CITY UNIVERSITY

DHAKA UNIVERSITY OF ENGINEERING AND TECHNOLOGY

DEPARTMENT OF MECHANICAL ENGINEERING
ME 4203 INDUSTRIAL MANAGEMENT
ME 473 ENGINEERING MANAGEMENT
_______________________________________________________________________
RESEARCH AND DEVELOPMENT

REFERENCE

R. D. Agarwal (1997) Organization and Management, Tata McGraw-Hill Publishing

Company

Sri K. K. Ahuja (1993) Industrial Management, CBS Publisher and Distribution, Delhi

Franklin G. Moore and Thomas E. Hendrick () Production/ Operations Management, DB

Taraporevala Sons & Co. Private Ltd with Richard D. Irwin Inc., Homewood, Illinois

David A. DeCenzom and Stephen P. Robins (1999) Personnel/Human Resource

Management, Prentice-Hall of India Private Limited, New Delhi

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 1

Introduction
All organizations have purposes. They try to make and sell products or to render certain
services. Business organizations have to be ever alert to see that the design of the products
and the kind of service they render are what customers want, lest they lose their customers
and go bankrupt. Public organizations such as government agencies also try to carry out their
missions so as best to serve the public. One of the most important of all managerial functions
in all kinds of organizations is to see that the inputs of the organization's resources result in
properly designed products and services, or "outputs," which suit the customers' desires.

Managerial imagination is usually needed because opportunities are often not readily
apparent. Some years ago, Kentucky Fried Chicken uncovered an enormous market for
prepared food that no one realized existed. It took years of greater and greater sales in the
United States of small foreign compact cars to convince Detroit that a great many Americans
wanted small cars. The managers of America's automobile companies just did not believe that
very many Americans wanted small cars. They let Volkswagen and Toyota sell millions of
cars. Then, paradoxically, in 1976 when Detroit gave in and supplied small cars in variety
and quantity, the American public opted for bigger cars again.

So it is that managers need always to be on the lookout for new products and new services,
which they might provide.

Innovation
Innovation is a process whereby new and creative ideas are welcomed, studied for their
feasibility, and, if feasible, implemented. Some of our better-selling products or larger cost
savings have come from ideas submitted by employees. For example, the 3M Company's
Post-it pad (the yellow pad with stickum on it) was developed from an idea of one of its
employees, research scientist Art Fry. Fry, a singer in his church's choir, recognized the need
for something to mark the pages of his hymnal so that he could easily turn to the next
selection. The marking pad had to have two major attributes-- it had to stick to a page and,
when removed, cause no damage. As ideas for new products are being generated, they
sometimes turn a problem into a success story. Art Fry, in looking for a way to find a hymnal
marker, found that a batch of glue that 3M made was not up to its standards for adhesion.
However, the below-standard adhesion had the properties required for his marker.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 2

Art Fry's desire to develop a page marker has turned into a multimillion-dollar product for
3M. Just about every secretary in every company in the United States uses the Post-it pad for
making quick notes, attaching them to desks, phones, letters, memos, or anyplace necessary
to get a message delivered.

Readiness for change

If one thing in this world could be said that is always true, it would be that things will never
remain the same. Change is a fact of life-- in both our private and our work lives. At the work
site, we must be aware that changes will occur. The change might be subtle, such as getting a
new boss. Or it might be a major endeavor, such as an organization installing a computer
system for the first time-automating many of the manual operations. But change rarely comes
easily for everyone; in some cases, it is resisted. For example, imagine the fear that many
secretaries experience when confronted by an office automation endeavor in the organization,
especially the secretary who has had twenty-five years' experience. Going from a typewriter
to a word processor could be traumatic and, accordingly, that change could be resisted. How
do you overcome this resistance? There are a few ways, but probably the two greatest would
be to inform the secretary that the word processor was designed to make her job more
efficient; it was not designed to take over her job. The fear associated with a possible threat to
job security could negate any advantage that might accrue by automating an office because
this fear might manifest it self as decreased morale.

