Application of branch and bound technique for 3 stage flow shop scheduling problem with transportation time

Industrial Engineering Letters www.iiste.org
ISSN 2224-6096 (print) ISSN 2225-0581 (online)
Vol 2, No.1, 2012

Application of Branch and Bound Technique for 3-Stage
Flow Shop Scheduling Problem with Transportation Time
Deepak Gupta* , Payal Singla, Shashi Bala
Department of Mathematics Maharishi Markandeshwar University Mullana, Ambala (India)
* E-mail of the corresponding author: guptadeepak2003@yahoo.co.in

Abstract
This paper provides a branch and bound technique to solve the three stage flow shop scheduling
problem including transportation time. Algorithm is given to find optimal or near optimal sequence,
minimizing the total elapsed time. This approach is very simple and easy to understand and, also
provide an important tool for decision makers to design a schedule for three stage flow-shop scheduling
problems. The method is clarified with the help of numerical illustration.

Keywords: Flow shop scheduling, Branch and Bound, Transportation time, Optimal sequence

1. Introduction:
Scheduling is the allocation of resources over time to perform a collection of task. It is an
important subject of production and operations management area. In flow-shop scheduling, the
objective is to obtain a sequence of jobs which when processed in a fixed order of machines, will
optimize some well defined criteria. Various researchers have done a lot of work in this direction.
Johnson (1954), first of all gave a method to minimise the makespan for n-job, two-machine
scheduling problems. The work was extended by Ignall and Scharge (1965),Lomnicki (1965), Palmer
(1965), Cambell (1970), Bestwick and Hastings (1976) ,Dannenbring (1977), Yoshida and Hitomi
(1979),Maggu and Dass (1981), Nawaz et al. (1983) , Sarin and Lefoka (1993) , Koulamas (1998) ,
Heydari (2003) ,Temiz and Erol(2004) etc. by considering various parameters. Yoshida and Hitomi
(1979) considered two stage flow shop problem to minimize the makespan whenever set up times are
separated from processing time. The basic concept of equivalent job for a job block has been
introduced by Maggu and Dass (1981). Heydari (2003) dealt with a flow shop scheduling problem
where n jobs are processed in two disjoint job blocks in a string consists of one job block in which
order of jobs is fixed and other job block in which order of jobs is arbitrary. Singh T.P. and Gupta
Deepak (2005) studied the optimal two stage production schedule in which processing time and set up
time both were associated with probabilities including job block criteria.

Lomnicki (1965) introduced the concept of flow shop scheduling with the help of
branch and bound method. Further the work was developed by Ignall and Scharge (1965),
Chandrasekharan (1992) , Brown and Lomnicki(1966) , with the branch and bound technique to the
machine scheduling problem by introducing different parameters. In many practical situations of
scheduling it is seen that machines are distantly situated and therefore, the transportation times are to
be considered. In this paper we have extended the study made by Lomnicki(1965) by considering the
transportation time. Hence the problem discussed here is wider and has significant use of theoretical
results in process industries.

2. Practical Situation:

Many applied and experimental situations exist in our day-to-day working in factories and industrial
production concerns etc. In many manufacturing companies different jobs are processed on various
machines. These jobs are required to process in a machine shop A, B, C, ---- in a specified order. When
the machines on which jobs are to be processed are planted at different places, the transportation time
(which includes loading time, moving time and unloading time etc.) has a significant role in production
concern.

3. Notations:

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We are given n jobs to be processed on three stage flowshop scheduling problem and we have used the
following notations:

Ai : Processing time for job i on machine A
Bi : Processing time for job i on machine B
Ci : Processing time for job i on machine C
Cij : Completion time for job i on machines A, B and C
ti : Transportation time of ith job from machine A to machine B.
gi : Transportation time of ith job from machine B to machine C.
Sk : Sequence using johnson’s algorithm
Jr : Partial schedule of r scheduled jobs
Jr′ : The set of remaining (n-r) free jobs

1. Mathematical Development:

Consider n jobs say i=1, 2, 3 … n are processed on three machines A, B & C in the order ABC. A job i
(i=1,2,3…n) has processing time Ai , Bi & Ci on each machine respectively, assuming their respective
probabilities pi , qi & ri such that 0 ≤ pi ≤ 1, Σpi = 1, 0 ≤ qi ≤ 1, Σqi = 1, 0≤ ri ≤ 1, Σri = 1. Let ti and gi
be the transportation time of machine A to machine B and machine B to machine C respectively. The
mathematical model of the problem in matrix form can be stated as :

Jobs Machine A Machine B Machine C

ti gi
i Ai Bi Ci

1 A1 t1 B1 g1 C1

2 A2 t2 B2 g2 C2

3 A3 t3 B3 g3 C3

- ---- -- --- --- ----

n An tn Bn gn Cn

Tableau – 1

Our objective is to obtain the optimal schedule of all jobs which minimize the total elapsed time, using
branch and bound technique.

5. Algorithm:

Step1: Calculate

(i) g1 = t ( J r ,1) +
∑ A + min( B + C )
i i i
′
i∈J r
′
i∈J r
(ii) g = t ( J , 2) + ∑ B + min(C )
2 r i i
′
i∈J r
′
i∈ jr
(iii) g t ( J ,3) + ∑ C
3= r i
′
i∈ jr
Step 2: Calculate g = max [g1, g2, g3].We evaluate g first for the n classes of permutations, i.e. for these
starting with 1, 2, 3………n respectively, having labelled the appropriate vertices of the scheduling tree
by these values.

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Step 3: Now explore the vertex with lowest label. Evaluate g for the (n-1) subclasses starting with this
vertex and again concentrate on the lowest label vertex. Continuing this way, until we reach at the end of
the tree represented by two single permutations, for which we evaluate the total work duration. Thus we
get the optimal schedule of the jobs.

Step 4: Prepare in-out table for the optimal sequence obtained in step 4 by considering the significant
transportation time between the machines.

6. Numerical Example:

Consider 5 jobs 3 machine flow shop problem. processing time of the jobs on each machine is given.
Our objective is to find optimal sequence of jobs to find the minimum elapsed time.

Jobs Machine A Machine B Machine C

ti gi
I Ai Bi Ci

1 15 4 20 5 16

2 25 7 10 8 5

3 10 6 12 3 12

4 18 9 15 7 18

5 16 2 25 6 3
Tableau – 2

Solution:Step1: Calculate

(i) g1 = t ( J r ,1) +
∑ A + min( B + C )
i i i
′
i∈J r
′
i∈J r
(ii) g = t ( J , 2) + ∑ B + min(C )
2 r i i
′
i∈J r
′
i∈ jr
(iii) g t ( J ,3) + ∑ C
3= r i
′
i∈ jr
For J1 = (1).Then J′(1) = {2,3,4}, we get

g1 = 43 , g2 = 37 & g3 = 43 and g = max(g1, g2, g3) = 43

similarly, we have LB(2)= 51 LB(3)= 52 LB(4)= 58

Step 2 & 3:Now branch from J1 = (1). Take J2 =(12). Then J′2={3,4} and LB(12) = 51

Proceeding in this way, we obtain lower bound values on the completion time on machine C as shown
in the tableau- 3

Step 4:Therefore the sequence S1 is 3-1-4-5-2 and the corresponding in-out table on sequence S1 is as
in table-4:

Hence the total elapsed time of the given problem is 115 units.

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References :

[1] Brown, A.P.G. and Lomnicki, Z.A. (1966), “Some applications of the branch and bound
algorithm to the machine scheduling problem”, Operational Research Quarterly, Vol. 17,
pp.173-182.

[2] Bestwick, P.F. and Hastings, N.A.J. (1976), “A new bound for machine scheduling”,
Operational Research Quarterly, Vol. 27, pp.479-490.

[3] Campbell, H.G., Dudek, R.A. and Smith, M.L. (1970) , “A heuristic algorithm for the n-job,
m-machine sequencing problem”, Management Science, Vol. 16, pp.630-637

[4] Chandramouli, A.B.(2005), “Heuristic approach for N job 3 machine flow shop scheduling
problem involving transportation time, break-down time and weights of jobs”, Mathematical
and Computational Application, Vol.10 (No.2), pp 301-305.

