cost of this initial Vogel’s approximation model solution is $5,125, which is not
VAM and minimum cell cost both as high as the northwest corner initial solution of $5,925. It is also not as low as the mini-mum
provide better initial solutions cell cost solution of $4,550. Like the minimum cell cost method, VAM typically results in a
than the northwest corner method.
lower cost for the initial solution than does the northwest corner method.
Table B-10 To
The Initial VAM SolutionFrom A B C Supply
6 8 10
1 150 150
7 11 11
2 175 175
4 5 12
3 25 100 150 275
Demand 200 100 300 600
The steps of Vogel’s approximation model can be summarized in the following list.
20. Determine the penalty cost for each row and column by subtracting the
lowest cell cost in the row or column from the next lowest cell cost in the same row
or column.
21. Select the row or column with the highest penalty cost (breaking ties
arbitrarily or choosing the lowest-cost cell).
22. Allocate as much as possible to the feasible cell with the lowest
transportation cost in the row or column with the highest penalty cost.
23. Repeat steps 1, 2, and 3 until all rim requirements have been met.
The Stepping-Stone Once an initial basic feasible solution has been determined by any of the previous three
Solution Method methods, the next step is to solve the model for the optimal (i.e., minimum total cost) solu-
tion. There are two basic solution methods: the stepping-stone solution method and the
Once an initial solution is derived, modified distribution method (MODI). The stepping-stone solution method will be
the problem must be solved using demonstrated first. Because the initial solution obtained by the minimum cell cost method
either the stepping-stone method had the lowest total cost of the three initial solutions, we will use it as the starting solution.
or MODI.
Table B-11 repeats the initial solution that was developed from the minimum cell cost
method.
Table B-11 To
The Minimum Cell From A B C Supply
Cost Solution
6 8 10
1 25 125 150
7 11 11
2 175 175
4 5 12
3 200 75 275
Demand 200 100 300 600
The basic solution principle in a transportation problem is to determine whether a
The stepping-stone method
transportation route not at present being used (i.e., an empty cell) would result in a lower total
determines if there is a cell cost if it were used. For example, Table B-11 shows four empty cells (1A, 2A, 2B, 3C)
with no allocation that would representing unused routes. Our first step in the stepping-stone method is to evaluate these
reduce cost if used.
empty cells to see whether the use of any of them would reduce total cost. If we find such
a route, then we will allocate as much as possible to it.
First, let us consider allocating one ton of wheat to cell 1A. If one ton is allocated to cell
1A, cost will be increased by $6—the transportation cost for cell 1A. However, by allocating
one ton to cell 1A, we increase the supply in row 1 to 151 tons, as shown in Table B-12.
To
Table B-12 From A B C Supply
The Allocation of One Ton to 6 8 10
Cell 1A 1 25 125 150 151
7 11 11
2 175 175
4 5 12
3 200 75 275
Demand 200 100 300 600
The constraints of the problem cannot be violated, and feasibility must be maintained.
If we add one ton to cell 1A, we must subtract one ton from another allocation along that
row. Cell 1B is a logical candidate because it contains 25 tons. By subtracting one ton
from cell 1B, we now have 150 tons in row 1, and we have satisfied the supply constraint
again. At the same time, subtracting one ton from cell 1B has reduced total cost by $8.
However, by subtracting one ton from cell 1B, we now have only 99 tons allocated to
column B, where 100 tons are demanded, as shown in Table B-13. To compensate for this
constraint violation, one ton must be added to a cell that already has an allocation. Since
cell 3B has 75 tons, we will add one ton to this cell, which again satisfies the demand
constraint of 100 tons.
Table B-13
To
From A B C Supply
The Subtraction of One Ton
from Cell 1B
+1 6 –1 8 10
1 25 125 150
7 11 11
2 175 175
4 5 12
3 200 75 275
Demand 200 100 300 600
99
A requirement of this solution method is that units can only be added to and subtracted
from cells that already have allocations. That is why one ton was added to cell 3B and not
to cell 2B. It is from this requirement that the method derives its name. The process of
adding and subtracting units from allocated cells is analogous to crossing a pond by
stepping on stones (i.e., only allocated-to cells).
By allocating one extra ton to cell 3B we have increased cost by $5, the transportation cost
for that cell. However, we have also increased the supply in row 3 to 276 tons, a viola-tion of
the supply constraint for this source. As before, this violation can be remedied by subtracting
one ton from cell 3A, which contains an allocation of 200 tons. This satisfies the supply
constraint again for row 3, and it also reduces the total cost by $4, the transportation cost for
cell 3A. These allocations and deletions are shown in Table B-14.
Table B-14 To A B C Supply

