A Brief History of Industrial Engineering

A HISTORY OF
INDUSTRIAL
ENGINEERING
Arif Rahman

INDUSTRIAL ENGINEERING
..is concerned with the design, improvement, and
installation of integrated systems of men, materials,
information, energy, and equipments. It draws
upon specialized knowledge and skill in the
mathematical, physical and social sciences
together with the principles and methods of
engineering analysis and design to specify, predict
and evaluate the result to be obtained from such
systems

Mathematical
Physical Sciences
Social Sciences
Engineering
Knowledge & Skill
Industrial
Engineering
Integrated
Systems
Design
Improvement Installation
Specify
Predict
Evaluate
Optimal
Result

I.E. IS AN ENGINEERING SCIENCE
DISCIPLINE
• Industrial Engineering focuses on systems that are not
limited in scope, either scale or area. Industrial Engineering
needs the multidisciplinary and interdisciplinary knowledge
and skills.
• Industrial Engineering studies many fields of science, so that
competence in one field of science is weaker than the
related disciplines. For example in mechanics, industrial
engineering is weaker than mechanical engineering; in the
chemical industry, industrial engineering is weaker than
chemical engineering; in finance, industrial engineering is
weaker than accounting economics.
• Industrial Engineering intersects with various disciplines. So
the industrial engineering becomes multidisciplinary and
interdisciplinary competence. Industrial Engineering deals
with the ability to analyze systems comprehensively and
integrated from multiple perspectives of many disciplines

CHALLENGES FOR INDUSTRIAL
ENGINEERING

DISCUSS THE FOLLOWING :
Challenges for
INDUSTRIAL
ENGINEERING
in the job competition
What job do you think that the graduates of Industrial Engineering
undergraduate program must be superior to other disciplines?
for instances :
1.A technician at maintenance department compete with mechanical
engineering
2.A production supervisor in chemical industry compete with chemical
engineering
3.A manager in banking service industry compete with accounting economics

I.E. vs OTHER DISCIPLINES
INDUSTRIAL ENGINEERING OTHER DISCIPLINES

I.E. INTERSECTS WITH VARIOUS
DISCIPLINES

GENEALOGY OF INDUSTRIAL
ENGINEERING
MathematicsMathematics
PhysicsPhysics
ChemistryChemistry
EconomicsEconomics
SociologySociology
PsychologyPsychology
StatisticsStatistics
ChemicalChemical
EngineeringEngineering
MechanicalMechanical
ElectricalElectrical
EngineeringEngineeringInformationInformation

INDUSTRIAL ENGINEERING
CHRONOLOGY
1900 2000 21001800
SCIENTIFIC MANAGEMENT
MANAGEMENT SCIENCE & OPERATION RESEARCH
SYSTEM ENGINEERING

•Frederick Winslow Taylor (1856 – 1915)
• He published “The Principles of Scientific Management”
and “Shop management” in 1911
• Experiments :
• Supervision activities for the production of bicycle cushion
bearings Simonds Rolling Machine Company. He selected the
workers. The result reduced 120 supervisors to 35 supervisors,
shortened the operation time (10.5 to 8.5 hours) and raised the
salary (80-100%)
• Pig iron loading and unloading activities at Bethlehem Steel. He
designed the shovel for 21 pounds. The result increased the
productivity from 12 tons / man-days to 48 tons / man-days.

•Frederick Winslow Taylor…
• Ideas :
• Work Study & Measurement
• Differential Rate System or Piecework Pay System
• Principles of Scientific Management
• A functional organizational structure by separating the planning
with the implementation. There are supervisors (disciplinarians).
Workers are responsible for several bosses according to their
function.

• Formulates a theory of scientific management to discover
“one best way”
• Every task needs a right operator with the right methods and
tools
• Work standardization by scientific approach
• Incentive system for work motivation

• Formulates four management principles :
• Replace working by "rule of thumb," or simple habit and common
sense, and instead use the scientific method to study work and
determine the most efficient way to perform specific tasks.
• Scientifically select, train, and develop each worker to work at
maximum efficiency rather than simply assign workers to just any
job, and passively leaving them to train themselves.
• Cooperate with the workers, provide instructions and supervision
of scientifically developed methods to ensure all of the work
being done in accordance with the methods.
• Divide work nearly equally between managers and workers, so
that the managers spend their time planning and training,
allowing the workers to perform their tasks efficiently.

•Adam Smith (1723-1790)
• He published “The Wealth of Nations” in 1776
• Experiments :
• Pins production activities. He selected and assigned 10 workers
with job specialization. The result increased productivity from 200
pins / man-day to 48,000 pins / day by 10 men.
• Ideas :
• Labor theory of value
• division of labor (job specialization) to improve labor productivity

•Robert Owen (1771 – 1858)
• He published “A New View Of Society” in 1813
• Experiments :
• The activity of producing spinning machines with 40 employees
and capital of 100 pounds
• The management activities of Scottish New Yorkark textile factory
with modern management. He regulated a minimum working age
limit of 10 years, reduced working hours from 14 hours to 10
hours, and provided housing facilities and schools for welfare and
motivation

•Robert Owen...
• Ideas :
• Personnel Management : regulating working age, controlling
working hours, formulating incentive schemes, prioritizing
training (rather than punishment).
• Performance appraisal and incentive systems : white for
excellent, yellow for good, blue for indifferent, and black for bad.