[5] Chander Shekharan, K, Rajendra, Deepak Chanderi (1992), “An efficient heuristic approach
to the scheduling of jobs in a flow shop”, European Journal of Operation Research 61, 318-
325.

[6] Dannenbring, D.G. (1977),“An evaluation of flowshop sequencing heuristics”, Management
Science, Vol. 23, No. 11, pp.1174-1182.

[7] Heydari (2003), “On flow shop scheduling problem with processing of jobs in a string of
disjoint job blocks: fixed order jobs and arbitrary order jobs”, JISSOR , Vol. XXIV , pp 1- 4.

[8] Temiz Izzettin and Serpil Erol(2004),“Fuzzy branch and bound algorithm for flowshop
scheduling”,Journal of Intelligent Manufacturing,Vol.15, pp449-454

[9] Ignall, E. and Schrage, L. (1965), “Application of the branch-and-bound technique to some
flowshop scheduling problems”, Operations Research, Vol. 13, pp.400-412.

[10] Johnson S. M. (1954), “Optimal two and three stage production schedule with set up times
included”. Nay Res Log Quart Vol 1, pp 61-68

[11] Koulamas,C.(1998),“A new constructive heuristic for the flowshop scheduling problem”,
European Journal of Operations Research’,Vol.105, pp.66-71.

[12] Lomnicki, Z.A. (1965), “A branch-and-bound algorithm for the exact solution of the three-
machine scheduling problem”, Operational Research Quarterly, Vol. 16, pp.89-100.

[13] Maggu & Das (1981), “On n x 2 sequencing problem with transportation time of jobs”, Pure
and Applied Mathematika Sciences, 12-16.

[14] Nawaz M., Enscore Jr., E.E. and Ham, I. (1983) , “A heuristic algorithm for the m-machine n-
job flowshop sequencing problem”, OMEGA International Journal of Management
Science, Vol. 11, pp.91-95.

[15] Palmer, D.S.(1965), “Sequencing jobs through a multi-stage process in the minimum total
time - a quick method of obtaining a near-optimum”, Operational Research Quarterly, Vol.
16,No. 1, pp.101-107.

[16] Park, Y.B. (1981), “A simulation study and an analysis for evaluation of performance-
effectiveness of flowshop sequencing heuristics: a static and dynamic flowshop model”,
Master’s Thesis, Pennsylvania State University.

[17] Sarin, S. and Lefoka, M. (1993), “Scheduling heuristics for the n-job, m-machine flowshop”,
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Vol 2, No.1, 2012

OMEGA, Vol. 21, pp.229-234.

[18] Singh, T.P., K, Rajindra & Gupta Deepak (2005), “Optimal three stage production schedule
the processing time and set up times associated with probabilities including job block
criteria”, Proceeding of National Conference FACM- (2005), pp 463-470.

[19] Yoshida and Hitomi (1979), “Optimal two stage production scheduling with set up times
separated”,AIIETransactions. Vol. II.pp 261-263.

Tables and Figures:

Table 3: lower bounds for respective jobs are as in tableau-3:

Table 4:In-out table on sequence S1 is as in tableau-4:

Job Machine A Machine B Machine C
ti
I In-out In-out gi In-out
Node Jr LB (Jr)

3 0 – 10 6 16 - 28 3 31 - 43
(1) 100

1 10 – 25 4 29 – 49 5 54 – 70 (2) 110

(3) 99
4 25 – 43 9 52 – 67 7 74 – 92
(4) 103

5 43 – 59 2 67 – 92 6 98 -101 (5) 103

Tableau- (31) 99 4
2 59 – 84 7 92 – 102 8 110 – 115
(32) 112

(34) 101

(35) 101

(312) 112
Tableau-3
(314) 99

(315) 100

(3142) 112

(3145) 99

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Vol 2, No.1, 2012

Empirical Analysis of Function Points in Service Oriented
Architecture (SOA) Applications

Khalid Mahmood,
Institute of Computing and Information Technology,
Gomal University, Pakistan
Khalid_icit@hotmail.com

M. Manzoor Ilahi
Comsats Institute of Information Technology
Islamabad, Pakistan
tamimy@comsats.edu.pk

Bashir Ahmad
Gomal University, Pakistan
bashahmad@gmail.com

Shakeel Ahmad,
D.I.Khan, Pakistan
Shakeel_1965@yahoo.com

Abstract:
Service Oriented Architecture (SOA) is an emerging area of software engineering, based on the
concept of “re-usable services” to support the development of rapid, economical and stable distributed
application even in heterogeneous environments. Function point is considered an accurate and well
established approach among its competitors to estimate the efforts, size and functionality of software
development projects. Estimating the cost, size and efforts for SOA application is a difficult task due to
its diverse nature and loose coupling behavior, which results in an inaccurate estimate to measure the
efforts, size and functionality of SOA applications. This research paper explores the shortcomings of
function point estimation technique and suggests calibration in its value adjustment factor to properly
map the characteristics of SOA applications. A Work flow model is proposed to estimate the efforts
and functionality of SOA application to consider the Service development efforts as well as Service
Integration efforts. Empirical Results shows considerable improvements in estimation process to
reduce the error percentage in performance measures like Magnitude of relative error, Mean Magnitude
of relative error and Root Mean Square Error.

Key Words: Service Oriented Architecture (SOA), Integration Efforts, Efforts Estimation,
Function Point Analysis,

1. Introduction:
“Service Oriented Computing (SOC)” (Michael 2006) is a contemporary software engineering
paradigm, construct on the notion of “service-logic” through which a kind of software development can
be reached which is fast, low cost, and rapid, economical and up to the mark even in diverse
environments. “Service Oriented Architecture (SOA)” is based on “service” logic, where the
components come together to form a group of services, which are “loosely coupled” that fulfills the
purpose and caters for the requirement of user and business process. SOA applications are able to assist

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all kinds of business applications and agile processes particularly in the domain of web services,
sanitation, executive institutions of a country, education and on demand business.

1.2. Service

“A service is an implementation of a well defined piece of business functionality, which is
discoverable through published interface and used by service consumers when building different
applications and business process” (Zdravko 2009).

1.3. SOA Entities and Characteristics

“Service Oriented Architecture” is an architectural paradigm that incorporates a structure of
coordination among the major functional components, where the “service consumer” interacts
with “service provider” to locate a service which matches it requirement by a process of
exploring for “service registry”.

Figure 1.1 Service Oriented Architecture Entities Conceptual Model (James 2003)

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“Service Oriented Architecture” lies down some particular rules and features the application of which
is mandatory for development of service oriented architecture applications (Bieber 2001).

• Services are self discoverable and dynamically bound
• Services are self contained and modular
• Services are loosely coupled.
• Services are contractual.
• Services are stateless.
• Services are interoperable.
• Services have network addressable interface.
• Services are coarse grained.
• Services are autonomous.
• Services are reusable entities.
• Services are abstract.

2. Effort estimation techniques

“The National Estimating Society (Boehm 1998) has defined Cost Estimating as: The art of
approximating the probable cost of something based on information available at the time”.

2.1 Function Point Analysis (FPA)

Initially function point counting method consist of four basic components and ten “general system
characteristics”, in 1983 modification to function point to increase the basic components to five with
the total of fourteen “general system characteristics” instead of ten. In 1984 (ifpug 1999) an
organization namely “International Function Point User Group (IFPUG)” was established to uniform
the counting standards and advancement in the function points. A number of variations to the actual
function points have been made by some practitioners and Mark-II function points majorly used in
Britain, 3D functions points developed by Boeing, COSMIC full function points, De-marco function
points and feature function points have been developed (David 2006). But function points developed by
Albrecht are used today and according to “International Software Bench Mark Standards Group”
(ISBSG) completed project database almost 90% projects are measured through function points
(Christopher 2005). In function point analysis fourteen General System Characteristics (GSCs) are used
to construct a Value adjustment factor (VAF) with which the basic function point is adjusted. Although
the GSC and VAF are criticized on both theoretical as well as practical grounds but they are used by
many practitioners (Zdravko 2009). Author suggests that for SOA environment some GSCs need
modifications to truly describe the SOA projects as well as inclusion of new characteristics such as
Integration efforts to provide accurate estimates.