The Addition of One Ton to CellFrom
3B and the Subtraction of One +199:6 –1 8 10
Ton from Cell 3A 25 125 150
999:
999:
1
7 11 11
175 175
2 –1 4 +1 5 12
99:
200 75 275
3 200 100 300 600
Demand
Notice in Table B-14 that by subtracting one ton from cell 3A, we did not violate the
demand constraint for column A, since we previously added one ton to cell 1A.
Now let us review the increases and reductions in costs resulting from this process. We
initially increased cost by $6 at cell 1A, then reduced cost by $8 at cell 1B, then increased
cost by $5 at cell 3B, and, finally, reduced cost by $4 at cell 3A.
1A : 1B : 3B : 3A
$6 8 5 4 $1
In other words, for each ton allocated to cell 1A (a route not at present used), total cost
An empty cell that will reduce cost will be reduced by $1. This indicates that the initial solution is not optimal because a
is a potential entering variable.
lower cost can be achieved by allocating additional tons of wheat to cell 1A (i.e., cell 1A
is analo-gous to a pivot column in the simplex method). Our goal is to determine the cell
or enter-ing “variable” that will reduce cost the most. Another variable (empty cell) may
result in an even greater decrease in cost than cell 1A. If such a cell exists, it will be
selected as the enter-ing variable; if not, cell 1A will be selected. To identify the
appropriate entering variable, the remaining empty cells must be tested as cell 1A was.
Before testing the remaining empty cells, let us identify a few of the general characteris-tics
To evaluate the cost reduction of the stepping-stone process. First, we always start with an empty cell and form a closed path
potential of an empty cell, a of cells that now have allocations. In developing the path, it is possible to skip over both
closed path connecting used cells
unused and used cells. In any row or column there can be only one addition and one
to the empty cell is identified.
subtraction. (For example, in row 1, wheat is added at cell 1A and is subtracted at cell 1B.)
Let us test cell 2A to see if it results in a cost reduction. The stepping-stone closed path
for cell 2A is shown in Table B-15. Notice that the path for cell 2A is slightly more
complex than the path for cell 1A. Notice also that the path crosses itself at one point,
which is per-fectly acceptable. An allocation to cell 2A will reduce cost by $1, as shown
in the computa-tion in Table B-15. Thus, we have located another possible entering
variable, although it is no better than cell 1A.
The remaining stepping-stone paths and the resulting computations for cells 2B and 3C
are shown in Tables B-16 and B-17, respectively.
Table B-15 To
The Stepping-Stone Path for From A B C Supply
Cell 2A
6 – 8 + 10
1 25 125 150
+ 7 11 – 11
2 175 175
– 4 + 5 12
3 200 75 275
Demand 200 100 300 600
2A : 2C : 1C : 1B : 3B : 3A
$7 11 10 8 5 4$1
Table B-16 To
Cell 2B
6 + 8 – 10
1 25 125 150
7 – 11 + 11
2 175 175
4 5 12
3 200 75 275
Demand 200 100 300 600
2B : 2C : 1C : 1B
$11 11 10 8$2
Table B-17
To
Cell 3C
6 + 8 – 10
1 25 125 150
7 11 11
2 175 175
4 – 5 + 12
3 200 75 275
Demand 200 100 300 600
3C : 1C : 1B : 3B
$12 10 8 5 $5
Notice that after all four unused routes are evaluated, there is a tie for the entering
variable between cells 1A and 2A. Both show a reduction in cost of $1 per ton allocated
After all empty cells are
evaluated, the one with the to that route. The tie can be broken arbitrarily. We will select cell 1A (i.e., x1A) to enter
greatest cost reduction potential the solution.
is the entering variable.
Because the total cost of the model will be reduced by $1 for each ton we can reallocate to
cell 1A, we naturally want to reallocate as much as possible. To determine how much to allocate,
we need to look at the path for cell 1A again, as shown in Table B-18.
Table B-18 To
The Stepping-Stone Path forFrom A B C Supply
Cell 1A
+ 6 – 8 10
1 25 125 150
7 11 11
2 175 175
– 4 + 5 12
3 200 75 275
Demand 200 100 300 600
The stepping-stone path in Table B-18 shows that tons of wheat must be subtracted at cells 1B and
3A to meet the rim requirements and thus satisfy the model constraints. Because we cannot subtract
When reallocating units to more than is available in a cell, we are limited by the 25 tons in cell 1B. In other words, if we allocate
the entering variable (cell),
more than 25 tons to cell 1A, then we must subtract more than 25 tons from 1B, which is impossible
the amount is the minimum
amount subtracted on the because only 25 tons are available. Therefore, 25 tons is the amount we reallocate to cell 1A
stepping-stone path. according to our path. That is, 25 tons are added to 1A, sub-tracted from 1B, added to 3B, and
subtracted from 3A. This reallocation is shown in Table B-19.
Table B-19 To
The Second Iteration of theFrom A B C Supply
Stepping-Stone Method
6 8 10
1 25 125 150
7 11 11
2 175 175
4 5 12
3 175 100 275
Demand 200 100 300 600
The process culminating in Table B-19 represents one iteration of the stepping-stone
method. We selected x1A as the entering variable, and it turned out that x1B was the leaving
variable (because it now has a value of zero in Table B-19). Thus, at each iteration one vari-
able enters and one leaves (just as in the simplex method).
Now we must check to see whether the solution shown in Table B-19 is, in fact, optimal. We
do this by plotting the paths for the unused routes (i.e., empty cells 2A, 1B, 2B, and 3C) that are
shown in Table B-19. These paths are shown in Tables B-20 through B-23.
Table B-20 To
Cell 2A
– 6 8 + 10
1 25 125 150
+ 7 11 – 11
2 175 175
4 5 12
3 175 100 275
Demand 200 100 300 600
3A : 2C : 1C : 1A
$7 11 10 6 $0
Table B-21 To
Cell 1B
– 6 + 8 10
1 25 125 150
7 11 11
2 175 175
+ 4 – 5 12
3 175 100 275
Demand 200 100 300 600
1B : 3B : 3A : 1A
$8 5 4 6 $1
Table B-22 To
Cell 2B
– 6 8 + 10
1 25 125 150
7 + 11 – 11
2 175 175
+ 4 – 5 12
3 175 100 275
Demand 200 100 300 600
2B : 3B : 3A : 1A : 1C : 2C
$11 5 4 6 10 11 $3
Table B-23 To
Cell 3C
+ 6 8 – 10
1 25 125 150
7 11 11
2 175 175
– 4 5 + 12
3 175 100 275
Demand 200 100 300 600
3C : 3A : 1A : 1C
$12 4 6 10 $4
Our evaluation of the four paths indicates no cost reductions; therefore, the solution
The stepping-stone process is shown in Table B-19 is optimal. The solution and total minimum cost are
repeated until none of the
empty cells will reduce cost x1A 25 tons x2C 175 tons x3A 175 tons
(i.e., an optimal solution).
x1C 125 tons x3B 100 tons
Z $6(25) 8(0) 10(125) 7(0) 11(0) 11(175) 4(175) 5(100) 12(0)
$4,525
A multiple optimal solution
However, notice in Table B-20 that the path for cell 2A resulted in a cost change of $0. In
occurs when an empty cell has
other words, allocating to this cell would neither increase nor decrease total cost. This situa-
a cost change of zero and all
other empty cells are positive. tion indicates that the problem has multiple optimal solutions of the text. Thus, x2A could be
entered into the solution and there would not be a change in the total minimum cost of $4,525.
An alternate optimal solution is
To identify the alternative solution, we would allocate as much as possible to cell 2A, which
determined by allocating to the
in this case is 25 tons of wheat. The alternative solution is shown in Table B-24.
empty cell with a zero cost change.
Table B-24 To
The Alternative Optimal From A B C Supply
Solution
6 8 10
1 150 150
7 11 11
2 25 150 175
4 5 12
3 175 100 275
Demand 200 100 300 600
The solution in Table B-24 also results in a total minimum cost of $4,525. The steps of
the stepping-stone method are summarized here.
1. Determine the stepping-stone paths and cost changes for each empty cell in the tableau.
2. Allocate as much as possible to the empty cell with the greatest net decrease in cost.
3. Repeat steps 1 and 2 until all empty cells have positive cost changes that indicate an
optimal solution.
The Modified The modified distribution method (MODI) is basically a modified version of the stepping-
Distribution Method stone method. However, in the MODI method the individual cell cost changes are determined
mathematically, without identifying all of the stepping-stone paths for the empty cells.
To demonstrate MODI, we will again use the initial solution obtained by the minimum
cell cost method. The tableau for the initial solution with the modifications required by
MODI is a modified version of
the stepping-stone method in MODI is shown in Table B-25.
which math equations replace
the stepping-stone paths.
Table B-25
vj vA vB vC
The Minimum Cell Cost
Initial Solution
To
ui From A B C Supply
6 8 10
u1 1 25 125 150
7 11 11
u2 2 175 175
4 5 12
u3 3 200 75 275
Demand 200 100 300 600
The extra left-hand column with the ui symbols and the extra top row with the vj sym-
bols represent column and row values that must be computed in MODI. These values are
computed for all cells with allocations by using the following formula.
ui vj cij
The value cij is the unit transportation cost for cell ij. For example, the formula for cell 1B is
u1 vB c1B
and, since c1B 8,

u1 vB 8
The formulas for the remaining cells that presently contain allocations are
x1C: u110 vC
x2C: u211 vC
vA 4
x3A: u3
x3B: u3 vB 5
Now there are five equations with six unknowns. To solve these equations, it is
necessary to assign only one of the unknowns a value of zero. Thus, if we let u1 0, we
can solve for all remaining ui and vj values.
x1B: u1 vB 8
0 vB 8
vB 8
x1C: u1 vC 10
0 vC 10
vC 10
x2C: u2 vC 11
u2 10 11
u2 1
x3B: u3 vB 5
u3 8 5
u3 3
x3A: u3 vA 4
3 vA 7
v
A
4
Notice that the equation for cell 3B had to be solved before the cell 3A equation could
be solved. Now all the ui and vj values can be substituted into the tableau, as shown in
Table B-26.
Table B-26
vj vA = 7 vB = 8 vC = 10
The Initial Solution with All ui
and vj Values
To
6 8 10
u1 0 1 25 125 150
7 11 11
u2 1 2 175 175
4 5 12
u3 –3 3 200 75 275
Demand 200 100 300 600
Next, we use the following formula to evaluate all empty cells:
cij ui vj kij
where kij equals the cost increase or decrease that would occur by allocating to a cell.
For the empty cells in Table B-26, the formula yields the following values:
x1A: k1A c1A u1 vA 6 0 7 1

x2A: k2A c2A u2 vA 7 1 7 1
x2B: k2B c2B u2 vB 11 1 8 2
x3C: k3C c3C u3 vC 12 ( 3) 10 5
These calculations indicate that either cell 1A or cell 2A will decrease cost by $1 per
Each MODI allocation replicates allo-cated ton. Notice that those are exactly the same cost changes for all four empty cells
the stepping-stone allocation. as were computed in the stepping-stone method. That is, the same information is obtained
by evaluating the paths in the stepping-stone method and by using the mathematical
formulas of the MODI.
We can select either cell 1A or 2A to allocate to because they are tied at 1. If cell 1A is
After each allocation to an selected as the entering nonbasic variable, then the stepping-stone path for that cell must
empty cell, the ui and vj values be determined so that we know how much to reallocate. This is the same path previously
must be recomputed. identified in Table B-18. Reallocating along this path results in the tableau shown in Table
B-27 (and previously shown in Table B-19).
The ui and vj values for Table B-27 must now be recomputed using our formula for the
allocated-to cells.
x1A: u1 vA 6
0 vA 6
vA 6
x1C: u1 vC 10
0 vC 10
vC 10
x2C u2 10 11
u2 1
u2
vC
11
Table B-27
vj vA vB vC
The Second Iteration of the
MODI Solution Method To
6 8 10
u1 1 25 125 150
7 11 11
u2 2 175 175
4 5 12
u3 3 175 100 275
Demand 200 100 300 600
x3A: u3 vA 4
u3 6 4
u32
x3B: u3 vB 5
2 vB 5
vB 7
These new ui and vj values are shown in Table B-28.
Table B-28 vj vA 6 vB 7 vC 10
The New ui and vj Values for
To
u
the Second Iteration i From A B C Supply
6 8 10
u1 0 1 25 125 150
7 11 11
u
21 2 175 175
4 5 12
u3 –2 3 175 100 275
Demand 200 100 300 600
The cost changes for the empty cells are now computed using the formula
cij ui vj kij.
x1A: k1B c1B u1 vB 8 0 7 1