•Charles Babbage (1792 – 1871)
• He published “On the Economy of Machinery and
Manufactures” in 1835
• Ideas :
• Division of labor (job specialization) as the principle of industrial
economics: learning period, adaptation time, job rotation, job
specialization, concern for work
• Accurate research data and experience exchange are utilized in
management for efficiency in production activities

•Frank Bunker Gilbreth (1868-1924) and
Lillian Evelyn Moller (1878-1972)
• They published “The Psychology of Management” in 1912
• Experiments :
• Bricklaying activity. He developed a multilevel scaffold that kept
the bricks within easy reach of the bricklayer. The result increased
productivity from 120 bricks / man-hours to 350 bricks / man-
hours, and reduced the motion elements from 18 to 5.
• Concrete mix production activity. He formulated 231 rules.

•Frank and Lillian Gilbreth…
• Ideas :
• Time & Motion study with 17 work motion elements of Therblig
• Cyclographic Analysis
• Work Study : motion, fatigue, skill & time study
• Psychology of Management
• Three position plan of promotion : (1) perform the job (2) learn
the next higher job, and (3) train a worker below who will take
over the present job.

•Henry Laurence Gantt (1861-1919)
• He published “Work, Wages, and Profits” in 1916 and
”Organizing for Work” in 1919
• Experiments :
• Cooperate with Taylor in Simonds and Betlehem
• Ideas :
• Incentive systems for individual or team work performance
• Performance appraisal : black for good achievement, and red for
failed achievement
• Gantt Chart and job scheduling

•Henry Ford (1863-1947)
• He published “My Life and Work” in 1922
• Experiments :
• Automotive manufacturing activity. He applied standardization
and interchangeable parts. The result reduced production costs
• Ideas :
• Welfare Capitalism
• Standardization & Interchangeable parts
• Assembly line technique of mass production
• Elimination of Waste

•Henry Ford ...

•Harrington Emerson (1853-1931)
• He published “The Twelve Principles of Efficiency” in 1913
• Ideas :
• 12 Principles of Efficiency

•Harrington Emerson ...
• 12 principles of efficiency :
• Clearly defined ideals: the organization must know what its goals
are, what it stands for, and its relationship with society.
• Common sense: the organization must be practical in its methods
and outlook.
• Competent counsel: the organisation should seek wise advice,
turning to external experts if it lacks the necessary staff expertise.
• Discipline: not so much top—down discipline as internal
discipline and self-discipline,with workers conforming willingly
and readily to the systems in place.
• The fair deal: workers should be treated fairly at all times, to
encourage their participation in the efficiency movement.
• Reliable, immediate and adequate records: measurement over
time is important in determining if efficiency has been achieved.

•Harrington Emerson ...
• 12 principles of efficiency ... :
• Despatching: workflow must be scheduled in such a way that
processes move smoothly.
• Standards and schedules: the establishment of these is, as
discussed above, fundamental to the achievement of efficiency.
• Standardized conditions: workplace conditions should be
standardized according to natural scientific precepts, and should
evolve as new knowledge becomes available.
• Standardised operations: likewise, operations should follow
scientific principles, particularly in terms of planning and work
methods.
• Written instructions: all standards should be recorded in the
form of written instructions to workers and foremen, which detail
not only the standards themselves but the methods of
compliance.
• Efficiency reward: if workers achieve efficiency, then they should

•Henry Fayol (1841 – 1925)
• He published “Administration Industrielle et Générale” in
1916
• Ideas :
• 6 primary function of Management : Forecasting, Planning,
Organizing, Commanding, Coordinating, Controlling
• 14 principles of Management
• 6 primary activities of organization : technical, commercial,
financial, security, accounting, managerial.

•Henry Fayol ...
• 14 principles of management :
• Division of Work: When employees are specialized, output can
increase because they become increasingly skilled and efficient.
• Authority: Managers must have the authority to give orders, but
they must also keep in mind that with authority comes
responsibility.
• Discipline: Discipline must be upheld in organizations, but
methods for doing so can vary.
• Unity of Command: Employees should have only one direct
supervisor.
• Unity of Direction: Teams with the same objective should be
working under the direction of one manager, using one plan. This
will ensure that action is properly coordinated.
• Subordination of Individual Interests to the General Interest:
The interests of one employee should not be allowed to become
more important than those of the group. This includes managers.

•Henry Fayol ...
• 14 principles of management ... :
• Remuneration: Employee satisfaction depends on fair
remuneration for everyone. This includes financial and non-
financial compensation.
• Centralization: This principle refers to how close employees are
to the decision-making process. It is important to aim for an
appropriate balance.
• Scalar Chain: Employees should be aware of where they stand in
the organization's hierarchy, or chain of command.
• Order: The workplace facilities must be clean, tidy and safe for
employees. Everything should have its place.
• Equity: Managers should be fair to staff at all times, both
maintaining discipline as necessary and acting with kindness
where appropriate.