3. Empirical Analysis of Function Points in SOA:

As SOA is implemented mostly by the concept of web services (Francisco 2001), and web services
have special characteristics. Function point estimation method was developed almost 31 years ago. Due
to technological and methodological advancement many new approaches have been introduced which
has changed the nature of software development. Though Function Point is adjusted with most of these
changes but recent software specifications do not perfectly meet FP metrics. Function points weight
system and its general system characteristics are mostly the same, so it needs modification (Abdullah
2005) as well as to solve integration issue inclusion of new characteristic namely “Service Integration
Efforts”, as SOA architecture is composed of a mesh of web services. The table listed below describes
the proposed GSC which should be modified.
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Table 3.1 Proposed General System Characteristics
S.No. General System Description Modification
Characteristics Needed: Yes
Not needed: No
GSC1 Data communications In SOA communication b/w Yes
services is not done through
RPC, but SOA supports a
number of protocols such as
UDDI, XML, SOAP, JSON
used for communication
GSC 2 Distributed data In SOA services are Yes
processing distributed but controlled
centrally through service
registry
GSC 3 Performance Performance measured in Yes
terms of resource utilization,
error handling and process
optimization
GSC 4. Heavily used Measurement in terms of Yes
configuration Software/Hardware
Implementation
GSC 5 Transaction rate How frequently are No
transactions executed daily,
weekly, monthly, etc.?
GSC 6 On-Line data entry What percentage of the No
information is entered On-
Line?
GSC 7 End-user efficiency Was the application designed No
for end-user efficiency?
GSC 8 On-Line update How many ILF’s are updated No
by On-Line transaction?
GSC 9 Complex processing Does the application have No
extensive logical or
mathematical processing?
GSC 10 Reusability Was the application developed No
to meet one or many user’s
needs?
GSC11 Installation ease How difficult is conversion No
and installation?
GSC 12 Operational ease How effective and/or
automated are start-up, back
up, and recovery procedures?
GSC 13 Multiple sites In SOA services are developed No
to be accessed by a number of
users at various sites. Instances
of single application accessed
at various locations at same
time.
GSC 14 Facilitate change Was the application No

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specifically designed,
developed, and supported to
facilitate change?
GSC 15 Integration Services Whether the application needs Newly added
other services to be integrated Characteristics
to perform its functions

4. IMPLEMENTATION

In order to perform the empirical analysis of function points in service oriented architecture
applications, and to verify and authenticate the Proposed Work Flow Model three case studies are
selected. First Case study describes the Course Registration System, secondly describes the Online
Resume Bank (ORB) and the third selected case study is Online Banking System. These above cited
case studies are developed by two teams of ICIT students as a final project for the fulfillment of their
Bachelor degree in Computer Science. In order to estimate efforts one team has estimated it through
function point estimation technique, where as the second team has estimated the efforts through
proposed modified function point estimation. All these projects are built on the concept of Service
Oriented Architecture using XML and ASP.Net as a source code languages. Description of the case
studies is provided below. Results are evaluated first empirically through Magnitude of Relative error,
Root Mean Square Error and statistically through Correlation and Regression Analysis. Results are
discussed in the next chapter.

4.1 Case study 1: Online Resume Bank

Online Resume Bank (ORB) provides a set of services to its users interested in applying for a number
of jobs offered by a particular organization. User Register itself through signup service. Resume
Builder service offers an easy way to build user profile, Online Job Application service is provided to
apply for the published jobs by the system. Current status of the application and application tracking
facility is provided. Short listed candidates can print the interview call letter, and other relevant
information through this system. This software application is developed on the concept of service
oriented architecture frame work by using ASP.Net, XML and Microsoft SQL Server as the
programming language tool.

4.2 Case Study 2: Course Registration System

Course Registration System provides services to students, professors and registrars. Using this system a
student can register itself into different course’s and view grades reports submitted by Professor for a
particular course. Professor can select a course to teach for current semester and submit grades.
Whereas a Registrar maintains student as well as professor information and close registration through
which information is provided to billing system. The services provided by the Course registration
system are provided in the table given below along with their operations. This software application is
developed on the concept of service oriented architecture frame work by using ASP.Net, XML and
Microsoft SQL Server as the programming language tool

4.3 Case Study 3: Online Banking System

Online Banking System Provides a variety of services to its Customers. These services include Account
Opening Service, Transaction Services, online Funds transfer, online account status checking service,
online Loan Application submission and displaying Foreign Currency rates. This software application
is developed on the concept of service oriented architecture frame work by using ASP.Net, XML and

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Microsoft SQL Server as the programming language tool. Services provided by the system are listed in
the table given below.

5. Results and discussion

Project Description Estimated Estimated Actual MRE1 MRE2
No Efforts Efforts Efforts (Proposed) (FP)
through through
Function Proposed
Points Function
Points
P1 Online Resume 201 222 256 0.13 0.21
Bank
P2 Course 204 218 240 0.09 0.15
Registration
System
P3 Online Banking 237 254 283 0.10 0.16
System
MMRE 0.11 0.18

Root Mean Square Error for Proposed and Actual Estimates

Project No Description Estimated Efforts Estimated Efforts Actual Efforts
through Function through Proposed
Points Function Points
P1 Online Resume 201 222 256
Bank
P2 Course 204 218 240
Registration
System
P3 Online Banking 254 283 152
System
Root mean Square Error (RMSE) Proposed 16.60
Root mean Square Error (RMSE) Function Points 26.54

DISCUSSION

Magnitude of relative error describes that proposed estimates are closer to actual efforts as compared to
function points estimates. For Project P1 the MRE (Jaswinder 2008) is 13 % as compared to 21%,
which describes that MRE for proposed has lesser error value than Function point estimates. For
Project P2 MRE is 9 % as compared to 15%, and finally for Project P3 MRE is 0.10 % as compared to
Function point MRE 0.16 %. Mean Magnitude of relative error for proposed effort estimation is 0.11
where as for function point estimation it is 0.18, which presents 7% difference among the effort
estimation techniques.
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6. Conclusion.
Service oriented Architecture (SOA) is a promising new area of software engineering, where services
are combined together to form a design structure, which not only fulfills the requirements of users but
also support the business processes to compete with its competitors. On the other hand Function Point
estimation technique is recognized as an accurate estimation technique amongst its competitors, the
calibration of its Value Adjustment Factor, and consideration of Integration efforts shows improvement
in its estimation accuracy, and inclusion of new factors in its GSC’s, proves that now it properly
address SOA characteristics. Results shows the when effort estimation is performed through proposed
work flow model the MMRE was 11 %, and 18 % from function point estimation, which shows the
proposed work flow model produce lesser error as compared to function point estimation with a
difference of 7%. Root mean square error (RMSE) also presents a notable difference in the estimation
efforts. Correlation analysis also shows that correlation coefficient (r) has more accurate value as
compared to its counterpart. Moreover the Integration efforts were some time ignored, due to its
diverse behavior and loose coupling nature, by considering and addressing this important factor will
capable the developers to provide accurate estimate for SOA applications to plan schedule, resources
and men power for software development.

References:

Michael P. Papazoglou et. al. (2006) “Service-Oriented Computing Research Roadmap” Dagstuhl
Seminar Proceedings 05462, 2006 [online]
Available: http://drops.dagstuhl.de/opus/volltexte/2006/524

Zdravko Anguelov, (2009) “Architecture framework in support of effort estimation of legacy systems
modernization towards a SOA environment” (Chapter 2) [online] Available: http://www.ewi.tudelft.n

James McGovern et. al. (2003) “Java Web service Architecture”, Morgan Kaufmann Publishers.

Bieber, Carpenter et. al. (2001) “Jini Technology Architectural Overview”, Sun Microsystems, [online]
Available: http://www.sun.com
Barry Boehm, Chris Abts (1998), University of Southern California, Los Angeles, CA 90089-0781,
1998, Software Development Cost Estimation Approaches – A Survey”

Function Point Counting Practices Manual release 4.1. (1999) [online]
Available: http://www.ifpug.org

David Longstreet (2002), “Function Point Analysis training course”, [online]
Available: http://www.softwaremetrics.com

Christopher J. Lokan, (2005), “Function Points”, School of Information Technology and Electrical
Engineering, UNSW@ADFA, Northcott Drive, Canberra ACT 2600, Australia,

Francisco Curbera et. al. (2001) “Web services: Why and How”, IBM T.J. Watson Research Center,
August, 2001.