x2A: k2A c2A u2 vA 7 1 6 0
x2B: k2B c2B u2 vB 11 1 7 3
x3C: k3C c3C u3 vC 12 ( 2) 10 4
Because none of these values is negative, the solution shown in Table B-28 is optimal.
However, as in the stepping-stone method, cell 2A with a zero cost change indicates a
multiple optimal solution.
The steps of the modified distribution method can be summarized as follows.
14. Develop an initial solution using one of the three methods available.
15. Compute ui and vj values for each row and column by applying the formula
ui vj cij to each cell that has an allocation.
16. Compute the cost change, kij , for each empty cell using cij ui vj kij.
17. Allocate as much as possible to the empty cell that will result in the greatest
net decrease in cost (most negative kij). Allocate according to the stepping-stone
path for the selected cell.
18. Repeat steps 2 through 4 until all kij values are positive or zero.
The Unbalanced Thus far, the methods for determining an initial solution and an optimal solution
Transportation Model have been demonstrated within the context of a balanced transportation model.
Realistically, however, an unbalanced problem is a more likely occurrence. Consider
our example of transporting wheat. By changing the demand at Cincinnati to 350
tons, we create a situation in which total demand is 650 tons and total supply is 600
tons.
When demand exceeds supply, To compensate for this difference in the transportation tableau, a “dummy” row is added
a dummy row is added to the to the tableau, as shown in Table B-29. The dummy row is assigned a supply of 50 tons to
tableau. balance the model. The additional 50 tons demanded, which cannot be supplied, will be
allocated to a cell in the dummy row. The transportation costs for the cells in the dummy
row are zero because the tons allocated to these cells are not amounts really transported but
the amounts by which demand was not met. These dummy cells are, in effect, slack variables.
Table B-29
To
An Unbalanced Model From A B C Supply
(Demand Supply)
6 8 10
1 150
7 11 11
2 175
4 5 12
3 275
0 0 0
Dummy 50
Demand 200 100 350 650
Now consider our example with the supply at Des Moines increased to 375 tons. This
When a supply exceeds increases total supply to 700 tons, while total demand remains at 600 tons. To
demand, a dummy column is
compensate for this imbalance, we add a dummy column instead of a dummy row, as
added to the tableau.
shown in Table B-30.
The addition of a dummy row or a dummy column has no effect on the initial solution
methods or on the methods for determining an optimal solution. The dummy row or col-umn
cells are treated the same as any other tableau cell. For example, in the minimum cell cost
method, three cells would be tied for the minimum cost cell, each with a cost of zero. In this
case (or any time there is a tie between cells) the tie would be broken arbitrarily.
Table B-30 To
An Unbalanced ModelFrom A B C Dummy Supply
(Supply Demand)
6 8 10 0
1 150
7 11 11 0
2 175
4 5 12 0
3 375
Demand 200 100 300 100 700
In all the tableaus showing a solution to the wheat transportation problem, the following
Degeneracy condition was met.
m rows n columns 1 the number of cells with allocations
For example, in any of the balanced tableaus for wheat transportation, the number of
rows was three (i.e., m 3) and the number of columns was three (i.e., n 3); thus, 3 3 1 5
In a transportation tableau with
cells with allocations.
m rows and n columns, there These tableaus always had five cells with allocations; thus, our condition for normal
must be m n 1 cells with solution was met. When this condition is not met and fewer than m n 1 cells have
allocations; if not, it is allocations, the tableau is said to be degenerate.
degenerate. Consider the wheat transportation example with the supply values changed to the
amounts shown in Table B-31. The initial solution shown in this tableau was developed
using the minimum cell cost method.
Table B-31 To
The Minimum Cell Cost InitialFrom A B C Supply
Solution
6 8 10
1 100 50 150
7 11 11
2 250 250
4 5 12
3 200 200
Demand 200 100 300 600
The tableau shown in Table B-31 does not meet the condition
m n 1 the number of cells with allocations 3 3 1 5

cells
because there are only four cells with allocations. The difficulty resulting from a degenerate
In a degenerate tableau, not all of solution is that neither the stepping-stone method nor MODI will work unless the preced-ing
the stepping-stone paths or MODI condition is met (there is an appropriate number of cells with allocations). When the tableau is
equations can be developed. degenerate, a closed path cannot be completed for all cells in the stepping-stone
To rectify a degenerate tableau, an empty cell must artificially be treated as an occupied cell.
To create a closed path, one of the empty cells must be artificially designated as a cell
with an allocation. Cell 1A in Table B-32 is designated arbitrarily as a cell with artificial
method, and not all the ui
allocation of zero. (However, any symbol, such as , could be used to signify the artificial
vj cij computations can be allocation.) This indicates that this cell will be treated as a cell with an allocation in deter-
completed in MODI. For mining stepping-stone paths or MODI formulas, although there is no real allocation in
exam-ple, a closed path
cannot be determined for this cell. Notice that the location of 0 was arbitrary because there is no general rule for
cell 1A in Table B-31. allocat-ing the artificial cell. Allocating zero to a cell does not guarantee that all of the
stepping-stone paths can be determined.
Table B-32 To
The Initial SolutionFrom A B C Supply
6 8 10
1 0 100 50 150
7 11 11
2 250 250
4 5 12
3 200 200
Demand 200 100 300 600
For example, if zero had been allocated to cell 2B instead of to cell 1A, none of the
step-ping-stone paths could have been determined, even though technically the tableau
would no longer be degenerate. In such a case, the zero must be reallocated to another cell
and all paths determined again. This process must be repeated until an artificial allocation
has been made that will enable the determination of all paths. In most cases, however,
there is more than one possible cell to which such an allocation can be made.
The stepping-stone paths and cost changes for this tableau follow.
2A 2C 1C 1A
x2A: 7 11 10 6 0
2B 2C 1C 1B
x2B: 11 11 10 8 2
3B 1B 1A 3A
x3B: 5 8 6 4 1
3C 1C 1A 3A
x3C: 12 10 6 4 4
Because cell 3B shows a $1 decrease in cost for every ton of wheat allocated to it, we will
allocate 100 tons to cell 3B. This results in the tableau shown in Table B-33.
Notice that the solution in Table B-33 now meets the condition m n 1 5. Thus, in
A normal problem can applying the stepping-stone method (or MODI) to this tableau, it is not necessary to make
become degenerate at any an artificial allocation to an empty cell. It is quite possible to begin the solution process
iteration and vice versa.
with a normal tableau and have it become degenerate or begin with a degenerate tableau
and have it become normal. If it had been indicated that the cell with the zero should have
units sub-tracted from it, no actual units could have been subtracted. In that case the zero
would have been moved to the cell that represents the entering variable. (The solution
shown in Table B-33 is optimal; however, a multiple optimal solution exists at cell 2A.)
Table B-33 To
The Second Stepping-StoneFrom A B C Supply
Iteration
6 8 10
1 100 50 150
7 11 11
2 250 250
4 5 12
3 100 100 200
Demand 200 100 300 600
Sometimes one or more of the routes in the transportation model are prohibited. That is, units
Prohibited Routes cannot be transported from a particular source to a particular destination. When this situation
occurs, we must make sure that no units in the optimal solution are allocated to the cell
A prohibited route is assigned representing this route. In our study of the simplex tableau, we learned that assign-ing a large
a large cost such as M so that it relative cost or a coefficient of M to a variable would keep it out of the final solu-tion. This
will never receive an allocation.
same principle can be used in a transportation model for a prohibited route. A value of M is
assigned as the transportation cost for a cell that represents a prohibited route. Thus, when the
prohibited cell is evaluated, it will always contain a large positive cost change of M, which
will keep it from being selected as an entering variable.
Solution of the Assignment Model

The assignment model is a special form of a linear programming model that is similar to
the transportation model. There are differences, however. In the assignment model, the
An assignment problem is supply at each source and the demand at each destination are each limited to one unit.
a special form of
transportation problem where
The following example from the text will be used to demonstrate the assignment model
all supply and demand values and its special solution method. The Atlantic Coast Conference has four basketball games on a
equal one. particular night. The conference office wants to assign four teams of officials to the four
games in a way that will minimize the total distance traveled by the officials. The dis-tances in
miles for each team of officials to each game location are shown in Table B-34.
Table B-34 Game Sites

The Travel Distances to Each
Game for Each Team ofOfficials RALEIGH ATLANTA DURHAM CLEMSON
Officials
A 210 90 180 160
B 100 70 130 200
C 175 105 140 170
D 80 65 105 120
The supply is always one team of officials, and the demand is for only one team of
offi-cials at each game. Table B-34 is already in the proper form for the assignment.
An opportunity cost table is The first step in the assignment method of solution is to develop an opportunity cost table.
developed by first substracting We accomplish this by first subtracting the minimum value in each row from every value in
the minimum value in each row
the row. These computations are referred to as row reductions. We applied a simi-lar principle
from all other row values and
then repeating this process for in the VAM method when we determined penalty costs. In other words, the
each column.
SOLUTION OF THE ASSIGNMENT MODEL B-23
best course of action is determined for each row, and the penalty or “lost opportunity” is
developed for all other row values. The row reductions for this example are shown in
Table B-35.