To reduce the fear associated with change, training is important. Once the secretary has been
given time to learn how to use the new equipment, and to experience how efficient it is and
how it makes her job easier, the fear of change can be reduced.

From an organizational perspective, employers must make changes to remain competitive.

But it is also their responsibility to communicate the forthcoming changes to their employees,
identify why the changes are necessary, and lend their total support in ensuring that the
change takes place. This support can be in the form of time allowed to introduce a new
system, time allowed for training, and decreased production allowed while one is in training,
as well as supporting the change by budgeting monies so that the complete change can be
made. Through this process, employers can create a work atmosphere that views changes as a
positive and progressive endeavor.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 3

Research and development
Everything in old movies looks out of date because it is out of date. Old products are
continually being redesigned, and new products are continually being developed. Research
has produced the scientific knowledge that lies behind the development of television, jet
airplanes, electronic computers, seawater desalting plants, nylon stockings, wonder drugs,
insecticides, nuclear power plants, laser beams, microcomputers, videodiscs, and thousands
of other things. And today a great deal of research effort is being directed at solving air and
water pollution problems, product safety problems, and health services.

Research payoffs
The bloom is off the rose, however, so far as big quick payoffs are concerned. New
discoveries and innovations are harder to come by, even though occasionally there is a new
major scientific breakthrough which creates whole, new products which have substantial
impacts on existing products, possibly making them obsolete overnight. But, even in these
cases, competition usually holds profits down to nominal amounts. Hand-held pocket sized
calculators for under $20 drove older type desktop mechanical calculators off the market in
only two or three years. Then the competition among the little calculator makers themselves
drove almost all of them business. Acrylic-type fibers have taken way most of wool's former
near monopoly in carpets. And today most of the clothes we wear are made almost wholly
from synthetic fibers and not from cotton or wool. All of these innovations have come out of
research; yet, because of competition, the makers of these products have earned only nominal
profits.

Source of ideas
Although research provides the base from which new innovative applications can be
developed, innovative ideas come from many sources rather than just from researchers.
Marketing people see the need for something their customers want. Production people see
opportunities to improve methods and processes. Everyone in an organization is a potential
source of ideas. In order to try to tap this source of ideas, many firms try to generate a
creative environment for their people. They tell them about technical advances and ask for
ideas about how they can be incorporated into products and services. And they tell them
about areas where new products or services are needed. Often they have suggestion systems
and give awards for worthwhile improvement suggestions.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 4

Sometimes new products and services are developed by individual people who are not
associated with any company at all. Most of us never become aware of this source of ideas
because most small-scale inventors have neither the capital nor the production nor the
marketing know-how to bring their products to market. So they sell their ideas to companies,
something which is not hard to do, since most companies are always on the lookout to buy
the rights to marketable innovations.

Developing a climate favorable to innovation

In spite of what has just been said, however, a great deal of innovation comes from
researchers. Other employees have their regular work to do and don't get to spend much time
innovating. The desirable "creative environment" which can be so helpful can have the most
far-reaching effects if it exists in the research area itself.

Some innovative products are of the "Why didn't I think of that?" kind. For example, years
ago, lacing up and later unlacing ski boots was a tiring and bothersome job. Then someone
improved on buckle boots and so changed the whole ski boot industry. Similarly, McDonald's
and Kentucky Fried Chicken perceived that people wanted simple foods served quickly and
at low prices. The result has been the billion-dollar fast foods industry. Probably very few
people ever thought that they needed an electric toothbrush, or a hot lather dispenser, or an
electric carving knife, or a telephone answering service. But, when given a chance to buy
them, millions of people bought. Imagination often pays off in product creation and service
improvement.

Research risks
Only after the research on a project is done and money spent on it, can it begin to save money
or produce income? RCA had $50 million invested in color TV before its color sets reached
the American living room and had $125 million invested in it before it began to pay off.