David Longstreet (2005) “Fundamentals of Function Point Analysis”, Software Development
Magazine [online] Available: http://www.softwaremetrics.com, 2005.

Mohammad Abdullah Al-Hajri (2005), “Modification of Standard Function Points Complexity Weights
System”, The Journal of Systems and Software 74 (2005), 195-206.

Jaswinder kaur et. al. (2008) “Comparative Analysis of the Software Effort Estimation
Models”, World Academy of Science, Engineering and Technology 46, 2008.

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Fuzzy Logic Analysis Based on Inventory Considering
Demand and Stock Quantity on Hand
Bharat Chede*, C.K.Jain, S.K.Jain, Aparna Chede
Department of Mechanical Engineering, Mahakal Institute of Technology and Management, Ujjain
* Email of the corresponding author : bharat_chede@rediffmail.com

Abstract

The approach is based on fuzzy logic analysis as it does not require the statement and solutions of
complex problems of mathematical equations. Here consideration is inventory control problem
solutions, for which demand values for the stock and it quantity-on-hand in store is proposed. Expert
decisions are considered for developing the fuzzy models, and the approach is based on method of
nonlinear dependencies identifications by fuzzy knowledge. The linguistic variables are considered for
the membership functions. Simple IF-Then rules are used with expert advices.

Keywords:- Inventory control, Fuzzy logic, Membership Function, Defuzzification.

1. Introduction

The most important problem for the management is the minimization of the inventory storage cost in
enterprises and trade stocks including raw materials, stuff, supplies, spare parts and products. The
models of this theory are built according to the classical scheme of mathematical programming: goal
function is storage cost; controllable variables are time moments needed to order (or distribute)
corresponding quantity of the needed stocks. Construction of such models requires definite
assumptions, for example, of orders flows, time distribution laws and others.
On the other hand, experienced managers very often make effective administrative decisions on the
common sense and practical reasoning level. Therefore, the approach based on fuzzy logic can be
considered as a good alternative to the classical inventory control models. This approach elaborated in
works requires neither complex mathematical models construction no search of optimal solutions on
the base of such models. It is based on simple comparison of the demand for the stock of the given
brand at the actual time moment with the quantity of the stock available in the warehouse. Depending
upon it inventory action is formed consisting in increasing or decreasing corresponding stocks and
materials.
“Quality” of control fuzzy model strongly depends on “quality” of fuzzy rules and “quality” of
membership functions describing fuzzy terms. The more successfully the fuzzy rules and membership
functions are selected, the more adequate the control action will be.
However, no one can guarantee that the result of fuzzy logical inference will coincide with the correct
(i.e. the most rational) control. Therefore, the problem of the adequate fuzzy rules and membership
functions construction should be considered as the most actual one while developing control systems
on fuzzy logic. In this article it is suggested to build the fuzzy model of stocks and materials control on
the ground of the general method of nonlinear dependencies identification by means of fuzzy
knowledge bases. The grounding for the expediency to use this fuzzy approach relative to inventory
control is given in the first section of the article. The main principles of the identification method
applied for modeling are brought forward. The inventory control model is constructed on the basis of
fuzzy knowledge base. The problems of fuzzy model tuning and numerical example illustrating
application of training data in tuning problem are described. Formulation of conclusions and directions
for further research are defined in the final section.

2. Method of identification

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The method of nonlinear objects identification by fuzzy knowledge bases serves as the theoretical basis
for the definition of the dependency between control actions and the current state of the control system.
Originally this method was suggested for medical diagnosis problems solution, and then it was spread
on arbitrary “inputs – output” dependencies.
The method is based on the principle of fuzzy knowledge bases two-stage tuning. According to this
principle the construction of the ”inputs – output” object model can be performed in two stages, which,
in analogy with classical methods, can be considered as stages of structural and parametrical
identification. The first stage is traditional for fuzzy expert systems. Formation and rough tuning of the
object model by knowledge base construction using available expert information is accomplished at
this stage. However, as it was mentioned in the introduction, no one can guarantee the coincidence of
the results of fuzzy logic inference and correct practical decisions. Therefore, the second stage is
needed, at which fine tuning of the model is done by way of training it using experimental data. The
essence of the fine tuning stage consists in finding such fuzzy IF-THEN rules weights and such fuzzy
terms membership functions parameters which minimize the difference between desired (experimental)
and model (theoretical) behavior of the object.

3. Fuzzy model of control

Let us present the inventory control system in the form of the object with two inputs ( x1( t ) , x2( t ) )
and single output ( y( t ) ), where: x1( t ) is demand, i.e. the number of units of the stocks of the given
brand, which is needed at time moment t; x2( t ) is stock quantity-on-hand, i.e. the number of units of
the stocks of the given brand which is available in the warehouse at moment t; y( t ) – inventory action
at moment t, consisting in increasing decreasing the stocks of the given brand.[5] System state
parameters x1( t ) , x2( t ) and inventory action y( t ) are considered as linguistic variables[1], which are
estimated with the help of verbal terms on five and seven levels:

x1 ( t ) = Falling(F), Decreased(D), Steady(S), Increased(I) and Rise up(R)

x2 ( t ) = Minimal(M), Low(L), adequately sufficient (A), high (H) and excessive (E)

y ( t ) = To decrease the stock sharply (D1), To decrease the stock moderately (D2),

To decrease the stock poorly (D3), do nothing (D4), To increase the stock poorly (D5)

To increase the stock moderately (D6), To increase the stock sharply (D7)

Let us note that term “adequately sufficient” in variable x2(t) estimation depicts the rational quantity of
the stock on the common sense level and does not pretend to the mathematically strong concept of
optimality which envisages the presence of goal function, controllable variables and area of constraints.
The Figure (1) is defined by expert way and depicts the complete sorting out of the ( 5× 5 = 25 ) terms
combinations in the triplets x1( t ), x2( t ), y( t ) . Grouping these triplets by inventory actions types, we
shall form fuzzy knowledge base system in following figure (2).
This fuzzy knowledge base defines fuzzy model of the object in the form of the following rules:
IF demand is falling AND stock is excessive, OR demand is falling AND stock is high, OR demand is
decreased AND stock is excessive, THEN it is necessary to decrease the stock sharply;
IF demand is falling AND stock is adequately sufficient, OR demand is decreased AND stock is high,
OR demand is steady AND stock is excessive, THEN it is necessary to decrease the stock moderately;
IF demand is falling AND stock is low, OR demand is decreased AND stock is adequately sufficient,
OR demand is steady AND stock is high, OR demand is increased AND stock is excessive, THEN it is
necessary to decrease the stock poorly;
IF demand is falling AND stock is minimal, OR demand is decreased AND stock is low, OR demand is
steady AND stock is adequately sufficient, OR demand is increased AND stock is high, OR demand is
rising up AND stock is excessive, THEN do nothing;
IF demand is decreased AND stock is minimal, OR demand is steady AND stock is low, OR demand is
increased AND stock is adequately sufficient, OR demand is rising up AND stock is high, THEN it is
necessary to increase the stock poorly;
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IF demand is steady AND stock is minimal, OR demand is increased AND stock is low, OR demand is
rising up AND stock is adequately sufficient, THEN it is necessary to increase the stock moderately;
IF demand is increased AND stock is minimal, OR demand is rising up AND stock is minimal, OR
demand is rising up AND stock is low, THEN it is necessary to increase the stock sharply.
By definition membership function µ T (u) characterizes the subjective measure (in range of [0,1]) of
the expert confidence in crisp value u corresponding to a fuzzy term Т.

4. Fuzzy membership functions

For simplification MATLAB is used as tool as consideration of Input membership function as Demand
(x1(t)) and In stock Quantity on Hand(x2(t)) and output as (y(t)) for this various linguistic variables are
taken into consideration and for that Gaussian bell shaped (Gaussian) membership functions, which
parameters allow to change the form of the function, are the most widely practiced.
For Defuzzification i.e. to convert the linguistic value into the crisp output the Centroid method is used
with Mamdani approach.