The Assignment Tableau with
Row ReductionsOfficials RALEIGH ATLANTA DURHAM CLEMSON
A 120 0 90 70
B 30 0 60 130
C 70 0 35 65
D 15 0 40 55
Next, the minimum value in each column is subtracted from all column values. These
computations are called column reductions and are shown in Table B-36. It represents the
completed opportunity cost table for our example. Assignments can be made in this table
wherever a zero is present. For example, team A can be assigned to Atlanta. An opti-mal
solution results when each of the four teams can be uniquely assigned to a different
game.

The Tableau with
Column ReductionsOfficials RALEIGH ATLANTA DURHAM CLEMSON
A 105 0 55 15
B 15 0 25 75
C 55 0 0 10
D 0 0 5 0
Notice in Table B-36 that the assignment of team A to Atlanta means that no other
Assignments are made to team can be assigned to that game. Once this assignment is made, the zero in row B is
locations with zeros in the infeasible, which indicates that there is not a unique optimal assignment for team B.
opportunity cost table.
Therefore, Table B-36 does not contain an optimal solution.
A test to determine if four unique assignments exist in Table B-36 is to draw the mini-
An optimal solution occurs when mum number of horizontal or vertical lines necessary to cross out all zeros through the
the number of independent rows and columns of the table. For example, Table B-37 shows that three lines are
unique assignments equals the
required to cross out all zeros.
number of rows or columns.
Table B-37
The Opportunity Cost
Table with the Line Test
Game Sites
Officials RALEIGH ATLANTA DURHAM CLEMSON
A 105 0 55 15
B 15 0 25 75
C 35 0 0 10
D 0 0 5 0
The three lines indicate that there are only three unique assignments, whereas four are required
for an optimal solution. (Note that even if the three lines could have been drawn dif-ferently, the
If the number of unique
assignments is less than the subsequent solution method would not be affected.) Next, subtract the minimum value that is not
number of rows (or columns), crossed out from all other values not crossed out. Then add this minimum value to those cells
a line test must be used. where two lines intersect. The minimum value not crossed out in Table B-37 is 15. The second
iteration for this model with the appropriate changes is shown in Table B-38.

The Second Iteration
Officials RALEIGH ATLANTA DURHAM CLEMSON
A 90 0 40 0
B 0 0 10 60
C 55 15 0 10
D 0 15 5 0
No matter how the lines are drawn in Table B-38, at least four are required to cross out
In a line test, all zeros are crossed all the zeros. This indicates that four unique assignments can be made and that an optimal
out by horizontal and vertical
solution has been reached. Now let us make the assignments from Table B-38.
lines; the minimum uncrossed
value is subtracted from all other
First, team A can be assigned to either the Atlanta game or the Clemson game. We will
uncrossed values and added to assign team A to Atlanta first. This means that team A cannot be assigned to any other
values where two lines cross. game, and no other team can be assigned to Atlanta. Therefore, row A and the Atlanta
col-umn can be eliminated. Next, team B is assigned to Raleigh. (Team B cannot be
assigned to Atlanta, which has already been eliminated.) The third assignment is of team
C to the Durham game. This leaves team D for the Clemson game. These assignments
and their respective distances (from Table B-34) are summarized as follows.
Assignment Distance
Team A : Atlanta 90
Team B : Raleigh 100
Team C : Durham 140
Team D : Clemson 120
450 miles
Now let us go back and make the initial assignment of team A to Clemson (the alternative
assignment we did not initially make). This will result in the following set of assignments.
Assignment Distance
Team A : Clemson 160
Team B : Atlanta 70
Team C : Durham 140
Team D : Raleigh 80
450 miles
These two assignments represent multiple optimal solutions for our example problem.
Both assignments will result in the officials traveling a minimum total distance of 450 miles.
Like a transportation problem, an assignment model can be unbalanced when supply
When supply exceeds demands, exceeds demand or demand exceeds supply. For example, assume that, instead of four
a dummy column is added to teams of officials, there are five teams to be assigned to the four games. In this case a
the assignment tableau.
dummy column is added to the assignment tableau to balance the model, as shown in
Table B-39.
PROBLEMS B-25
Table B-39
Game Sites
An Unbalanced Assignment
Tableau with a Dummy ColumnOfficials RALEIGH ATLANTA DURHAM CLEMSON DUMMY
A 210 90 180 160 0
B 100 70 130 200 0
C 175 105 140 170 0
D 80 65 105 120 0
E 95 115 120 100 0
In solving this model, one team of officials would be assigned to the dummy column.
When demand exceeds supply, If there were five games and only four teams of officials, a dummy row would be added
a dummy row is added to the instead of a dummy column. The addition of a dummy row or column does not affect the
assignment tableau.
solution method.
Prohibited assignments are also possible in an assignment problem, just as prohibited
A prohibited assignment is routes can occur in a transportation model. In the transportation model, an M value was
given a large relative cost of M assigned as a large cost for the cell representing the prohibited route. This same method is
so that it will never be selected.
used for a prohibited assignment. A value of M is placed in the cell that represents the pro-
hibited assignment.
The steps of the assignment solution method are summarized here.
12. Perform row reductions by subtracting the minimum value in each row from all
row values.
13. Perform column reductions by subtracting the minimum value in each column
from all column values.
14. In the completed opportunity cost table, cross out all zeros, using the minimum
number of horizontal or vertical lines.
15. If fewer than m lines are required (where m the number of rows or columns),
sub-tract the minimum uncrossed value from all other uncrossed values, and add
this same minimum value to all cells where two lines intersect. Leave all other
values unchanged, and repeat step 3.
16. If m lines are required, the tableau contains the optimal solution and m unique
assignments can be made. If fewer than m lines are required, repeat step 4.
Problems
12. Green Valley Mills produces carpet at plants in St. Louis and Richmond. The carpet is then
shipped to two outlets located in Chicago and Atlanta. The cost per ton of shipping carpet from
each of the two plants to the two warehouses is as follows.
To
From Chicago Atlanta
St. Louis $40 $65

Richmond 70 30
The plant at St. Louis can supply 250 tons of carpet per week; the plant at Richmond can supply 400 tons per
week. The Chicago outlet has a demand of 300 tons per week, and the outlet at Atlanta demands 350 tons per
week. The company wants to know the number of tons of carpet to ship from each plant to each outlet in
order to minimize the total shipping cost. Solve this transportation problem.
2. A transportation problem involves the following costs, supply, and demand.
To
From 1 2 3 4 Supply
1 $500 $750 $300 $450 12

2 650 800 400 600 17
3 400 700 500 550 11
Demand 10 10 10 10
Find the initial solution using the northwest corner method, the minimum cell cost method,
and Vogel’s approximation model. Compute total cost for each.
Using the VAM initial solution, find the optimal solution using the modified distribution
method (MODI).
22. Consider the following transportation tableau and solution.
To
From A B C Supply
12 10 6
1 600 600
4 15 3
2 400 400
9 7 M
3 300 300
11 8 6
4 500 300 800
0 0 0
Dummy 200 200
Demand 900 500 900 2,300
19.Is this a balanced or an unbalanced transportation problem? Explain.