•Henry Fayol ...
• 14 principles of management ... :
• Stability of Tenure of Personnel: Managers should strive to
minimize employee turnover. Personnel planning should be a
priority.
• Initiative: Employees should be given the necessary level of
freedom to create and carry out plans.
• Esprit de Corps: Organizations should strive to promote team
spirit and unity.

•George Elton Mayo(1880 – 1949)
• He published “The Human Problems of an Industrialized
Civilization” in 1933
• Experiments :
• Hawthorne Investigation
• Ideas :
• 7 primary function of Management : Planning, Organizing,
Staffing, Directing, Coordinating, Reporting, Budgeting
• Managerial Guidelines

•George Elton Mayo ...
• Hawthorne Investigation
A series of productivity experiments are conducted in
Western Electric Co. from 1927 to 1932
EXPERIMENT 1
• Null Hypoteses : The productivity is low because of gloomy and
inadequate lighting. The light intensity within the building
affected the productivity of the workers.
• Treatments :
• Experiment groupvaried light intensity
• Controlled group  constant light intensity
• Result : the light intensity made no difference in the productivity.
The workers increased output whenever the light intensity was
switched from a low level to a high level, or vice versa. When any
variable was manipulated, the workers would change their
behavior, because they were aware that they were under
observation.

• Hawthorne Investigation ...
EXPERIMENT 2
• Null Hypoteses : The productivity will increase because of
incentive or compensation for motivation
• Treatment :
• Apply incentive system
• Working hour decrease from 48 hours to 40 hours 40 minutes
every week with 5 days/week
• Varied resting time (based on worker suggestion)
• Free lunch
• Result : Although after the concession of experiments were
abolished and returned to the origin, worker productivity
increased from 2400 to 3000 units / man-weeks.

• Hawthorne Investigation ...
EXPERIMENT 3
• Null Hypoteses : The productivity will increase if they get well
motivation and supervision
• Treatments :
• 12 workers were responsible to 2 inspector and 1 supervisor
• Set the production target and apply the compensation scheme
• Result : Works were slowed down without any relevant reason,
ignoring the official organizational norms and formal
organizational hierarchy. It revealed the existence of informal
groups or "cliques" within the formal groups. These cliques
developed informal rules to control group members. Workers had
become suspicious that their productivity will used to justify firing
some of the workers later on.

• The social man concept replaces the rational man
concept
• Social man works driven by social needs, including belongingness,
recognition, and actualization in work group
• Rational man works motivated by personal needs
• Social needs: being part of a group, gaining recognition
and respect, feeling belonging, expecting attention and
love, willing to participate and be involved

•Abraham Maslow (1908 – 1970)
• He published “Motivation and Personality” in 1964
• Ideas :
• Hierarchy of needs Pyramid of human needs
• Human behavior is basically good, polite and tolerant in contrast
to Freud's opinion which states that humans are aggressive,
lustful and evil beasts.
• Eupsychian management

•Abraham Maslow ...
• Hierarchy of needs

•Douglas McGregor (1906 – 1964)
• He published “The Human Side of Enterprise” in 1964
• Ideas :
• Theory X – Theory Y
• Performance appraisal : self-appraisal, self-evaluation, self-
control

•Frederick Irving Herzberg (1923-2000)
• He published “The Motivation to Work” in 1959
• Ideas :
• Motivator-Hygiene Theory
Organizational policies
Quality of supervision
Working conditions
Base wage or salary
Relationships with peers
Relationships with subordinates
Status
Job Security
Achievement
Recognition
Working itself
Responsibility
Advancement
Growth
High HighNeutral

CHRONOLOGY
1850 1900 1950 20001800
Division of Labor
(Smith,1800)
Division of Labor
(Smith,1800)
Interchangable Parts
(Whitney,1800)
Interchangable Parts
(Whitney,1800)
Incentive Scheme
(Owen,1800)
Incentive Scheme
(Owen,1800)
Performance Assessment
(Owen,1800)
Performance Assessment
(Owen,1800)
Time Study
(Taylor,1870)
Time Study
(Taylor,1870)
Scientific Mngmt
(Taylor,1880)
Scientific Mngmt
(Taylor,1880)
Therblig System
(Gilbreth,1900)
Therblig System
(Gilbreth,1900)
Job Specialization
(Babbage,1830)
Job Specialization
(Babbage,1830)
Gantt Chart
(Gantt,1910)
Gantt Chart
(Gantt,1910)
Mass Production
(Ford,1910)
Mass Production
(Ford,1910)
Assembly Line
(Colt,1830)
Assembly Line
(Colt,1830)
Psychology of
Management
(Gilbreth,1910)
Psychology of
Management
(Gilbreth,1910)
Principles of Efficiency
(Emerson,1910)
Principles of Efficiency
(Emerson,1910)
Principles of Management
(Fayol,1910)
Principles of Management
(Fayol,1910)
Hawthorne Effect
(Mayo,1930)
Hawthorne Effect
(Mayo,1930)
Hierarchy of needs
(Maslow,1960)
Hierarchy of needs
(Maslow,1960)
Theory X & Y
(McGregor,1960)
Theory X & Y
(McGregor,1960)
Motivator-Hygiene
(Herzberg,1960)
Motivator-Hygiene
(Herzberg,1960)