5. Results

The fuzzy logic approach to the above model give the most appropriate result in term of inventory as
we can get the value for any input in the system to optimize the inventory mentioned in the Table no 9
which provide the rule viewer for inventory control as one value mentioned in the rule viewer is as
input 1 is 41.5 and input 2 is 160 the output i.e inventory should be 0.38 for these values.

6. Conclusion

The approach to inventory control problems solution, which uses the available information about
current demand values for the given brand of stock and it quantity-on-hand in store, is proposed. The
approach is based on the method of nonlinear dependencies identification by fuzzy knowledge bases. It
was shown that fuzzy model data sample allows approximating model control to the experienced expert
decisions.
The advantage of the approach proposed consists in the fact that it does not require the statement and
solution of the complex problems of mathematical programming. Expert IFTHEN rules are used
instead which are formalized by fuzzy logic and tuned with the help of data.
Further development of this approach can be done in the direction of the adaptive (neuro fuzzy)
inventory control models creation, which are tuned with the acquisition of new experimental data about
successful decisions. Besides that with the help of supplementary fuzzy knowledge bases factors
influencing the demand and quantity-on-hand values (seasonal prevalence, purchase and selling
praises, delivery cost, plant-supplier power and others) can be taken into account.
The approach proposed can find application in the automated management systems of enterprises and
trade firms. It can also be spread on the wide class of the optimal control problems in reliability and
complex systems maintenance.

References:-

Boute R, Lambrecht M and Lambrechts O, (2004), “Did Just-In-Time management effectively decrease
inventory ratios in Belgium?”, Tijdschrift voor Economie en Management, Vol. XLIX (3), pp.441-456
Dutta, P., Chakraborty, D. and Roy, A. R. (2007), “Continuous review inventory model in mixed fuzzy
and stochastic environment”, Applied Mathematics and Computation, 188, 970–980.
Hedjar, R. (2008), “Fuzzy control of periodic-review state-dependent production systems with
unknown deterioration rate”, International Journal of Operational Research, 3(6), 632-642.
Ioannidis.S and Tsourveloudis,N.C.(2006),“Fuzzy Techniques in Scheduling of Manufacturing
Systems”, Fuzzy Applications in Industrial Engineering , Springer Series: Studies in Fuzziness and Soft
Computing, vol. 201, ISBN 3-540-33516-1,

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Venkataraman, P. (2009), “Applied Optimization with MATLAB Programming”, John Wiley, New
York: Rochester.
Zadeh L. (1976), “The Linguistic Variable Concept and Its Application to Approximate Decision
Making”, Moscow Mir Publication 176 p. - (In Russian)
Zimmermann H.J and Zysno P.(1980), “Latent connectives in human decision making”, Fuzzy Sets
Syst., vol. 4, pp. 37–51, .

First Author. Bharat Chede has received Bachelor’s degree from Amravati University, India and
Masters Degree in Mechanical Engineering (Production Engineering) from Shivaji University, India,
He is currently pursuing PhD from Rajiv Gandhi Proudyogiki Vishwavidyalaya Bhopal, India. He is
working as Head of Department (Mechanical Engineering) at Mahakal Institute of Technology and
Management Ujjain India. His Current area of research is Optimization in manufacturing techniques
using fuzzy logics.
Second Author. Dr C.K.Jain Phd in Production Engineering from IIT Rourkee. A renowned
academician, was responsible for making trendsetting transformations during his last stint as Principal,
UEC. Having received a Gold Medal in M.Tech and an award winning research scholar during his
PhD. His Current area of research is Casting methods optimization.
Third Author. Dr S.K.Jain. Phd from APS university Rewa India. He is principal Ujjain Engineering
College Ujjain, India . His current areas of research are Fuzzy logic Technique in Engineering
Fourth Author. Aparna Chede has received Bachelors and Masters Degree in Mechanical
Engineering from Rajiv Gandhi Proudyogiki Vishwavidyalaya Bhopal, India. She is currently working
as Lecturer in Mechanical Engineering at Mahakal Institute of Technology and Science Ujjain India.
Her current areas of research are Industrial Engineering techniques.

Functional dependency

y( t ) = f ( x1( t ),x2( t ))

x2(t)

E D1 D1 D2 D3 D4

H D1 D2 D3 D4 D5

A D2 D3 D4 D5 D6

L D3 D4 D5 D6 D7

M D4 D5 D6 D7 D7

F D S I R

x
1(t)

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Fig (1) Dependencies between parameters and inventory actions

IF Then

Demand х1 (t) Stock quantity-on-hand х2(t) Inventory action у(t)

F E

F H D1

D E

F A

D H D2

S E

F L

D A D3

S H

I E

F M

D L

S A D4

I H

R E

D M

S L D5

I A

R H

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Vol 2, No.1, 2012

S M

I L D6

R A

I M

R M D7

R L

Figure (2) Grouping of Triplet as fuzzy Knowledge base system

Linguistic assessment Parameter

Falling(F) 1.15

Decreased(D) 34.51

Steady(S) 105

Increased(I) 170.1

Rising up(R) 199.1

Figure (3) Input membership function parameter of variable x1(t) Demand

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Linguistic Variable Parameter

Minmal(M) 75.09

Low(L) 88.12

Adequately sufficient(A) 125

High (H) 157

Excessive(E) 168

Figure (4) Input Membership Functions for In stock quantity on hand

Figure(5) Output Membership Functions for Inventory Models

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Figure(6) Rule base editor for inventory control

Figure (7) Defuzzfication Apporach

Figure (8) Surface Viewer for inventory control

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Figure (9) Rule Viewer for Inventory Control

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Vol 2, No.1, 2012

Growth of Industrial Production in Selected Indian
Manufacturing Industries: Is It Productivity Driven or
Input Accumulated?

Sarbapriya Ray
Dept. of Commerce, Shyampur Siddheswari Mahavidyalaya,
University of Calcutta,West Bengal, India.
Tel:+91-33-9433180744,E-mail:sarbapriyaray@yahoo.com

Abstract:
The present article attempts to examine the contribution of inputs and total factor productivity growth
to the growth of output by considering the aggregate manufacturing sector and seven selected
manufacturing industries of India during the period 1979-80 to 2003-04. Major findings of the study
indicate that output growth in the selected Indian manufacturing industrial sectors is driven mainly by
inputs accumulation while the contribution of total factor productivity growth remains either minimal
or negative. The growth rate of total factor productivity in almost all the industries under our study is
gradually declining, especially during the post-reforms period. The change in pattern of sources of
output growth may have taken place due to liberalization policies and structural reforms undertaken
during the 1990s.
Key words: Growth, productivity, input, manufacturing, industry, India.