20.Is this solution degenerate? Explain. If it is degenerate, show how it would be put into proper
form.
21.Is there a prohibited route in this problem?
22.Compute the total cost of this solution.
23.What is the value of x2B in this solution?
PROBLEMS B-27
4. Solve the following transportation problem.
To
From 1 2 3 Supply
1 $ 40 $ 10 $ 20 800
2 15 20 10 500
3 20 25 30 600
Demand 1,050 500 650
13. Given a transportation problem with the following costs, supply, and demand, find the initial
solu-tion using the minimum cell cost method and Vogel’s approximation model. Is the VAM
solution optimal?
To
From 1 2 3 Supply
A $ 6 $ 7 $ 4 100
B 5 3 6 180
C 8 5 7 200
Demand 135 175 170
6. Consider the following transportation problem.
To
From 1 2 3 Supply
A $6 9 M 130
B 12 3 5 70
C 4 8 11 100
Demand 80 110 60
16.Find the initial solution by using VAM and then solve it using the stepping-stone method.
17.Formulate this problem as a general linear programming model.
7. Solve the following linear programming problem.

minimize Z 3x11 12x12 8x13 10x21 5x22 6x23 6x31 7x32 10x33 subject to
x x
11 x12 x13 90 11 x21 x31 70
x x
21 x22 x23 30 12 x22 x32 110
x x
31 x32 x33 100 13 x23 x33 80
xij 0
8. Consider the following transportation problem.
To
From 1 2 3 Supply
A $6 $ 9 $7 130
B 12 3 5 70
C 4 11 11 100
Demand 80 110 60
P. Find the initial solution using the minimum cell cost method.
Q. Solve using the stepping-stone method.
9. Steel mills in three cities produce the following amounts of steel.

Location Weekly Production (tons)
A. Bethlehem 150
B. Birmingham 210
C. Gary 320
680
These mills supply steel to four cities where manufacturing plants have the following demand.
Location Weekly Demand (tons)
1. Detroit 130
2. St. Louis 70
3. Chicago 180
4. Norfolk 240
620
Shipping costs per ton of steel are as follows.
To
From 1 2 3 4
A $14 9 16 18
B 11 8 7 16
C 16 12 10 22
Because of a truckers’ strike, shipments are at present prohibited from Birmingham to Chicago.
26.Set up a transportation tableau for this problem and determine the initial solution. Identify the
method used to find the initial solution.
PROBLEMS B-29
Solve this problem using MODI.

Are there multiple optimal solutions? Explain. If so, identify them.
Formulate this problem as a general linear programming model.
15. In problem 9, what would be the effect on the optimal solution of a reduction in production
capac-ity at the Gary mill from 320 tons to 290 tons per week?
16. Coal is mined and processed at the following four mines in Kentucky, West Virginia, and Virginia.
Location Capacity (tons)

A. Cabin Creek 90
B. Surry 50
C. Old Fort 80
D. McCoy 60
280
These mines supply the following amount of coal to utility power plants in three cities.
Plant Demand (tons)

1. Richmond 120
2. Winston-Salem 100
3. Durham 110
330
The railroad shipping costs ($1,000s) per ton of coal are shown in the following table. Because of
railroad construction, shipments are now prohibited from Cabin Creek to Richmond.
To
From 1 2 3
A $7 $10 $5
B 12 9 4
C 7 3 11
D 9 5 7
Set up the transportation tableau for this problem, determine the initial solution using VAM,
and compute total cost.
Solve using MODI.
Are there multiple optimal solutions? Explain, If there are alternative solutions, identify them.
Formulate this problem as a linear programming model.
7. Oranges are grown, picked, and then stored in warehouses in Tampa, Miami, and Fresno. These
warehouses supply oranges to markets in New York, Philadelphia, Chicago, and Boston. The fol-
lowing table shows the shipping costs per truckload ($100s), supply, and demand. Because of an
agreement between distributors, shipments are prohibited from Miami to Chicago.
To
From New York Philadelphia Chicago Boston Supply
Tampa $ 9 $ 14 $ 12 $ 17 200
Miami 11 10 6 10 200
Fresno 12 8 15 7 200
Demand 130 170 100 150
6. Set up the transportation tableau for this problem and determine the initial solution using the
minimum cell cost method.
7. Solve using MODI.
8. Are there multiple optimal solutions? Explain. If so, identify them.
9. Formulate this problem as a linear programming model.
10. A manufacturing firm produces diesel engines in four cities—Phoenix, Seattle, St. Louis, and
Detroit. The company is able to produce the following numbers of engines per month.
Plant Production
1. Phoenix 5
2. Seattle 25
3. St. Louis 20
4. Detroit 25
Three trucking firms purchase the following numbers of engines for their plants in three cities.
Firm Demand
A. Greensboro 10
B. Charlotte 20
C. Louisville 15
The transportation costs per engine ($100s) from sources to destinations are shown in the follow-
ing table. However, the Charlotte firm will not accept engines made in Seattle, and the Louisville
firm will not accept engines from Detroit; therefore, these routes are prohibited.
To
From A B C
1 $7 $8 $5
2 6 10 6
3 10 4 5
4 3 9 11
Set up the transportation tableau for this problem. Find the initial solution using VAM.
Solve for the optimal solution using the stepping-stone method. Compute the total minimum
cost.
Formulate this problem as a linear programming model.
6. The Interstate Truck Rental firm has accumulated extra trucks at three of its truck leasing outlets,
as shown in the following table.
PROBLEMS B-31
Extra
Leasing Outlet Trucks
1. Atlanta 70
2. St. Louis 115
3. Greensboro 60
Total 245
The firm also has four outlets with shortages of rental trucks, as follows.
Trucks
Leasing Outlet Shortage
A. New Orleans 80
B. Cincinnati 50
C. Louisville 90
D. Pittsburgh 25
Total 245
The firm wants to transfer trucks from those outlets with extras to those with shortages at the
minimum total cost. The following costs of transporting these trucks from city to city have been
determined.
To
From A B C D
1 $ 70 80 45 90
2 120 40 30 75
3 110 60 70 80
7. Find the initial solution using the minimum cell cost method.
8. Solve using the stepping-stone method.
11. The Shotz Beer Company has breweries in two cities; the breweries can supply the following
numbers of barrels of draft beer to the company’s distributors each month.
Brewery Monthly Supply (bbl)
A. Tampa 3,500
B. St. Louis 5,000
Total 8,500
The distributors, which are spread throughout six states, have the following total monthly
demand.
Distributor Monthly Demand (bbl)
1. Tennessee 1,600
2. Georgia 1,800
3. North Carolina 1,500
4. South Carolina 950
5. Kentucky 1,250
6. Virginia 1,400
Total 8,500
The company must pay the following shipping costs per barrel.
To
From 1 2 3 4 5 6
A $0.50 0.35 0.60 0.45 0.80 0.75

B 0.25 0.65 0.40 0.55 0.20 0.65
Find the initial solution using VAM.

Solve using the stepping-stone method.
 In problem 15, the Shotz Beer Company management has negotiated a new shipping contract with
trucking firm between its Tampa brewery and its distributor in Kentucky that reduces the ship-
ping cost per barrel from $0.80 per barrel to $0.65 per barrel. How will this cost change affect the
optimal solution?
 Computers Unlimited sells microcomputers to universities and colleges on the East Coast and
ships them from three distribution warehouses. The firm is able to supply the following numbers
of microcomputers to the universities by the beginning of the academic year.
Distribution Supply
Warehouse (microcomputers)
1. Richmond 420
2. Atlanta 610
3. Washington, D.C. 340
Total 1,370
Four universities have ordered microcomputers that must be delivered and installed by the begin-
ning of the academic year.
PROBLEMS B-33
Demand
University (microcomputers)
A. Tech 520
B. A and M 250
C. State 400
D. Central 380
Total 1,550
The shipping and installation costs per microcomputer from each distributor to each university
are as follows.
To
From A B C D
1 $22 17 30 18
2 15 35 20 25
3 28 21 16 14
 Find the initial solution using VAM.