MANAGEMENT SCIENCE & OPERATION
RESEARCH
•Linear Programming
•Transportation Problem
•Transshipment Problem
•Traveling & Salesman
Problem
•Vehicle Routing Problem
•Assignment Problem
•Nonlinear Programming
•Dynamic Programming
•Network Analysis
•Decision Analysis
•Markov Chain
•Queueing Theory
•Inventory Theory
•Game Theory
•Reliability
•Heuristic Programming
•Simulation
•Statistical Analysis
•Equilibrium Model
•Econometric
•Engineering Economy
•Forecasting
•Financial Analysis

46
RESEARCH
•Linear Programming
• Linear Programming is an optimization mathematical
modeling for maximizing or minimizing a linear objective
function of several non-negative variables subject to
constraints expressed as linear equalities or inequalities.
• Linear Programming formulation
Maximize z = c1x1 + c2x2 + … + cnxn
Subject to
a11x1 + a12x2 + … + a1nxn ≤ b1
a21x1 + a22x2 + … + a2nxn ≤ b2
am1x1 + am2x2 + … + amnxn ≤ bm
and
x1 ≥ 0; x2 ≥ 0; … ; xn ≥ 0

47
RESEARCH
•Linear Programming...
• Leonid Vitaliyevich Kantorovich (Soviet) illustrated
economic distribution problem using linear programming
formulation in 1939 (“Mathematical Methods in The
Organization and Planning of Production”).
• George Bernard Dantzig (Amerika Serikat) developed
simplex method as problem solving algorithm for linear
programming problem in 1947 (“Programming in a Linear
Structure”).
• The term linear programming was coined by Tjalling
Charles Koopmans in 1948

48
RESEARCH
•Linear Programming...
• Other problem solving methods of Linear Programming
• Two Phase Method or Artificial Variable technique
• Big M Method
• Duality atau primal-dual algorithm (George B. Dantzig, L.R. Ford
dan D.R. Fulkerson “A Primal Dual Algorithm for Linear Programs”
1956).
• Revised Simplex Method
• Polynomial algorithm (A.Khachian “A Polynomial Algorithm in
Linear Programming” 1979)
• New Polynomial-Time algorithm (N. Karmarkar “A New
Polynomial-Time Algorithm for Linear Progamming” 1984)

49
RESEARCH
•Transportation Problem
• Transportation problem is a linear programming problem
that is concerned with the optimal pattern of the
distribution of goods from several points of origin
(sources) to several different destinations, with the
specified requirements at each destination.
• Transportation Problem formulation
Destination Sup-
1 2 ... n ply
Source
c11 C12 ... C1n
1 X11 X12 X1n S1
: : :
:
Cm1 Cm2 ... Cmn
m Xm1 Xm2 Xmn Sm
Demand D1 D2 ... 70 Dn

50
RESEARCH
•Transportation Problem...
• Frank Lauren Hitchcock illustrated the goods distribution
problem using transportation problem formulation in
1941 (“Distribution of a product from Several Sources to
Numerous Localities”).
• Tjalling Charles Koopmans and Stanley Reiter published
“A Model of Transportation” in 1951

51
RESEARCH
•Transportation Problem...
• Algorithms to define Initial tableu :
• North-West Corner Method
• Vogel’s Aproximation (N.V. Reinfeld & W.R.Vogel, “Mathematical
Programming” 1958)
• Russel’s Approximation (Edward J. Russell “Extension of Dantzig’s
Algorithm to Finding an Initial Near-Optimal Basis for The
Transportation Problem “1969)
• Algorithms to find optimal solution :
• Stepping Stone Method (A.Charnes & W.W.Cooper “The Stepping
Stone Method for Explaining Linear Programming Calculations in
Transportation Problem” 1954)
• MOdified DIstribution

52
RESEARCH
•Assignment Problem
• Assignment problem is a linear programming problem
that deals with the allocation of the various resources to
the various activities on one to one basis as a
combinatorial optimization problem in a weighted
bipartite graph.
• Assignment Problem formulation
Task
1 2 ... n
Resource
c11 C12 ... C1n
1 X11 X12 X1n
: : :
:
Cm1 Cm2 ... Cmn
m Xm1 Xm2 Xmn

53
RESEARCH
•Assignment Problem...
• Denes Konig and Jeno Egervary developed Hungarian
Method to solve Assignment problem in 1916. He
published “Grafok es Alkalmazasuk a Determinansok es a
Halmasok Elmeletere” (Graphs and Their Application to
The Determinants and Theory of Sets) in 1916 and
“Theorie der Endlichen und Unendlichen Grephen” (Theory
of Finite and Infinite Graphs) in 1936
• Harold William Kuhn published “The Hungarian Method
for The Assignment Problem” in 1955, and “Variants of
The Hungarian Method for Assignment Problems” in 1956
• James Raymond Munkres published “Algorithms for The
Assignment and Transportation Problems” in 1957