1. Introduction:
India has been adopting a highly protective industrial and foreign trade regime since 1951. The
liberalisation of Indian economy initiated slowly in the 1980's and key economic liberalisations via
structural adjustment programs began from 1991. By virtue of this programme, intensive charges have
been made in industrial policy of India Government. Relaxing of licensing rule, reduction tariff rates,
removal of restrictions on import etc are among those which have been initiated at early stage. The
policy reforms had the objectives to make Indian industries as well as entire economy more efficient,
technologically up-to-date and competitive. This was done with the expectation that efficiency
improvement, technological up-gradation and competitiveness would ensure Indian industry to achieve
rapid growth. In view of greater openness of Indian economy due to trade liberalization, private sector
can build and expand capacity without any regulation.Earlier,the protective regime not only prohibited
entry into industry and capacity expansion but also technology, output mix and import content. Import
control and tariff provided high protection to domestic industry. There was increasing recognition by
the end of 1980’s that the slow and inefficient growth experienced by Indian industry was the result of
a tight regulatory system provided to the Indian industry.
The logic that manufacturing industries play a special role in the growth process involves two related
propositions: (i) that manufacturing activity contributes to overall growth in ways not reflected in
conventional output measures; and (ii) that this growth premium is larger in the case of manufacturing
relative to its output share than for other sectors of the economy. According to Cornwall (1977), the
manufacturing sector would act as engine of growth for two reasons –it displays dynamic economies of
scale through “learning by doing” (Young, 1928, Kaldor, 1966,1967).With increased output, the scope
for learning and productivity increase becomes larger. Thus, the rate of growth of productivity in
manufacturing will depend positively on the rate of growth of output in manufacturing (called as the
Kaldor-Verdoorn law). Secondly, manufacturing sector leads to enhanced productivity growth through
its linkages with other manufacturing and non-manufacturing sectors.
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1.1. Manufacturing as an Engine of Growth – Arguments:
The development path as followed by a large number of developed countries is from agriculture to
manufacturing to services. The productivity being higher in the manufacturing sector and the sector
being more dynamic, the transfer of labour / resources from agriculture to manufacturing would
immediately lead to increased productivity (termed as a structural change bonus), thereby contributing
to growth. Moreover, there exists opportunities for capital accumulation and for embodied and
disembodied technological progress which act as an engine of growth (Cornwall, 1977). Capital
accumulation can be more conveniently realized in spatially concentrated manufacturing than in
spatially dispersed agriculture. Technological advance is concentrated in the manufacturing sector and
diffuses from there to other economic sectors such as the service sector. The manufacturing sector also
offers important opportunities for economies of scale in large number of key industries like steel,
cement, aluminium, paper, glass, chemical, fertilizer etc which are less available in agriculture or
services. Incidentally, due to the increasing use of ICTs in service sectors and their inherent
characteristic of negligible marginal cost, these economies are no longer restricted to manufacturing.
Linkages in terms of both forward and backward and spillover effects within manufacturing and other
sectors are stronger for manufacturing than for agriculture or mining. Increased final demand for
manufacturing output will persuade increased demand in many sectors supplying inputs. In addition to
these backward linkages, Cornwall (1977) emphasizes that the manufacturing sector also has numerous
forward linkages, through its role as a supplier of capital goods (and the new technologies that these
goods embody). Lastly, Engel’s law states that as per capita incomes rise, the share of agricultural
expenditure in total expenditure declines and the share of expenditure on manufactured goods
increases. The implication of this is that if countries specialize in agricultural and primary products,
they will not gain from expanding world markets for manufacturing goods.
[Insert Table-1 here]

Table 1 shows that annual growth rate of industrial production is gradually increasing in Indian
manufacturing over years as Index number of Industrial Production depicts so. Against this background
information, this article aims at examining whether growth in industrial output of selected
manufacturing industries of our research consideration like –Iron&steel, aluminium, cement, glass,
fertilizer, chemical and paper and pulp etc. is as a result of productivity growth or input accumulation.
Results obtained through such an exercise are expected to help identify the character of growth path
followed by the manufacturing sector of India in the context of Krugman’s thesis. For that purpose, it
considers the data of a seven energy intensive industries mentioned above.
Rest of the paper is organised as follows. Section 3 presents methodology and data source, while
Section 4 gives empirical results. Major conclusions of the analysis are presented in Section 5.
3.Methodology and data source:
3.1. Econometric model:
This paper covers a period of 25 years from 1979 -80 to 2003-04.The entire period is sub-divided into
two phases as pre-reform period (1979 -80 to 1991-92) and post-reform period (1991-92 to 2003-04).
The partial factor productivity has been estimated by dividing the total output by the quantity of an
input. In this paper, TFPG is estimated under three input framework applying translog index of TFP as
below: -

∆Ln TFP(t) =
∆Ln Q(t) –[ SL + SL(t-1) x ∆Ln L(t)] – [SK(t) + SK(t-1) x ∆Ln K(t)] – [SM(t)+ SM(t-1) x ∆LnM(t)]
2 2 2
Q denotes gross output, L Labour, K Capital, M material including energy input.

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∆Ln Q(t) = Ln Q(t) – Ln Q(t – 1)
∆Ln L(t) = Ln L(t) – Ln L(t – 1)
∆Ln K(t) = Ln K(t) – Ln K(t – 1)
∆LnM(t) = Ln M(t) – Ln M(t – 1)
SK, SL and SM being income share of capital, labor and material respectively and these factors add up to
unity. ∆Ln TFP is the rate of technological change or the rate of growth of TFP.
Using the above equation, growth rates of total factor productivity have been computed for each year.
These have been used to obtain an index of TFP in the following way. Let Z denote the index of TFP.
The index for the base year, Z(0), is taken as 100. The index for the subsequent years is computed
using the following equation:
Z(t) / Z( t-1) = exp[∆LnTFP(t)].
The translog index of TFP is a discrete approximation to the Divisia index of technical change. It has
the advantage that it does not make rigid assumption about elasticity of substitution between factors of
production (as done by Solow index). It allows for variable elasticity of substitution. Another
advantage of translog index is that it does not require technological progress to be Hicks-neutral. The
translog index provides an estimate of the shift of the production function if the technological change is
non-neutral.
After that ,growth of output of those industries under our research consideration has been compared
with productivity growth and inputs accumulation to be acquainted with nature of contribution of
productivity growth and inputs accumulation in output growth of the industries.
3.2.Data source:
The present study is based on industry-level time series data taken from several issues of Annual
Survey of Industries, National Accounts Statistics, CMIE and Economic survey, Statistical Abstracts
(several issues), RBI Bulletin on Currency and Finance, Handbook of Statistics on Indian Economy,
Whole sale price in India prepared by the Index no of office of Economic Advisor, Ministry of Industry
etc covering a period from 1979-80 to 2003-04.
4. Empirical results regarding Growth in output, employment, partial factor productivity and
total factor productivity growth:
The reforms initiated in 1990s added momentum to enhance the competition, productivity and
efficiency. Productivity is a relationship between real output and input; it measures the efficiency with
which inputs are transformed into outputs in the production process. Increased productivity is related
with more output produced with either the same amount of inputs, or with fewer inputs, or with little
increment in inputs. Higher productivity growth is associated with increase in capital intensity, labour
productivity and capital productivity and material productivity. Empirical evidence suggests that
productivity in turn reduces unit cost; enhance product quality, increase workers wage, and offers
returns on investment. Productivity is the prime determinant of a country’s level of competitiveness,
higher standard of living and sustained growth in the long run. The present section is an attempt to
analyze the response of energy intensive industries in India in terms of inputs and output growth as
well as in terms of total factor productivity growth to new policy initiatives started in 1991 at aggregate
level.
Therefore, in this section, we have tried to measure total factor productivity growth, partial
productivity growth in respect of material, labour and capital inputs. Partial productivity indices
defined as the real output per unit of any particular real input like labour, material or capital, are the
simplest and most intuitive measures of productivity. One point is to be noted in the context of partial
productivity analysis is that it tends to depend, to a great extent, on capital intensity.

