Techniques of control in an industrial enterprise

Introduction

Control techniques are the tools a manager uses to measure performance, compare it with standards and correct deviations. Some are traditional, in use for a long time; others belong to a newer generation of planning and control tools. An industrial enterprise, such as a cement plant or an auto-component factory, has to control output, quality, costs, time and the performance of the business as a whole, so it uses a mix of both. They are grouped here by what they control.

Techniques for the shop floor

1. Statistical data. Averages, percentages, ratios and correlations of operating figures help control production, quality and inventory, by showing deviations from the standard so that action can be taken. In large plants, pieces are checked at random for quality, which is called sample checking.
2. Personal observation. The manager visits the operations and talks to the people whose work is controlled; some impressions can be gained only face to face, and a new worker is watched more closely than an experienced one.
3. Special reports and analysis. Where routine reports fall short, for example on a recurring breakdown, a group is assigned to investigate the problem and report on it.

Techniques for costs and finance

1. Budgetary control. A budget sets out, for a stated period, where resources will come from and how they will be used; actual performance is compared with the budgeted figures, variations are found and responsibility is fixed. It also makes people conscious of cost and performance, so labour, machines and materials are used well.
2. Break-even analysis. It shows the volume at which revenue equals total cost and how changes in fixed costs, variable costs, prices, volume and sales mix affect profit. Management can exercise control over the variable costs, though not over the fixed ones.
3. Standard costs alongside observation. Budgets, standard costs and statistical tools all help managerial control, but they work best alongside the manager's own observation of the operations.

Techniques for projects

Network techniques (PERT and CPM). A project, such as setting up a new production line, is broken into small activities arranged in a logical sequence and drawn as a network that shows which activities must be completed before others start. CPM marks the critical activities and concentrates control on them, and is applied where activity times are relatively well known; PERT uses probability to estimate activity times.

Techniques for overall performance

1. Internal (operational) audit. It reviews not only the accounts but policies, procedures, the use of authority and the effectiveness of methods, and recommends action to managers.
2. Ratio-based and other modern measures. Return on investment, ratio analysis, responsibility accounting, management audit and management information systems are named as the modern techniques of managerial control; of these, ratios such as gross profit, net profit and return on investment are calculated at periodic intervals to measure the company's performance.

Conclusion

No single technique is enough for an industrial enterprise. Shop-floor techniques control the process, financial techniques control costs, network techniques control project time, and audits and overall measures show whether the enterprise is meeting its objectives; used together they make control complete.