 Solve using MODI.
6. In problem 17, Computers Unlimited wants to better meet demand at the four universities it sup-
plies. It is considering two alternatives: (1) expand its warehouse at Richmond to a capacity of
600 at a cost equivalent to an additional $6 in handling and shipping per unit, or (2) purchase a
new warehouse in Charlotte that can supply 300 units with shipping costs of $19 to Tech, $26 to
A and M, $22 to State, and $16 to Central. Which alternative should management select based
solely on transportation costs (i.e., no capital costs)?
7. Computers Unlimited in problem 17 has determined that when it is unable to meet the demand
for microcomputers at the universities it supplies, the universities tend to purchase
microcomputers elsewhere in the future. Thus, the firm has estimated a shortage cost for each
microcomputer demanded but not supplied that reflects the loss of future sales and goodwill.
These costs for each university are as follows:
University Cost/Microcomputer
A. Tech $40
B. A and M 65
C. State 25
D. Central 50
Solve problem 17 with these shortage costs included. Compute the total transportation cost
and the total shortage cost.
 A severe winter ice storm has swept across North Carolina and Virginia, followed by over a foot of
snow and frigid, single-digit temperatures. These weather conditions have resulted in numerous
downed power lines and power outages in the region causing dangerous conditions for much of the
population. Local utility companies have been overwhelmed and have requested assistance from
unaffected utility companies across the Southeast. The following table shows the number of
utility trucks with crews available from five different companies in Georgia, South Carolina, and
Florida; the demand for crews in seven different areas that local companies cannot get to; and the
weekly cost ($1,000s) of a crew going to a specific area (based on the visiting company’s normal
charges, the distance the crew has to come, and living expenses in an area).
Area (Cost $1,000s)

Crews
Crew NC-ENC-SW NC-PNC-W VA-SW VA-C VA-T Available
GA-1 15.2 14.3 13.9 13.5 14.7 16.5 18.7 12

GA-2 12.8 11.3 10.6 12.0 12.7 13.2 15.6 10
SC-1 12.4 10.8 9.4 11.3 13.1 12.8 14.5 14
FL-1 18.2 19.4 18.2 17.9 20.5 20.7 22.7 15
FL-2 19.3 20.2 19.5 20.2 21.2 21.3 23.5 12
Crews
Needed 9 7 6 8 10 9 7
Determine the number of crews that should be sent from each utility to each affected area that
will minimize total costs.
 A large manufacturing company is closing three of its existing plants and intends to transfer some
of its more skilled employees to three plants that will remain open. The number of employees
avail-able for transfer from each closing plant is as follows.
Closing Plant Transferable Employees

1 60
2 105
3 70
Total 235
The following number of employees can be accommodated at the three plants remaining open.
Open Plants Employees Demanded
A 45
B 90
C 35
Total 170
Each transferred employee will increase product output per day at each plant as shown in the fol-
lowing table. The company wants to transfer employees so as to ensure the maximum increase in
product output.
PROBLEMS B-35
To
From A B C
1 5 8 6
2 10 9 12
3 7 6 8
H. Find the initial solution using VAM.

I. Solve using MODI.
4. The Sav-Us Rental Car Agency has six lots in Nashville, and it wants to have a certain number of cars
available at each lot at the beginning of each day for local rental. The agency would like a model it
could quickly solve at the end of each day that would tell it how to redistribute the cars among the six
lots in the minimum total time. The time required to travel between the six lots are as follows.
To (minutes)
From 1 2 3 4 5 6
1 — 12 17 18 10 20
2 14 — 10 19 16 15
3 14 10 — 12 8 9
4 8 16 14 — 12 15
5 11 21 16 18 — 10
6 24 12 9 17 15 —
The agency would like the following number of cars at each lot at the end of the day. Also shown
is the number of available cars at each lot at the end of a particular day. Determine the optimal
real-location of rental cars using any initial solution approach and any solution method.
Lot
Cars 1 2 3 4 5 6
Available 37 20 14 26 40 28
Desired 30 25 20 40 30 20
 Bayville has built a new elementary school so that the town now has a total of four school— Addison,
Beeks, Canfield, and Daley. Each has a capacity of 400 students. The school wants to assign children
to schools so that their travel time by bus is as short as possible. The school has par-titioned the town
into five districts conforming to population density—north, south, east, west, and central. The average
bus travel time from each district to each school is shown as follows.
Travel Time (mins)

Student
District Addison Beeks Canfield Daley Population
North 12 23 35 17 250
South 26 15 21 27 340
East 18 20 22 31 310
West 29 24 35 10 210
Central 15 10 23 16 290
Determine the number of children that should be assigned from each district to each school to
minimize total student travel time.
 In problem 23, the school board has determined that it does not want any one school to be more
crowded than any other school. It would like to assign students from each district to each school
so that enrollments are evenly balanced between the four schools. However, the school board is
con-cerned that this might significantly increase travel time. Determine the number of students to
be assigned from each district to each school so that school enrollments are evenly balanced.
Does this new solution appear to result in a significant increase in travel time per student?
 The Easy Time Grocery chain operates in major metropolitan areas on the eastern seaboard. The stores
have a “no-frills” approach, with low overhead and high volume. They generally buy their stock in
volume at low prices. However, in some cases they actually buy stock at stores in other areas and ship
it in. They can do this because of high prices in the cities they operate in compared with costs in other
locations. One example is baby food. Easy Time purchases baby food at stores in Albany, Binghamton,
Claremont, Dover, and Edison, and then trucks it to six stores in and around New York City. The stores
in the outlying areas know what Easy Time is up to, so they limit the number of cases of baby food
Easy Time can purchase. The following table shows the profit Easy Time makes per case of baby food
based on where the chain purchases it and which store it’s sold at, plus the available baby food per
week at purchase locations and the shelf space available at each Easy Time store per week.
Easy Time Store

Purchase
Location 1 2 3 4 5 6 Supply
Albany 9 8 11 12 7 8 26
Binghamton 10 10 8 6 9 7 40
Claremont 8 6 6 5 7 4 20
Dover 4 6 9 5 8 10 40
Edison 12 10 8 9 6 7 45
Demand 25 15 30 18 27 35
Determine where Easy Time should purchase baby food and how the food should be distributed in
order to maximize profit. Use any initial solution approach and any solution method.
 Suppose that in problem 25 Easy Time can purchase all the baby food it needs from a New York
City distributor at a price that will result in a profit of $9 per case at stores 1, 3, and 4, $8 per
case at stores 2 and 6, and $7 per case at store 5. Should Easy Time purchase all, none, or some
of its baby food from the distributor rather than purchasing it at other stores and trucking it in?
 In problem 25, if Easy Time could arrange to purchase more baby food from one of the outlying
locations, which should it be, how many additional cases could be purchased, and how much
would this increase profit?
PROBLEMS B-37
2. The Roadnet Transport Company has expanded its shipping capacity by purchasing 90 trailer
trucks from a competitor that went bankrupt. The company subsequently located 30 of the
purchased trucks at each of its shipping warehouses in Charlotte, Memphis, and Louisville. The
company makes shipments from each of these warehouses to terminals in St. Louis, Atlanta, and
New York. Each truck is capable of making one shipment per week. The terminal managers have
indicated their capacity of extra shipments. The manager at St. Louis can accommodate 40 addi-
tional trucks per week, the manager at Atlanta can accommodate 60 additional trucks, and the
manager at New York can accommodate 50 additional trucks. The company makes the following
profit per truckload shipment from each warehouse to each terminal. The profits differ as a result
of differences in products shipped, shipping costs, and transport rates.
Terminal
Warehouse St. Louis Atlanta New York
Charlotte $1,800 $2,100 $1,600

Memphis 1,000 700 900
Louisville 1,400 800 2,200
Determine how many trucks to assign to each route (i.e., warehouse to terminal) in order to
maximize profit.
(iv) During the Gulf War, Operation Desert Storm required large amounts of military matériel and
supplies to be shipped daily from supply depots in the United States to bases in the Middle East.
The critical factor in the movement of these supplies was speed. The following table shows the
number of planeloads of supplies available each day from each of six supply depots and the num-
ber of daily loads demanded at each of five bases. (Each planeload is approximately equal in ton-
nage.) Also included are the transport hours per plane, including loading and fueling, actual flight
time, and unloading and refueling.
Supply Military Base
Depot A B C D E Supply
1 36 40 32 43 29 7
2 28 27 29 40 38 10
3 34 35 41 29 31 8
4 41 42 35 27 36 8
5 25 28 40 34 38 9
6 31 30 43 38 40 6
Demand 9 6 12 8 10
Determine the optimal daily flight schedule that will minimize total transport time.
(iv) PM Computer Services produces personal computers from component parts it buys on the open
market. The company can produce a maximum of 300 personal computers per month. PM wants
to determine its production schedule for the first six months of the new year. The cost to produce
a personal computer in January will be $1,200. However, PM knows the cost of component parts
will decline each month such that the overall cost to produce a PC will be 5% less each month.
The cost of holding a computer in inventory is $15 per unit per month. Following is the demand
for the company’s computers each month.
Month Demand Month Demand
January 180 April 210