In cement industry, broad variations in the magnitude of TFPG are found in the estimation. The
estimated TFPG of Indian cement sector at the aggregate reveals contradictory rates of TFPG growth
(both positive and negative) and it varies over years within the same sector. But, our aggregate
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analysis also depicts sign of declining trend in average TFP growth rate during post-reform period as
compared to pre-reform period. It is evident that the estimated average growth rate of TFP at aggregate
level in cement sector for the period 1979-80 to 1991-92 is 1.44 percent p.a whereas post-reform period
covering 1991-92 to 2003-04 in our study witnessed a further decreasing growth of 1.013 percent p.a.,
a noticeable decline from growth rate as in pre-reform period. The trend growth rate of TFP in Indian
cement sector is assessed to be -0.0043 percent for the entire period 1979-80 to 2003-04 (estimated
from semi-log trend) implying average overall annual deceleration of -0.0043 percent p.a. On the
whole, impact of economic reforms on TFPG at aggregate level was adverse as the average rate of
TFPG estimated in the pre-reform period furthermore decreased in post-reform period. Moreover,
difference between mean TFPG of two periods is statistically significant at 0.05 levels thereby
indicating that average TFPG between two periods are statistically different. The estimated TFPG rate
at the aggregate level of Indian aluminium industry for the entire period, 1979-80 to 2003-04 reveals
paradoxical pictures with positive as well as negative rates. During pre-reforms period (1979-80 to
2003-’04), aluminium sector has recorded a negative growth rate of -0.2008 %. It could be noticed
from the average TFPG estimated during the post- reforms period that the reform process yielded
negative results on the productivity levels of the aluminium sector because it is visible from the
estimated average TFPG that there is a significant drop in the extent of negative TFPG which is -1.43%
when compared to that in the pre-reform period. Total factor productivity growth in iron and steel
industry displays declining growth rate in post-reforms period compared to pre-reform period. It is
evidenced from table 2 that the estimated growth rate of TFP at aggregate level for the period 1979-80
to 1991-92 is 0.5650 percent p.a whereas post-reform period covering 1991-92 to 2003-04 in our study
witnessed a declining positive growth of 0.4761 percent p.a., a noticeable downfall from growth rate as
shown in pre-reform period. On the whole, impact of economic reforms on TFPG of iron industry at
aggregate level was adverse as the average rate of TFPG estimated in the pre-reform period
furthermore decreased in post-reform period. Within the same industry, over the years, there exist
severe variations in total factor productivity growth. Analysis of the TFPG of Indian chemical industry
shows declining growth rate in negative fashion during post- reforms period. The pre-reform era (1979-
80 to 1991-92) witnessed a positive growth rate of 0.6525 percent but during post-reforms period
(1991-92 to 2003-04), it is estimated to be -0.3231 percent p.a. Moreover, total factor productivity
growth shows contradictory positive and negative trends over years within the same industry.
Inspection of average TFPG of fertilizer industry in India exhibits an overall negative growth rate in
TFP. It is obvious from table 2 that the estimated growth rate of TFP for the period 1979-80 to 1991-92
is 0.44 percent p.a which signifies a positive rate of growth in TFP where as post-reform period
covering 1991-92 to 2003-04 in our study witnessed a sharp negative growth of -1.12 percent p.a., a
steeper fall from growth rate as revealed in pre-reform period. This decline is due to reduced capacity
utilization caused by downfall in production rather than being a consequence of lack of technical
progress. The growth rate of TFP in Indian fertilizer sector is assessed to be –0.055 percent p.a.
implying average overall annual deceleration for the entire period 1979-80 to 2003-04. On the whole,
impact of economic reforms on TFPG at aggregate level was poor as the positive average rate of TFPG
estimated in the pre-reform period declined to negative growth in post-reform period. More over,
difference between mean TFPG of two periods is statistically significant at 0.05 levels thereby
indicating that average TFPG between two periods are statistically different.
In paper and pulp sector, the estimated growth rate of TFP for the period 1979-80 to 1991-92 is 0.64
percent per annum whereas during the post-reform period, 1991-92 to2003-04, TFPG shows slight
downward trend which is estimated to be 0.58 percent per-annum but average growth rate for the
entire period is significantly negative (-0.014 percent). Moreover, TFPG varies widely among years
within the same paper sector. Total factor productivity growth of Indian glass industry during pre-
reform period declined in a negative fashion which is posted as -0.09 and in post-liberalization period,
it further declined to -0.68.Large variations in the magnitude of TFPG are found in the evaluation. The
estimated TFPG of the Indian glass industry at the aggregate level reveals differing rates of
productivity growth over years. Over our study period, negative trend in the TFPG is observed at
aggregate level.

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Therefore, overall analysis of average TFPG growth suggests that in all the industries taken up under
our study, average TFPG growth depicts declining growth rate during post-reform periods as compared
to pre-reform periods.
This does not mean, however, that reforms failed to have a favorable effect on industrial productivity.
Rather, some research undertaken recently (Goldar and Kumari, 2003; Topalova, 2004) has shown that
trade liberalization did have a positive effect on industrial productivity. The explanation for the
slowdown in TFP growth in Indian manufacturing in the post-reform period seems to lie in the adverse
influence of certain factors that more than offset the favorable influence of the reforms. Two factors
that seem to have had an adverse effect on industrial productivity in the post-reform period are (a)
decline in the growth rate of agriculture and (b) deterioration in capacity utilization in the industrial
sector (Goldar and Kumari,2003). Uchikawa (2001, 2002) has pointed out that there was an investment
boom in Indian industry in the mid-1990s. While the investment boom raised production capacities
substantially, demand did not rise which led to capacity under-utilization.Goldar and Kumari (2003)
have presented econometric evidence that indicates that the slowdown in TFP growth in Indian
manufacturing in the post-reform period is attributable to a large extent to deterioration in capacity
utilization.

The table 2 depicts the overall growth rate in value added, capital, employment and partial productivity
in energy intensive industries under our study. The picture that emerges for the Indian cement sector is
that the overall long-term growth in output (value added) is 7.94 percent per annum in this sector
during 1979-80 to 2003-04 which is associated with a rapid growth of capital (10.29 percent per
annum) and comparatively a low growth of employment (3.43 percent per annum). Comparing the
annual growth rates during 1979-80 to 1991-92 with those of 1991-92 to 2003-04, the post-reform
period, it is found that there is a sharp decline in growth rate of value added from 10.49 per cent per
annum in pre-reform period to 5.74 per cent per annum in post-reform period. Labour productivity for
the whole period increased at an annual rate of 4.88 per cent per annum while capital productivity
decreased at a rate of -1.75 per cent per annum. Capital intensity for the entire period is 6.97 per cent
per annum. Estimates for the sub-periods reveal differences in the growth rates. Labour productivity
decreases at a higher rate, i.e. at a 6.50 per cent per annum in the pre-reform period as against 3.80 per
cent per annum in the post-reform period. Capital productivity shows a sign of negative trend in the
first period of the analysis and it decreases sharply in the second period. Capital intensity decreases
slightly at a 6.51 per cent per annum in the post-reform period as against 7.96 per cent per annum in the
pre-reform period. The estimate of total factor productivity (TFP) growth of Indian cement industry is -
0.0043 per cent per annum over the entire period, 1979-80 to 2003-04. Total factor productivity growth
is lowered down during the post-liberalization period than during the pre- reforms period of the
analysis. In iron and steel industry, labour productivity for the whole period shows a growth rate at an
annual average of 5.81 percent per annum whereas capital productivity shows an annual average
growth rate of 0.80 percent. Capital intensity for the entire period is 5.05 whereas an estimate for the
sub-period shows difference in growth rates. Post-reform capital productivity and labour productivity
shows increasing trend. Capital intensity increases at higher rate from 4.59 percent in pre-reform period
to 5.5 percent in post-reform period. Total factor productivity growth is declining associated with
declining growth rate in capital, employment during post-reform period. In a nutshell, for iron and
steel sector, post-reform era witnessed declining growth rate in total factor productivity but
acceleration in capital intensity as well as capital, material and labour productivity.
Table 2 also shows that overall long-term growth of 6.76 percent in value added (output ) in Indian
iron and steel industry during 1979-80 to 2003-04 is associated with rapid growth of capital(6 percent
per annum) and low growth of labour(0.82 percent per -annum). Comparing the annual growth rate of
pre-reform period (1979-80 to 1991-92) with that of post-reform period, it is evident that there is an
increase in the growth rate of value added from 6.29 percent in pre-reform period to 6.90 percent in
post-reform period. It is evident that the revival of growth in output in post 90s was not accompanied
by adequate generation of employment in iron and steel sector. Several explanations have been cited