Unfortunately, research does not always pay off. Du pont spent $25 million over 25 years
developing Corfam (artificial leather) before putting it on the market in 1964. Six years later,
after losing $100 million on Corfam, Du Pont stopped making it. Polaroid spent over $350
million on its SX-70 camera, but initial sales were much less than expected.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 5

Unfortunately, risks are not always limited to the research expenditures themselves. If a
company does not do research, it risks losing out to its researching competitors.

Yet, since everyone knows that research payoffs are hazardous and that few projects pay off,
one might ask why do almost all companies of any size carry on research. Aside from having
to research in order to keep up, it is still true that some of the successes pay for themselves
several times over. In general and in total, research usually pays off.

Furthermore, if a company does not do research, then income taxes will take nearly 50% of
its profit dollars-- nearly half of what is left over-- so tax savings pay for almost 50% or more
of research costs.

Product life cycle (PLC)

Every product goes through five distinct phases of its life cycle:
(i) introductory or pioneering stage
(ii) growth
(iii) maturity
(iv) saturation, and
(v) decline.

Each of these stages in the product life cycle is characterized by distinctly different
competitive forces and market response. An effective marketing manager takes into account
the length, and character of each stage of his product’s life cycle while formulating his
product strategy and policy. An illustrative product life cycle is depicted in Figure 1. It shows
the various stages through which every product passes during its life cycle. The profit curve
superimposed in the figure indicates that profit margins reach optimum and start moving on
the declining path much before the corresponding stages of sales decline is reached by the
product during its course of life cycle. Profit margins start declining after reaching their
optimum as the product enters the maturity stage. This happens because of intensive
competition offered by new entrants in the industry and consequent price reductions and
increased costs of production. Companies having high overhead costs reach the stage of
declining profits sooner than others because even a marginal decline in sales volume causes a
sharp increase in average fixed costs. Therefore, companies which invest heavily on research

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 6

and development and special tooling are compelled to innovate continually in order to offset
declining profits on existing products. They can maintain their rate of profit growth only by
introducing new products as soon as their existing products enter the maturity stage. They
should not delude themselves in complacency by growth in sales volume of their existing
products through their maturity and even saturation stages.

We will now turn to a brief discussion of market characteristics associated with various
stages of product life cycle.
Sales volume

Sales
Volume
New
products
needed to
Profit sustain
margins growth

Introduction Growth Maturity Saturation Decline

Time

Figure1. An illustrative product life cycle

Introductory or pioneering stage

When a new product is marketed, the most important task facing a marketing manager is to
create its primary demand. He has to develop a suitable distribution channel and execute an
aggressive promotion program in order to gain market acceptance for his product. He may
adopt skim-the-cream or penetration pricing strategy depending on the nature of product,
likelihood of competition and his marketing objectives. There are only a few competitors at
this stage, and thy are mostly manufacturers of substitute products rather than the same but
differentiated product. Cost of production and distribution is also high and profits are low.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 7

When a new product is promoted, it goes through a consumer adoption process, Rogers has
identified five steps in the consumer adoption process of innovation products.

1. Awareness: A potential customer becomes aware of the product but has little
information to evaluate it.
2. Interest: His interest is aroused and he becomes actively involved in searching
information about the new product.
3. Evaluation: He evaluates the information and decides whether he wants to try the
product.
4. Trial: He tries the product to evaluate its utility, quality and other features.
5. Adoption: At this stage, he adopts the product for regular use.

The growth stage

The growth stage in the life cycle of a product is characterized by a rapid increase in its sales
volume and profits. High profitability of the product attracts competitors and several brands
of the product start appearing in the market. Promotion strategy in this stage is aimed at
cultivating market for one's own brand, and is called selective demand strategy in contrast to
primary demand strategy pursued in the pioneering stage. Distribution outlets expand rapidly
as more and more retailers want to sell in the rapidly growing market of the product. Price of
the product starts falling as a result of competition, and economies of scale accruing from
large production runs. It is during this stage that a company accumulates strength for survival
in the subsequent stages of life cycle. If a company succeeds in getting its brand widely
accepted in the market and also in establishing a sound distribution channel, it will find itself
in a strong position to stand in competition when its product enters the maturity stage.