54
RESEARCH
•Dynamic Programming
• Dynamic programming is a systematic recursive method
for solving a complex optimization problem by breaking it
down into a collection of simpler subproblems, solving
each of those subproblems just once, and storing their
solutions.
• Richard Ernest Bellman formulated dynamic
programming and published “The Theory of Dynamic
Programming” in 1954.
• The systematic procedures to solve dynamic
programming are top-down approach or bottom-up
approach

55
RESEARCH
•Game Theory
• Game Theory is an optimization mathematical modeling
to illustrate situations of competition and conflict
between two or more participants
• Felix Edouard Justin Emile Borel published some articles
of game theory since 1921. One of them was “La Theorie
Du Jeu et Les Equations Integrales A Noyan Symetrique
Gauche” (Game Theory and Integrals Equations To Noyan
Left Symmetric)
• John Von Neumann and Oskar Morgenstern developed
game theory to illustrate economical behavior. They
published “Theory of Games and Economic Behavior” in
1944. Previously Neumann published “Zur Theorie der
Gesellschaftsspiele” (On The Theory of Games) in 1928.

56
RESEARCH
•Game Theory
• Variety of Game Theory :
• Cooperative / Non-cooperative games
• Symmetric / Asymmetric games
• Zero-sum / Non-zero-sum games
• Simultaneous / Sequential games
• Perfect / Imperfect Information games
• Classical / Combinatorial games
• Discrete / Continuous games
• Static / Dynamic games
• Infinitely long games
• Differential games
• Duopoly, Many-player and Population games
• Stochastic outcomes (and relation to other fields)
• Metagames
• Pooling games

RESEARCH
•Network Flows Problem
• Network flows problem is an optimization mathematical
modeling using graph theory to illustrate the structure of
digraph network (directed network) that consist of some
nodes (vertices or points) connected by arcs (links,
branches, edges or lines)
• In 1736, Leonhard Euler wrote an article that presents
graph theory in “Seven Bridges of Konigsberg”.

RESEARCH
•Network Flows Problem
• Problems of network flows : shortest route/path, minimal
spanning tree, minimal cost, maximal flow,
multicommodity flow, chinese postman problem,
traveling salesman problem, vehicle routing problem
• LR Ford and DR Fulkerson developed labeling method to
solve maximal flow problem in some articles, for instance
is “A Simple Algorithm for Finding Maximal Network
Flows and An Application to The Hitchcock Problem” in
1957.

RESEARCH
•Queueing Theory
• Queueing theory is an optimization mathematical
modeling that studies queueing line and waiting.
• Queueing theory is pioneered by Agner Krarup Erlang
who conducted a research of cutting edge technology in
telephone system. He published “The Theory of
Probabilities and Telephone Conversation” in 1909
• It needs to learn two stochastic processes to support
queueing theory, consisting birth-death process and
Poisson process. It could be applied to queueing system
M/M/1.
• It usually implements queueing theory to analyze
queueing sytem at steady state.

RESEARCH
•Markov Chain
• Markov chain is an optimization mathematical modeling
that experiences possible transitions from one state to
another of stochastic process according to certain
probabilistic rules. It uses state diagram, transition matrix
and state space.
• Andrey Markov used it in his research in 1906, to explain
the Law of Large Number of dependent events.
• There are two kind of markov chain, i.e. : discrete time
markov chain and continuous time markov chain.
Transition matrix of discrete time markov chain consists
of transition probability or proportion. Transition matrix
of continuous time markov chain consists of transition
rate.

RESEARCH
•Simulation
• Simulation is an optimization mathematical modeling that
represents the key characteristics, behaviors and
functions of system or process. It help to conduct random
experiments based on model existing system or proposed
system using computer aided quasi experiment.
• Stanislaw Marcin Ulam and John von Neumann develop
Monte-Carlo to investigate radiation shielding and the
distance that neutrons would likely travel through various
materials in 1946. Monte-Carlo method uses probabilistic
approach with pseudorandom number generator.
• Nicholas Metropolis and Ulam published “The Monte
Carlo Method” in 1949
• Alan B. Pritsker made numerous fundamental
contributions to the theory and methodology for
computer simulation

RESEARCH
•Statistical Process Control
• Statistical Process Control uses control chart or run chart
that was developed by Walter Andrew Shewhart in 1920.
• This method applies continuous quality control of various
processes. Shewhart defined strong dependency between
process capability consistency with product quality.
• In 1931 Shewhart published “Economic Control of Quality
of Manufactured Product”
• The control charts are developed in various type :
• Variable : Xbar and R charts
• Attribute : p, np, c and u charts
• Moving data : CUSUM and EWMA charts
• Multivariate : Hoteling T2
, Mahalanobis charts