February 260 May 400
March 340 June 320
Determine a production schedule for PM that will minimize total cost.
31. In problem 30, suppose the demand for personal computers increased each month as follows.
Month Demand
January 410
February 320
March 500
April 620
May 430
June 380
In addition to the regular production capacity of 300 units per month, PM Computer Services can
also produce an additional 200 computers per month using overtime. Overtime production adds
20% to the cost of a personal computer.
Determine a production schedule for PM that will minimize total cost.
(v) National Foods Company has five plants where it processes and packages fruits and vegetables. It has
suppliers in six cities in California, Texas, Alabama, and Florida. The company has owned and
operated its own trucking system in the past for transporting fruits and vegetables from its suppli-ers to
its plants. However, it is now considering outsourcing all of its shipping to outside trucking firms and
getting rid of its own trucks. It currently spends $245,000 per month to operate its own trucking
system. It has determined monthly shipping costs (in $1,000s per ton) using outside ship-pers from
each of its suppliers to each of its plants as shown in the following table.
Processing Plants ($1,000s per ton)
Suppliers Denver St. Paul Louisville Akron Topeka Supply (tons)
Sacramento 3.7 4.6 4.9 5.5 4.3 18

Bakersfield 3.4 5.1 4.4 5.9 5.2 15
San Antonio 3.3 4.1 3.7 2.9 2.6 10
Montgomery 1.9 4.2 2.7 5.4 3.9 12
Jacksonville 6.1 5.1 3.8 2.5 4.1 20
Ocala 6.6 4.8 3.5 3.6 4.5 15
Demand (tons) 20 15 15 15 20 90
Should National Foods continue to operate its own shipping network or sell its trucks and out-
source its shipping to independent trucking firms?
PROBLEMS B-39
 In problem 32, National Foods would like to know what the effect would be on the optimal solu-
tion and the company’s decision regarding its shipping if it negotiates with its suppliers in
Sacramento, Jacksonville, and Ocala to increase their capacity to 25 tons per month? What would
be the effect of negotiating instead with its suppliers at San Antonio and Montgomery to increase
their capacity to 25 tons each?
 Orient Express is a global distribution company that transports its clients’ products to customers
in Hong Kong, Singapore, and Taipei. All of the products Orient Express ships are stored at three
dis-tribution centers, one in Los Angeles, one in Savannah, and one in Galveston. For the coming
month the company has 450 containers of computer components available at the Los Angeles
center, 600 containers available at Savannah, and 350 containers available in Galveston. The
company has orders for 600 containers from Hong Kong, 500 containers from Singapore, and
500 containers from Taipei. The shipping costs per container from each U.S. port to each of the
overseas ports are shown in the following table.
U.S.
Center Overseas Port
Distribution Hong Kong Singapore Taipei
Los Angeles $300 $210 $340
Savannah 490 520 610
Galveston 360 320 500
The Orient Express as the overseas broker for its U.S. customers is responsible for unfulfilled
orders, and it incurs stiff penalty costs from overseas customers if it does not meet an order. The
Hong Kong customers charge a penalty cost of $800 per container for unfulfilled demand,
Singapore customers charge a penalty cost of $920 per container, and Taipei customers charge
$1,100 per container. Formulate and solve a transportation model to determine the shipments
from each U.S. distribution center to each overseas port that will minimize shipping costs.
Indicate what portion of the total cost is a result of penalties.
 Binford Tools manufactures garden tools. It uses inventory, overtime, and subcontracting to
absorb demand fluctuations. Expected demand, regular and overtime production capacity, and
subcon-tracting capacity are provided in the following table for the next four quarters for its basic
line of steel garden tools.
Regular Overtime Subcontracting

Quarter Demand Capacity Capacity Capacity
1 9,000 9,000 1,000 3,000

2 12,000 10,000 1,500 3,000
3 16,000 12,000 2,000 3,000
4 19,000 12,000 2,000 3,000
The regular production cost per unit is $20, the overtime cost per unit is $25, the cost to subcon-
tract a unit is $27, and the inventory carrying cost is $2 per unit. The company has 300 units in
inventory at the beginning of the year.
Determine the optimal production schedule for the four quarters that will minimize total costs.
36. Solve the following linear programming problem.
minimize Z 18x11 30x12 20x13 18x14 25x21 27x22 22x23

16x24 30x31 26x32 19x33 32x34 40x41 36x42 27x43 29x44
30x51 26x52 18x53 24x54
subject to
x11 x12 x13 x14 1

x21 x22 x23 x24 1
x31 x32 x33 x34 1
x41 x42 x43 x44 1
x51 x52 x53 x54 1
x11 x21 x31 x41 x51 1

x12 x22 x32 x42 x52 1
x13 x23 x33 x43 x53 1
x14 x24 x34 x44 x54 1
xij 0
 A plant has four operators to be assigned to four machines. The time (minutes) required by each
worker to produce a product on each machine is shown in the following table. Determine the
optimal assignment and compute total minimum time.
Machine
Operator A B C D
1 10 12 9 11
2 5 10 7 8
3 12 14 13 11
4 8 15 11 9
38. A shop has four machinists to be assigned to four machines. The hourly cost of having each machine operated
by each machinist is as follows.
Machine
Machinist A B C D
1 $12 11 8 14
2 10 9 10 8
3 14 8 7 11
4 6 8 10 9
However, because he does not have enough experience, machinist 3 cannot operate machine B.
a. Determine the optimal assignment and compute total minimum cost.
b. Formulate this problem as a general linear programming model.
39. The Omega pharmaceutical firm has five salespersons, whom the firm wants to assign to five sales
regions. Given their various previous contacts, the salespersons are able to cover the regions in
PROBLEMS B-41
different amounts of time. The amount of time (days) required by each salesperson to cover each
city is shown in the following table. Which salesperson should be assigned to each region to
mini-mize total time? Identify the optimal assignments and compute total minimum time.
Region
Salesperson A B C D E
1 17 10 15 16 20
2 12 9 16 9 14
3 11 16 14 15 12
4 14 10 10 18 17
5 13 12 9 15 11
40. The Bunker Manufacturing firm has five employees and six machines and wants to assign the
employees to the machines to minimize cost. A cost table showing the cost incurred by each
employee on each machine follows. Because of union rules regarding departmental transfers,
employee 3 cannot be assigned to machine E and employee 4 cannot be assigned to machine B.
Solve this problem, indicate the optimal assignment, and compute total minimum cost.
Machine
Employee A B C D E F
1 $12 $7 $20 $14 $8 $10

2 10 14 13 20 9 11
3 5 3 6 9 7 10
4 9 11 7 16 9 10
5 10 6 14 8 10 12
41. Given the following cost table for an assignment problem, determine the optimal assignment and
compute total minimum cost. Identify all alternative solutions if there are multiple optimal
solutions.
Machine
Operator A B C D
1 $10 $2 $8 $6
2 9 5 11 9
3 12 7 14 14
4 3 1 4 2
42. An electronics firm produces electronic components, which it supplies to various electrical manu-facturers.
Quality control records indicate that different employees produce different numbers of defec-tive items. The
average number of defects produced by each employee for each of six components
is given in the following table. Determine the optimal assignment that will minimize the total
aver-age number of defects produced by the firm per month.
Component
Employee A B C D E F
1 30 24 16 26 30 22
2 22 28 14 30 20 13
3 18 16 25 14 12 22
4 14 22 18 23 21 30
5 25 18 14 16 16 28
6 32 14 10 14 18 20
43. A dispatcher for the Citywide Taxi Company has six taxicabs at different locations and five cus-
tomers who have called for service. The mileage from each taxi’s present location to each
customer is shown in the following table. Determine the optimal assignment(s) that will
minimize the total mileage traveled.
Customer
Cab 1 2 3 4 5
A 7 2 4 10 7
B 5 1 5 6 6
C 8 7 6 5 5
D 2 5 2 4 5
E 3 3 5 8 4
F 6 2 4 3 4
44. The Southeastern Conference has nine basketball officials who must be assigned to three confer-
ence games, three to each game. The conference office wants to assign the officials so that the
total distance they travel will be minimized. The distance (in miles) each official would travel to
each game is given in the following table.
Game
Official Athens Columbia Nashville
1 165 90 130
2 75 210 320
3 180 170 140
4 220 80 60
5 410 140 80
6 150 170 190
7 170 110 150
8 105 125 160
9 240 200 155
PROBLEMS B-43
a. Should this problem be solved by the transportation method or by the assignment method? Explain.
b. Determine the optimal assignment(s) that will minimize the total distance traveled by the
officials.
45. In problem 44, officials 2 and 8 have had a recent confrontation with one of the coaches in the
game in Athens. They were forced to eject the coach after several technical fouls. The conference
office has decided that it would not be a good idea to have these two officials work the Athens
game so soon after this confrontation, so they have decided that officials 2 and 8 will not be
assigned to the Athens game. How will this affect the optimal solution to this problem?
46. State University has planned six special catered events for the November Saturday of its homecoming
football game. The events include an alumni brunch, a parent’s brunch, a booster club luncheon,
a postgame party for season ticket holders, a lettermen’s dinner, and a fund-raising dinner for
major contributors. The university wants to use local catering firms as well as the university
cater-ing service to cater these events and it has asked the caterers to bid on each event. The bids
(in $1,000s) based on menu guidelines for the events prepared by the university are shown in the
following table.
Event
Alumni Parent’s Booster Postgame Lettermen’s Contributor’s