The maturity stage

As a product passes through its growth stage, it starts attaining maturity. This stage is
characterized by a continuous decline in the growth rate of its sales volume until it levels off.
Competition becomes more fierce in this stage and profits decline due to increasingly high
costs of marketing. Decline in profits also leads to mergers, acquisitions and liquidation of
marginal firms. As indicated above, only those firms survive through this stage which had
gained wide market acceptance for their product, built a sound distribution organization and
accumulated sufficient financial strength during the growth stage.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 8

The saturation stage
Sales volume becomes stagnant in the saturation stage, as there are no new customers.
Competition intensifies and profit margins decline further as production and distribution costs
increase and prices tumble down further due to increasing price competition.

The decline stage

Sales start declining in absolute volume in this stage. New products enter the market and push
out the existing competing products. Promotion expenditure is heavily cut down to minimize
costs. This further tends to reduce the sales volume. When a firm no longer finds it possible
to market the product profitably, it is abandoned unless it is required to complement a
profitable product line, or to utilize existing production capacity so as to meet at least a part
of the fixed costs.

Every product goes through all these stages of life cycle. A company may, however, extend
the growth and maturity stages of its product through product innovation and making suitable
modification in products. For example, the manufactures of Allwyn refrigerators have
recently brought to extend the growth stage of its refrigerators by replacing its last model by
introducing Frige-cum-Deep Freezer.

Finally, new products are manufactured and marketed in order to take advantage of perceived
profitable opportunities. Most products result from the exploitation of such profitable
opportunities. The innovator of pressure cookers, for example, perceived such a profitable
opportunity for his product as he foresaw a wide and continually expanding market for
pressure cookers, which not only save housewife’s time and fuel cost but keep vitamins
intact.

Planning for new products

As indicated earlier, a firm aspiring to maintain its rate of growth should develop and
introduce new products to offset declining sales and profits from its existing products which
have become obsolete. However, the task of new product development and
commercialization is very demanding and challenging. It has been estimated by various
experts that as many as 80% of new products turn out to be market failures. Cost involved in

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 9

research and development, tooling, engineering, etc., of new products is so high that market
failure of a product may cause disaster to a firm and imperil its very survival. On the other
hand, cost of not developing and introducing new products can also be high and threaten a
company's survival. No product lasts forever in the market. As a company's existing product
enters the saturation and then declining stage of its life cycle, its sales volume and profit
margins decline, and then disappear. The only way that it can continue in business in the face
of obsolescence of its existing products, is by developing and marketing new products.

Organization for product development

Many a time, organizational factors impede the development of new products. Overcautious
executives tend to visualize many limitations to new product development. Usual arguments
advanced against new ventures run along these lines: We do not have adequate financial
resources for investment in new products; most new products fail and if our new product also
fails, it will cause serious damage to market acceptability of our existing products; let others
invest money in R&D, we will enter the field when the competitors new product has proved
to be a marketing success. These attitudes often compromise a company's competitive
position. Another obstacle to new ventures comes from improper assignment of the function
of new product development. Often, this task is separated from marketing, and the marketing
people are asked to sell a product already developed and manufactured. It is not fully
appreciated that marketability of a new product should be tested and evaluated long before it
is manufactured. Production is no problem in our times of tremendous technological
developments; the real problem is marketing. This is being increasingly realized in most
companies and they have developed a coordinated approach to new product development and
introduction.