RESEARCH
•Acceptance Sampling
• Lot-by-lot sampling was developed by Harold French
Dodge and Harry Gutelius Romig in 1930.
• Dodge and Romig published “Sampling Inspection Tables:
Single and Double Sampling”
• This method used probabilistic approach topredict lot
characteristics based on sampling result.
• There are acceptance sampling standards that were
developed by US military, i.e. MIL STD 105E for attribute
data, and MIL STD 414 for variable data; or were
developed by ANSI/ASQC, i.e. ANSI/ASQC Z1.4 for
attribute data, and ANSI/ASQC Z1.9 for variable data

RESEARCH
•Process Capability Indices
• Process capability indices refers to the uniformity
measure of the process. Variability characteristic of
process quality is also the uniformity measure of the
product.
• There are two methods to measure variability, i.e.:
natural/inherent variability at a specified time, and
variability over time.
• Equation of process capability indices are the ratio
between specification limits and process variability.
• Victor E. Kane published “Process Capability Indices” in
1986

RESEARCH
•Pareto Diagram
• Pareto Diagram was developed by Vilfredo Federico
Damaso Pareto in 1906.
• This method contains both bars and line graph. It sorts
data descending from the largest to the smallest. The bar
graph illustrates the variable value, the line graph
represents its cumulative value.
• In 1916, Pareto published “Trattato Di Sociologia
Generale”. It was translated into english with the title
“The Mind and Society”, and published in 1935.

RESEARCH
•Pareto Diagram
• The pareto principle (80-20 rule) was built on his
observations which showed that 80% of the land in Italy
was owned by about 20% of the population. It states that,
for many events, roughly 80% of the effects come from
20% of the causes.
• The principle is also recognised as “the vital few and the
trivial many”, or Juran calls it as “the vital few and the
useful many”.
input output

RESEARCH
•Fishbone Diagram
• Fishbone Diagram was developed by Kaoru Ishikawa in
1982. Also known as the Cause-Effect Diagram or
Ishikawa Diagram
• This method uses a hierarchical approach to break down
the root cause of the problem.
• In 1962, Ishikawa introduced quality circles.
• Ishikawa published “QC Circle Koryo: General Principles of
The QC Circle” in 1980 (Japanese version in 1970).
• Ishikawa published “What is Total Quality Control? The
Japanese Way” in 1985 (Japanese version in 1981).

RESEARCH
•Design of Experiments
• Design of Experiments was developed by Sir Ronald
Aylmer Fisher in 1926.
• It provides a methodology for designing statistical
experiments by arranging sequence of systematic trials
using several principles: comparison, randomization,
replication, blocking, orthogonality, and factorial
experiments.
• Fisher published “The Arrangement of Field Experiments”
in 1926.
• Fisher published “The Design of Experiments” in 1935.
• Fisher and George Waddel Snedecor developed F
distribution that is used for analysis of variance (ANOVA)

RESEARCH
•Quality Engineering
• Quality Engineering was developed by Genichi Taguchi in
1950.
• This method is controversial, as opposed to conventional
statistics, because its methodology reduces the
experimentation block systematically even though it
allows the occurrence of bias due to missing values.
• Taguchi worked with Walter A. Shewhart, Sir Ronald
Aylmer Fisher and Calyampudi Radhakrishna Rao in
Indian Statistical Institute in 1954-1955.
• His contributions are Quality Loss Function, Signal-To-
Noise Ratio, Orthogonal Array Design of Experiments,
Robust Engineering and Mahalanobis-Taguchi System.

RESEARCH
•Zero Defect
• Zero Defect was developed by Philip Bayard Crosby in
1979
• The method has 14-step quality improvement program
based on Crosby’s “Quality Is Free: The Art of Making
Quality Certain”.
• Crosby proposed the concept of the “Absolutes of Quality
Management” :
• The definition of quality is conformance to requirements
• The system of quality is prevention
• The performance standard is Zero Defects
• The measurement of quality is the price of nonconformance.

RESEARCH
•Six Sigma
• Six Sigma was developed by William B. Smith, Jr. and
Mikel J. Harry in Motorola in 1986.
• The method uses the principle of quality variability that is
measured by the variance (σ, sigma) compared to the
specification to estimate the process capability.
• It has two cycles: DMAIC (Define-Measure-Analyze-
Improve-Check) and DMADV (Define-Measure-Analyze-
Design-Verify) according to principles of Deming’s PDCA
cycle (Plan-Do-Check-Act)
• It applies several statistical methods and tools.

RESEARCH
•Economic Order Quantity
• Economic Order Quantity was initiated by Ford Whitman
Harris in 1913, and developed by R.H. Wilson and K.
Andler
• The method is an optimization principle of differential
calculus, which is the first derivative of total inventory
operational cost to order quantity.
• Stock movement is illustrated by sawtooth model

RESEARCH
•Material Requirement Planning
• Material Requirement Planning was developed by Joseph
Orlicky in 1964
• The method is a heuristic algorithm in tabular form.
• It plans a schedule of production and material
procurement (make or buy) based on master production
schedule, bill of materials and inventory status.
• The cycle consists of:
netting-lotting-offsetting-
exploding.
• There are several methods of
lotting or lotsizing.