Caterer Brunch Brunch Club Lunch Party Dinner Dinner
Al’s $12.6 $10.3 $14.0 $19.5 $25.0 $30.0

Bon Apetít 14.5 13.0 16.5 17.0 22.5 32.0
Custom 13.0 14.0 17.6 21.5 23.0 35.0
Divine 11.5 12.6 13.0 18.7 26.2 33.5
Epicurean 10.8 11.9 12.9 17.5 21.9 28.5
Fouchés 13.5 13.5 15.5 22.3 24.5 36.0
University 12.5 14.3 16.0 22.0 26.7 34.0
The Bon Apetít, Custom, and University caterers can handle two events, whereas the other four
caterers can handle only one. The university is confident all the caterers will do a high-quality
job, so it wants to select the caterers for the events that will result in the lowest total cost.
Determine the optimal selection of caterers that will minimize total cost.
47. A university department head has five instructors to be assigned to four different courses. All of
the instructors have taught the courses in the past and have been evaluated by the students. The
rating for each instructor for each course is given in the following table (a perfect score is 100).
The department head wants to know the optimal assignment of instructors to courses that will
maximize the overall average evaluation. The instructor who is not assigned to teach a course
will be assigned to grade exams. Solve this problem using the assignment method.
Course
Instructor A B C D
1 80 75 90 85
2 95 90 90 97
3 85 95 88 91
4 93 91 80 84
5 91 92 93 88
48. The coach of the women’s swim team at State University is preparing for the conference swim meet
and must choose the four swimmers she will assign to the 800-meter medley relay team. The medley
relay consists of four strokes—the backstroke, breaststroke, butterfly, and freestyle. The coach has
computed the average times (in minutes) each of her top six swimmers has achieved in each of the four
strokes for 200 meters in previous swim meets during the season as follows.
Stroke (min)
Swimmer Backstroke Breaststroke Butterfly Freestyle
Annie 2.56 3.07 2.90 2.26

Beth 2.63 3.01 3.12 2.35
Carla 2.71 2.95 2.96 2.29
Debbie 2.60 2.87 3.08 2.41
Erin 2.68 2.97 3.16 2.25
Fay 2.75 3.10 2.93 2.38
Determine the medley relay team and its total expected relay time for the coach.
49. Biggio’s Department Store has six employees available to assign to four departments in the store
— home furnishing, china, appliances, and jewelry. Most of the six employees have worked in
each of the four departments on several occasions in the past, and have demonstrated that they
perform better in some departments than in others. The average daily sales for each of the six
employees in each of the four departments is shown in the following table.
Department Sales ($)
Home
Employee Furnishings China Appliances Jewelry
1 340 160 610 290

2 560 370 520 450
3 270 — 350 420
4 360 220 630 150
5 450 190 570 310
6 280 320 490 360
Employee 3 has not worked in the china department before, so the manager does not want to
assign this employee to china.
Determine which employee to assign to each department and indicate the total expected daily sales.
50. The Vanguard Publishing Company has eight college students it hires as salespeople to sell encyclo-
pedias during the summer. The company desires to allocate them to three sales territories. Territory 1
requires three salespeople, and territories 2 and 3 require two salespeople each. It is estimated that
each salesperson will be able to generate the amounts of dollar sales per day in each of the three ter-
ritories as given in the following table. The company desires to allocate the salespeople to the three
territories so that sales will be maximized. Solve this problem using any method to determine the
initial solution and any solution method. Compute the maximum total sales per day.
PROBLEMS B-45
Territory
Salesperson 1 2 3
A $110 $150 $130

B 90 120 80
C 205 160 175
D 125 100 115
E 140 105 150
F 100 140 120
G 180 210 160
H 110 120 90
51. Carolina Airlines, a small commuter airline in North Carolina, has six flight attendants whom it
wants to assign to six monthly flight schedules in a way that will minimize the number of nights
they will be away from their homes. The numbers of nights each attendant must be away from
home with each schedule are given in the following table. Identify the optimal assignments that
will minimize the total number of nights the attendants will be away from home.
Schedule
Attendant A B C D E F
1 7 4 6 10 5 8
2 4 5 5 12 7 6
3 9 9 11 7 10 8
4 11 6 8 5 9 10
5 5 8 6 10 7 6
6 10 12 11 9 9 10
52. The football coaching staff at Tech focuses its recruiting on several key states, including Georgia,
Florida, Virginia, Pennsylvania, New York, and New Jersey. The staff includes seven assistant
coaches, two of whom are responsible for Florida, a high school talent-rich state, whereas one
coach is assigned to each of the other five states. The staff has been together for a long time and
at one time or another all the coaches have recruited all of the states. The head coach has
accumulated some data on the past success rate (i.e., percentage of targeted recruits signed) for
each coach in each state as shown in the following table.
State
Coach GA FL VA PA NY NJ
Allen 62 56 65 71 55 63
Bush 65 70 63 81 75 72
Crumb 46 53 62 55 64 50
Doyle 58 66 70 67 71 49
Evans 77 73 69 80 80 74
Fouch 68 73 72 80 78 57
Goins 72 60 74 72 62 61
Determine the optimal assignment of coaches to recruiting regions that will maximize the over-all
success rate and indicate the average percentage success rate for the staff with this assignment.

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Course Name ENGINEERING MANAGEMENT

Decision-making; the functions of management; managing

Measurement of Management Performance

According to the Management Level:

According To The Range Of Organizational Activities:

Formal Authority and Status

Interpersonal Roles Information of Roles Decisional Roles

Is a specialized form of management that is concerned with the application of engineering

Is a term that is used to describe a specialized form of management that is required to

Example areas of engineering are product development, manufacturing, construction, design

Prepared by: DANILO B. PULMA, DM

Four Basic Steps of Planning:

Prepared by: DANILO B. PULMA, DM

Two main types of Plans:

Types of operational Plans:

Prepared by: DANILO B. PULMA, DM

The Organizing Process:

Prepared by: DANILO B. PULMA, DM

5. Monitoring the effectiveness of the organization and making adjustments to

Elements of organizational structure

Determinants of Organizational Structure

Prepared by: DANILO B. PULMA, DM

The Organizational Chart:

The three Major Formal Organizational Structure

A. Functional Organization is perhaps the most logical and basic form of

Prepared by: DANILO B. PULMA, DM

Prepared by: DANILO B. PULMA, DM

Prepared by: DANILO B. PULMA, DM

Prepared by: DANILO B. PULMA, DM

Power is the ability to exert influence.

Source of Leaders Power

Personality and Situational Factors that Influence Effective Leadership

Prepared by: DANILO B. PULMA, DM

Basic Steps in the Control Process:

Prepared by: DANILO B. PULMA, DM

Organizational Factors Creating the Need for Control

Types of Control Methods

Prepared by: DANILO B. PULMA, DM

RELATIVE AMOUNT OF TIME THAT MANAGERS SPEND ON

Shiela Marie M. Afable

Chris Olivar Rica

Jean Rose L. Quintana

 Management as a practice gained ground when the concept of working

 Egyptians pyramids and the Great Wall of China

 City of Venice, which was a major economic and trade center in

CLASSICAL SCHOOL OF THOUGHT

 Developed during the Industrial Revolution when new problems related to

 Body of management thought based on the belief that employees have

 Dominated management thinking in the 1920s and 1930s by

 Has three theories:

 The classical scientific branch arose because of the need to increase

 Scientific management, according to an early definition, refers to that

 Henry Laurence Gantt (1861 – 1919)

 Frank Gilbreth (1868-1924) and Lillian Gilbreth (1878-1972)

 Frank Gilbreth, a construction contractor by trade, gave up that

 Application to Modern Management

 The classical administrative approach concentrates on the total organization.

 It is focused more on what managers do and what constituted good

 While pioneers of the scientific management tried to determine the best

 Attempts to find a rational way to design an organization as a whole. The

 Born in France, where he worked for a coal‐mining business

3. Financial activities: This activity is related to the creation of

 Fayol has focused on the role of a manager. He believes that anyone