Four organizational arrangements are commonly found for new product development. Many
companies have created a separate position of new product manager or new product planner.
All new product ideas are channelled to him and he coordinates marketing, production,
engineering and finance functions through all stage beginning from the searching of new
product ideas to commercialization of accepted new products. Large companies which invest
heavily in R&D and consider new products as their major competitive weapon, have created
full fledged new product departments. Some companies perform this function through ad hoc
or standing new product committees composed of all concerned top executives, including
marketing, engineering, production and financial executive. It is the task of this committee to

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 10

screen all new product ideas, and pursue the process of new product development and
commercialization. Some companies use venture teams instead of new product committees. It
is composed of experts in various functional areas. These venture teams are often
characterized by a high degree of expertise as well as enthusiasm. They also tend to be more
marketing-oriented than product-oriented. However, much depends on the composition of the
venture team.

Product development process

New product development generally goes through the following process:
(i) Generation of new product ideas
(ii) Screening
(iii) Business analysis
(iv) Product development
(v) Testing, and
(vi) Commercialization.

(i) Generation of new product ideas

The first step in the process of development of a new product is the generation of new
product ideas. The importance of ideas in product development has been brought out by
Albert Low who defines a product as "an idea in a from with a demand". New product ideas
may come from various sources including research and development, engineering,
production, salesmen, top management, customers, competitors, dealers and making
researchers. All product ideas, however worthless they may seem to be at first glance, should
be systematically collected and channelled to the product development group in the
organization. If there is no effective system for channelling new product ideas, it is possible
that many good ideas may be lost.

(ii) Screening of ideas

Screening of ideas is a very important step in new product development. All ideas are, of
course, worth considering but only a few are worth pursuing. In a study of 51 companies,
Booz-Allen-Hamilton, a leading consulting company of USA., found that out of 60 product
ideas, only three reached the market testing stage, two of them went into commercialization
and only one was a marketing success. More than half of the ideas were dropped after
screening, and all but six were eliminated after business analysis. These research findings

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 11

focus on the critical function of screening the new product ideas. If a poor idea is allowed to
pass through the screening process, cost of its further processing through business analysis,
product development, etc., keeps on increasing. Moreover, farther a product idea goes in the
development process, more difficult it becomes to abandon it not only because of the
investment that has already gone into it but also due to the personal involvement of people
who have worked on it. Finally, no company can develop more than a few new product
development projects at a time because of the limitations imposed by its financial and
personnel resources.

(iii) Business analysis

Once a product idea has been approved after screening, its business implications are
analyzed. It involves research in several areas such as its market potential, cost of production
and distribution, profit margin, production problems, distribution problems, capital
requirements for setting up production and distribution facilities, manpower needs, likelihood
and nature of competition. The basic purpose of business analysis is to determine whether the
proposed product can be produced and marketed profitably, and how the forecasted profit
compare with the targeted profit or rate of return on investment. It involves marketing,
financial, production engineering, and research and development groups to work in a highly
coordinated manner.

(iv) Product development

If a proposed product is found suitable after its business analysis, it goes through the
development stage. Product development stage consists of two sequential steps. First, applied
laboratory research is done for developing the exact product specifications. It leads to the
development of a prototype model for further study. If the prototype model is found
satisfactory, manufacturing feasibility and methods research is undertaken. Its objective is
first to determine the feasibility of its production on a commercial scale, and then to find the
most efficient and economical manufacturing methods.

Product development is often costly and time-consuming. Sometimes it takes several years
before the product prototype can be put into commercial manufacturing. Testing operation
and functioning of the prototype and its marketability may result into modifications with the
result that several prototypes may have to be constructed. But time and money spent on
development is always well rewarded as it minimizes the risk of product failure.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 12

(v) Test marketing
If it is found after development that the product can be commercially manufactured, it falls on
the marketing department to test its marketability. The objective of test marketing is to
validate and extend the results obtained from earlier prototype and marketing research
conducted at the business analysis stage. Test marketing is aimed at ascertaining the chances
of marketing success of the product is tested but other elements of its marketing mix
including promotion, price and distribution channels are also tested for their effectiveness.
Packaging, branding and other elements of marketing strategy are also tested.