MS & OPERATION RESEARCH
CHRONOLOGY
1900 1950 2000 20501850
Transportation Model
(Koopmans,1950)
Transportation Model
(Koopmans,1950)
Assignment Problem
(Konig,1916)
Assignment Problem
(Konig,1916)
Dynamic Programming
(Bellman,1921)
Dynamic Programming
(Bellman,1921)
Linear Programming
(Dantzig,1950)
Linear Programming
(Dantzig,1950)
Material Requirement Planning
(Orlicky,1960)
Material Requirement Planning
(Orlicky,1960)
Simulation
(Pritsker,1960)
Simulation
(Pritsker,1960)
Game Theory
(Borell,1921)
Game Theory
(Borell,1921)

SYSTEM ENGINEERING
• The system approach views the problem as a unified and
meaningful system consisting of interconnected parts.
• The perspective perceives the problem as a whole, so that
all activities part in the problem scope at various levels wil
influences the activity of each other
• The system is formed from several interconnected
subsystems. The subsystems work together and are
synergistically linked together to produce more effective
outcomes than when pooling or merging separate working
subsystems.
• The system point of view corresponds to the needs of the
stakeholders

SYSTEM ENGINEERING
•Contingency Approach
• It is also known as “situational approach”.
• Charles Poor Kindlerberger published “Maniacs, Panics
and Crashes” in 1978.
• Kindlerberger said that the answer of any engrossing
question in economics was “It depends”. It is also
“depends on what” dan “depends on how”
• There are no universal principles that can be applied to all
situations for managing the system.
• Different situations need different solutions (contingency
variables).
• Identifying appropriate technique or approach in a
particular situation, under particular circustances and at
particular time will best contribute to achieving the
objectives of studying the system

SYSTEM ENGINEERING
•Contingency Approach

SYSTEM ENGINEERING
•System Dynamics
• System Dynamics uses Influence Diagram that was
initiated by Jay Wright Forrester in his publication
“Industrial Dynamics” in 1969
• Influence Diagram is a graphical representation that
describes the relation of causal influence between
components in system and its environment, to
understanding the nonlinear behaviour of the systems
over time using stocks, flows, loops, functions and time
delays.
• Influence Diagram is also known as Causal Diagram or
Dynamic Model.
• Colin Eden, David Sims and Sue Jones introduces another
form of influence diagram in “Messing about in
Problems” in 1983

SYSTEM ENGINEERING
•Logic Model
• Logic Model was initiated by Joseph S. Wholey in his
publication “Evaluation: Promise and Performance” in
1979
• Logic Model is a simple graphical representation of a
system that shows the logical relation of a transformation
process from input to output to realize output (outcome /
result) according to goal
• Form and structure of Logic Model is unstandardized, it
depends on :
• the purpose of studying the system,
• the application (planning, design, controlling, evaluation),
• stakeholders,
• system context,
• resource availability

SYSTEM ENGINEERING
•Logic Model
• Logic Model becomes a program management tool and
communication tool, since it can provide direction and
clarity how input and process to be executed will produce
output and desired outcome
• Logic Model Components :
• Inputs, or resources or infrastructure. What items will be used or
considered to conduct the transformation?
• Process, or activities, or interventions. What will the initiative do
with its resources to direct the course of change?
• Outputs. What evidence is there that the activities were performed
as planned?
• Outcomes, or effects, or results, or consequences, or impacts.
What kinds of changes came about as a direct or indirect effect of
the activities?

SYSTEM ENGINEERING
Controlled Input
Uncontrolled Input
Material,
Resources,
Controllers,
Utilities, others
Data, Facts,
Noise/disturbance
Catalyst/supports
Rationale/reasons
Responds,
Initiatives
InputInput ProcessProcess
Activities,
Processes,
Operations
Participants,
Processors,
Servers,
Facilitators,
Components
Supervisors,
Operators,
Machines,
Equipments
Relations,
Interactions
OutputOutput
Output
Product
Informations,
Recommendation
Decision
Value added,
Waste,
Scrapped
OutcomesOutcomes
Results, Impacts
Short-term,
Mid-term,
Long-term
•Logic Model

SYSTEM ENGINEERING
•Value Chain
• Value Chain was introduced by Michael Porter in his
publication “Competitive Advantage” in 1985
• A value chain disaggregates a firm into its strategically
relevant activities in order to understand the behavior of
costs and the existing and potential sources of
differentiation
• The value chain details every activity from materials
procurement from suppliers to product delivery to
consumers in order to provide maximum added value.
• The value chain becomes a strategic tool to analyze the
relative cost position, differentiation, and role of
competing coverage in achieving competitive advantage

SYSTEM ENGINEERING
•Value Chain

SYSTEM ENGINEERING
•Lean Production System
• Ford's My Life and Work and Ohno’s Toyota Production
System were pioneers of Just In Time and Lean
Production System
• In the Lean Production System, system management is
focused on continuous improvement in waste
elimination.
• Henry Ford, Sakichi Toyoda, Taiichi Ohno, Shigeo Shingo,
Masaaki Imai and Yasuhiro Monden are key figures who
developed methods and tools for just in time and lean
production system, such as : Hoshin Kanri, 5S, Kanban,
Shojinka, Heijunka, Jidoka, Pokayoke, dll