(vi) Commercialization
If the product is found to be sound as a result of analysis and study of the results of test
marketing, it is ready to be launched in the market. The decision to commercialize the
product is one of the most critical and strategic decisions, which has serious and far-reaching
consequences for the future survival, growth, and profitability of the enterprise.
Commercialization of a product involves huge investment in buildings, plant and machinery,
training of a sales-force, creation of distribution channel and customer goodwill, which may
seriously affect its future effectiveness.

Commercialization of the product requires long and careful preparation. Production facilities
have to be set up and initial technical problems solved. Marketing mix is to be finalized and
promotion expenditure budgeted. Distribution channels have to be identified, cultivated and
persuaded to carry the product. The timing of launching the product and promotional
activities, particularly advertising has to be carefully synchronized.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 13

Management Information System (MIS)

Concept of Information
We perceive information as paper work, which means nuisance. This feeling is not correct;
Information at present is one of the ingredients of industrial operations. In a simple
organization, the amount of information needed to provide efficient utilization of men-
materials and machinery is not very significant, but in a larger size production unit, efficient
production depends considerably on systematic flow of information regarding the sales
forecasts, materials planning, production scheduling, costs and profitability at various
production levels. Information is an action concept. When you want somebody to work, you
must tell him what to do and how to do it. Modification for creative and intelligent work
come only from job satisfaction cannot be achieved with understanding the objectives of the
job to be achieved which in turn can not be understood without information.

To understand the concept of management information system, let us understand each of the
following terms:
1. Management
2. Information
3. System

1. Management
It is an essential part of any group activity. An organization cannot survive without
management. It is the management, which makes people realize the objectives of the
organization and directs the efforts towards their achievement. Management is a multi-
purpose organ of an organization that manages the work and personnel at work. It is a
creative and innovative force striving to secure the maximum result by the use of available
resources. Management provides new ideas and vision to the work group and integrates its
efforts in such a manner as to account for better results. The word “Management” refers to
top, middle and lower level as well as different functional areas of management such as
production, operations, marketing, finance, accounts, management services, personnel etc.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 14

2. Information
It is something which management expects to know at a given time. Information is not data,
the data comprises of a host of information, which may be of little or no consequence to
management. The information is needed to plan, organize, direct and control the business and
suitably designed information pays for itself. The effectiveness of any information is
dependent on the timing and content of the information presented and the management
action. The need for management information is felt when the managers have to make
decisions. The manager will have to rely on his judgment but he must have information on
the basis of which he arrives at the decisions. The three important uses of information are:
process of management planning (decision-making), execution, and control.

Once the objective of the business are decided then it is necessary to plan the course of action
to be followed in order to achieve these. Such a plan needs reliable information so as to
obtain best results. The next step is to communicate the plan or decision to lower levels for
execution. This requires information from those higher up as to what action is to be taken all
along the line to the lowest levels. The next is the control functions of management. After the
plan has been made and executed one must have the formation of the results and standards to
evaluate whether objective have been achieved or not. This calls for a regular flow of
feedback information which will indicate in what way the results vary from planned targets.
By examining these variances management can decide the corrective actions to be taken.
Thus planning, executive and controlling the affairs of a business will require information.

3. System
System refers to a group of components, which interact to provide management with the
information it seeks. The system would have its components as: inputs, outputs and
processing devices.

Nature and design of MIS

Nature. The unique information requirements of different management levels and the
functional areas are outlined in Figure 2. The diagram clearly describes the information
systems in the corporate hierarchy. Table 1 shows the various management areas and the kind
of information that might be needed.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 15

 Decisions policy
Special
making information
requests Policy
MIS
Demand reports

Information Operating
request MIS Scheduled
reports

Functions

Planning & analysis

R&D Payroll A/P INV MKTG

Data management
Formalized report
Organizational information

Figure 2. Information requirements of different management levels and the functional areas

Table 1 An information system and corporate hierarchy

Level Organization Activities Information Output
identity system
Strategic Top Set objectives Special “one Decision
planning management time reports” “personal
leadership”
Management Departments Allocate Many regular Decision
control heads assigned reports and “Personal
resources Formats leadership”
Operational Supervisors, Use resources to Formal Actions
control Foremen, Clerks carry out tasks

Design. It is indeed a difficult task to design a suitable and efficient information system for
the management. This demands a thorough knowledge of the organizational structure
working and system. It requires experience, skill and vision of the information system.
Designer who must understand, assimilate and foresee the information needs of the
management. A few of the important steps involved in the design of MIS are:

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 16

 – Problem recognition
1. Analysis Phase – Problem identification
– Problem definition

– Problem of flow chart

– Examination of the document flow
2. Synthesis – Working out quantities
– Hardware and software considerations
– Establishing inputs and outputs
_ Fixing user responsibility
_ Running in parallel

1. Analysis phase
(i) Problem recognition. The designer must recognize the potential areas which need to
be served better and supplied with information which is better, prompt and accurate.
This has to accomplish by frequent and free discussion with the various levels of
management. Enough time should be spent in the recognition of the problem,
because it is preferable to have wrong solution for the right problem rather than the
right solution for wrong problem.
(ii) Problem identification. This involves a further study into the areas which have been
broadly recognized in the problem recognition phase and a closer scrutiny of the
selected areas already identified a deficient areas.
(iii) Problem definition. This phase is a further detailed study of the problem
identification phase. For instance, it will point out the exact discrepancy.

2. Synthesis
(i) Preparation of a document flow chart. The purpose of the flow chart is to present
the flow of different documents relating to the discrepancies of the deficient areas.
(ii) A close examination of the document flow chart. This is an exercise involving a
careful examination of the several deficiencies thrown in by the document flow
chart.
(iii) Working out quantities. This involves the computation of the record size and the
data elements involved in the systems design. The total volume of data to be

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 17

 processed and maintained has to be determined. This will, in turn constitute the
basis for identifying the type of information system that may be necessary and the
kind of organization, hierarchy equipment and procedures which will be required to
support such an information system.
(iv) Hardware and software considerations. Now it is the time for identifying the exact
computer configuration, input-output terminals, data storage devices, on-line
terminals and other peripherals. It is the time when exact software support that will
be necessary needs to be analyzed, planned for training personnel as an integral part
of this phase.
(v) Establishing inputs and outputs. This calls for the identification of the areas of entry
of raw information into the information system including the exact contents of that
information. This also involves determination of the kind of outputs which will be
required out of the MIS.
(vi) Fixing user responsibilities. It is important to state precisely and clearly the user
responsibilities in the matter of data entry including instructions on such vital
matters as the formats, the input output times, the devices, the equipment and the
location in which the entry will take place. It will also have to be explained to the
user the importance of feedback from him to the reporting output in order that
discrepancies in the reporting could be rectified without loss of time.
(vii) Running in parallel. Any newly designed MIS has to be observed through a period
before it is finally accepted. It is important that the new system should run in
parallel with the existing system. This is referred to as ‘running in parallel’. This
phase of new system development and testing could last from a few weeks to
several months depending upon the feedback received from the user with respect to
the report reliability offered by the new system.

Impact of Management Information System on Management

Following points give the impact of MIS on management:

(1) Information is power and a kind of information or computer man has grown in the
organization. Information man is consulted by the top management as well as heads
of functional groups, in connection with the fulfillment of information needs of the
organization.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 18

 (2) MIS growth has resulted in centralization. The availability of prompt, accurate and
timely information about the various activities of the organization to the
management has enhanced their capacity to perform the control function.
(3) MIS one growth of computers has changed the entire philosophy of the
management. Certain problems which are used to be considered very complicated
and almost impossible to solve are now a matter of fact. Production scheduling.
Linear programming, Transportation and assignment models problems are now
solved in time by the help of computers.

ME 423 Industrial Management Professor Dr. Md. Arefin Kowser 19