SYSTEM ENGINEERING

SYSTEM ENGINEERING
Continuous Improvement (Kaizen, Kaikaku, Quality Control Circle)
QualityAssurance(zerodefect,robustdesign)
Maintenance(Corrective,Preventive,Predictive)
Setupreduction(SMEDatauRETAD)
Autonomation(Jidoka,Andon)
LineBalancing(Shojinka,,CellManufacturing)
JustInTime(TaktTime,SmallBatchSize)
LevelProduction(Mixedscheduling,Heijunka)
PullSystem(Kanban,Keiretsu)
LEAN PRODUCTION SYSTEM
Workplace Improvement (seiri – seiton – seiso – seiketsu – shitsuke)
Policy Deployment (Hoshin Kanri)
ProcessSimplify(Interchangeableparts,DFMA)
Standardisation – Visual Management – Foolproof Mechanism (Poka Yoke)
Waste Elimination (Mura, Muri, Muda)

SYSTEM ENGINEERING
•Agile Production System
• In the Agile Production System, organizations are
designed so that processes and resources (people and
equipment) can respond quickly to consumer needs and
market changes with immediate adaptations, but keep
control of quality and cost.
• It requires data mining and industrial intelligence to
explore information change about consumer needs and
technological innovation.
• The organization focuses at its core competency. Other
business processes is supported by outsourcing.
Concurrent engineering will reduce lead time.

SYSTEM ENGINEERING

SYSTEM ENGINEERING
• Agile Production System combines Change Management
and Lean Production System that assisted by Knowledge
Based Information System
• Everett Rogers published “Diffusion of Innovations” in
1962.
• Daryl Conner published “ Managing at The Speed of
Change” in 1974
• Paul T. Kidd published “Agile Manufacturing: Forging New
Frontier” in 1994

SYSTEM ENGINEERING
LOGISTIC
Management
PROCU-
REMENT
Manage-
ment PRODUCTION
Management
MARKE-
TING
Manage-
ment
RESEARCH &
DEVELOPMENT
Management HUMAN
RESOURCE
Management
MAINTE-
NANCE
Manage-
ment
QUALITY
Management cross-cross-
functionalfunctional
Concept
Design
& Develop
Prototype
& Pilot
Launch
& Ramp
Production
Service &
Support
Phase-out
& Disposal
agileagileADVANTAGE
ADVANTAGE
ERP
ERP
HCM
HCM
CRM
CRM
SCM
SCM

SYSTEM ENGINEERING
•Optimized Production Technology
• Eliyahu Goldratt developed software of Optimized
Production Technology in 1970. He initiated Theory Of
Constraints. His books are “The Goal” (1984) and “The
Race” (1989). OPT is also known as synchronous
manufacturing.
• Financial measures are net profit, return on investment
and cash flow. OPT has three important criterias, i.e.
Troughput, Inventory, and Operating Expenses

SYSTEM ENGINEERING
TROUGHPUT INVENTORY OPERATING EXPENSES
NET PROFIT R.O.I. CASH FLOW

SYSTEM ENGINEERING
• Goldratt’s Rule :
• Do not balance capacity balance the flow.
• The level utilization of a nonbottleneck resource is not determined by its
own potential but by some other constraint in the system.
• Utilization and activation of a resource are not the same.
• An hour lost at a bottleneck is an hour lost for the entire system.
• An hour saved at a nonbottleneck is a mirage.
• Bottlenecks govern both throughput and inventory in the system.
• Transfer batch may not and many times should not be equal to the
process batch.
• A process batch should be variable both along its route and in time.
• Priorities can be set only by examining the system’s constraints. Lead
time is a derivative of the schedule.

SYSTEM ENGINEERING
THEORY OF CONSTRAINT VAT ANALYSIS
DRUM BUFFER ROPE

SYSTEM ENGINEERING
•Information System
• The development of information technology to support
operational and management becomes the driver of
information system development
• Information systems evolving from the smallest scope
help one task from one position to a very wide across
organization.
• System Development Life Cycle has three approach, i.e.
entity approach, process approach, and object-oriented
approach.
• Innovations in hardware, software and netware
technologies provide a good infrastructure for the
information system development.

SYSTEM ENGINEERING
•Information System

SYSTEM ENGINEERING
•Manufacturing Resources Planning (MRP II)
Business
Planning
Marketing
Planning
Aggregate
Planning
Distribution
Requirements
Planning
Resource
Requirements
Planning
Master
Production
Scheduling
Inventory
Management
Material
Requirements
Planning
Machine & Labor
Scheduling
Rough Cut
Capacity
Planning
Capacity
Requirements
Planning
Bill of
Material
Shop Floor
Control
Demand
Management

SYSTEM ENGINEERING
•Manufacturing Resources Planning (MRP II)

SYSTEM ENGINEERING
•Enterprise Resources Planning (ERP)

SYSTEM ENGINEERING
•Supply Chain Management (SCM)

Management
Science
Scientific
Management
Operations
Research
System
Engineering

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