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for that. It is argued that capital-intensive techniques were adopted because of increase in real wage in
1980s and onward. According to Nagaraj (Cited in A.K.Ghosh.1994), the “overhang’ of employment
that existed in 1970s were intensively used in the 1980s, thus generating only few additional
employment opportunities in the latter decades. It has also been argued that labour retrenching
technique was difficult after introduction of the job security regulation in the late1970s and this forced
the employers to adopt capital-intensive production techniques (Goldar, 2000). Productivity of capital
increased from 0.26 to 1.33 along with that of labour productivity, which increased from 4.7 to 7.06
during these two time frames. These changes were reflective of an increase in the rate of growth of
capital intensity. The data also shows that the increase in the growth rate of output as is evident from
the table 2 is not accompanied by an increase in the productivity.
In aluminium industry, labour productivity for the whole period shows a growth rate at an annual
average of 1.39 percent per annum whereas capital productivity shows an annual average growth rate
of 0.23 percent. Capital intensity for the entire period is 1.16 whereas an estimate for the sub-period
shows difference in growth rates. Consequent to economic reforms in July, 1991, capital productivity
shows increasing trend but labour productivity reflects dismal declining trend. Capital intensity
decreases at higher rate from 3.21 percent in pre-reform period to 1.04 percent in post-reform period.
Total factor productivity growth is sharply declined associated with declining growth rate in capital as
well as employment during post-reform period. In a nut shell, for aluminium sector, post-reform era
witnessed declining growth rate in total factor productivity accompanied by acceleration in capital and
material productivity. Overall long-term growth of 6.21 percent in value added (output) in Indian
aluminium industry during 1979-80 to 2003-04 is associated with rapid growth of employment (3.82
percent per-annum). It is obvious that there is a decrease in the growth rate of value added from 6.27
percent in pre-reform period to -2.20 percent in post-reform period. The revival of growth in output in
post 90s was not possible by adequate generation of employment in aluminium sector. Productivity of
capital increased from 2.34 to 7.88 whereas labour productivity declined sharply from 5.10 to 1.89
during these two time frames. These changes were reflective of a decline in the rate of growth of
capital intensity.
In paper and pulp industry, productivity of capital decreased from -0.60 to -1.83 along with that of
labour productivity, which decreased from 4.71 to 3.02 during these two time frames. These changes
were reflective of an increase in the rate of growth of capital intensity. The data also shows that the
decrease in the growth rate of productivity as is evident from the table 2 is accompanied by a decrease
in the growth rate of output.Labour productivity for the whole period shows a growth rate at an annual
average of 4.86 percent per annum whereas capital productivity shows an annual average growth rate
of -0.61 percent. Capital intensity for the entire period is 5.47 whereas an estimate for the sub-period
shows difference in growth rates. Capital productivity and labour productivity during post-reform era
shows simultaneously declining trend. Capital intensity increases slightly in post-reform period. Total
factor productivity growth is decelerating with declining growth rate in capital, employment during
post-reform period. In brief, for paper sector, post-reform era visualized some kind of declining growth
rate in total factor productivity along with acceleration in capital intensity as well as material
productivity but value added, employment and capital growth along with capital and labour
productivity reflects declining growth rate.
In fertilizer sector, labour productivity for the entire period,1979-80 to 2003-04, shows a growth rate
at an annual average of 10.02 percent per annum whereas capital productivity shows a negative
annual average growth rate of -1.06 percent. Capital intensity for the entire period is 11.12 whereas an
estimate for the sub-period shows difference in growth rates. With the initiation of new policy regime
in 1991, capital productivity shows abrupt decreasing trend which turns out to be negative (-5.52
percent) but labour productivity growth displays slightly accelerated growth rate during post reform
periods. Capital intensity also decreases from 15.17 percent in pre-reform period to 8.32 percent in
post-reform period. Total factor productivity growth is declining associated with declining growth rate
in value added, employment, and capital intensity during post-reform period. Therefore, for fertilizer
sector, post-reform era is evidenced by declining growth rate in total factor productivity but
acceleration in capital growth, material and labour productivity. Overall long-term growth of 8.93
percent in value added (output) in Indian fertilizer industry during 1979-80 to 2003-04 is associated
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with rapid growth of capital (8.71 percent per annum). Comparing the annual growth rate of pre-reform
period (1979-80 to 1991-92) with that of post-reform period, it is evident that there is a decline in the
growth rate of value added from 15.33 percent in pre-reform period to 3.74 percent in post-reform
period. Productivity of capital decreased from 3.20 to -5.52 but labour productivity increased from
10.13 to 10.21 during these two time frames. These changes were reflective of a decline in the rate of
growth of capital intensity. The data also shows that the decrease in the growth rate of output is
accompanied by a decrease in the productivity.
In glass sector, labour productivity for the whole period of our study shows a growth rate at an
annual average of 6.19 percent per annum and capital productivity shows an annual average growth
rate of -3.08 percent . Capital intensity for the entire period is 10.06 whereas an estimate for the sub-
period shows difference in growth rates. After economic reforms in July, 1991, capital productivity and
labour productivity shows decreasing trend. Capital intensity increases at higher rate from -6.36 percent
in pre-reform period to12.52 percent in post-reform period. Total factor productivity growth is
declining in negative fashion associated with declining growth rate in capital and employment growth
declines during post-reform period. In short, for Glass sector, post-reform era witnessed declining
growth rate in total factor productivity, labour and capital productivity but acceleration in capital
intensity as well as material productivity. Comparing the annual growth rate of pre-reform period
(1979-80 to 1991-92) with that of post-reform period, it is evident that there is a decrease in the growth
rate of value added from 10.34 percent in pre-reform period to 4.76 percent in post-reform period
showing an average growth rate of 6.19 percent during the entire period. It is evident that the revival of
growth in output in post 90s was not possible by adequate generation of employment in Glass sector.
Productivity of capital decreased from 2.39 to -5.27 along with that of labour productivity which shows
abrupt decline from 1.53 to -0.26 during these two time frames. The data also shows that the decrease
in the growth rate of output is also accompanied by a decrease in the productivity.
In chemical industry, labour productivity for the entire period of our study shows a growth rate at an
annual average of 7.61 percent per annum whereas capital productivity shows an annual average
growth rate of 0.34 percent. Capital intensity for the entire period is 5.58 whereas an estimate for the
sub-period shows slight difference in growth rates. Capital productivity and labour productivity shows
decreasing trend with the introduction of reforms in 1991. Capital intensity increases very negligibly
from 5.52 percent in pre-reform period to 5.50 percent in post-reform period. Total factor productivity
growth is declining in negative fashion associated with declining growth rate in value added. In short,
for chemical sector, post-reform era witnessed declining growth rate in total factor productivity, labour
and capital productivity but acceleration in capital growth as well as material productivity is noticed.
There is a decrease in the growth rate of value added from 8.04 percent in pre-reform period to 6.85
percent in post-reform period showing an average growth rate of 7.61 percent during the entire period.
The stimulation of growth in output in post 90s was not possible by adequate generation of
employment in Glass sector. Productivity of capital decreased from 1.07 to -0.05 along with that of
labour productivity which shows abrupt decline from 6.57 to 5.10 during these two time frames. The
data also shows that with the decrease in the growth rate of output, total factor productivity decreases.
On the whole, value added in all the industries except iron&steel sector declined sharply during the
post-reforms period whereas post-reform period shows that growth in capital investment gradually
declined in all the industries except chemical and fertilizer. Growth in employment also declined in all
industries except chemical during post-liberalized scenario. Analysis of partial productivity shows that
material productivity increases in all the sectors except cement industry, capital productivity declined
during post-reform period in all industries except aluminium and iron industry. Post-reform era
witnesses declining growth rate of labour in all energy intensive industries except fertilizer and
iron&steel industries.
For a very long time, economic theory highlighted capital and labour, the two primary factors of
production, as the key driving force behind production and growth. It was only in the 1950s that
technological advancement as an important source of growth was brought into the discussion of
mainstream economic theory. Solow’s (1957) pioneering attempt to estimate the contribution of
physical factors to growth, by introducing the technique of growth accounting, revealed that only 1/8th
of the growth of the US economy during the first half of the present century could be explained by the
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growth of its endowments of physical factors, leaving the remaining to a “residual” (termed as
technical progress or total factor productivity growth (TFPG)). Focus shifted thereafter from physical
factors to the role of technology in production and growth. It is fairly well established now that
technological advancement resulting from R&D is the most important factor behind today’s
productivity growth. Indeed, the growth experience of most advanced industrial nations has been
driven by TFPG rather than by growth in factor endowments. For these nations, operating essentially
on the frontiers of global technology, TFP growth necessarily implies an outward shift of the
technological frontier. Of course, the contribution of TFPG to their economic growth has not been
uniform across all industrialized nations. Hayami (1999), for instance, compared the sources growth in
Japan and the USA during their respective high growth periods (1958-70 for Japan and 1929-66 for the
USA) and found, not surprisingly, that Japan’s growth was attributable to both capital input growth as
well as technical progress as opposed to the US experience of predominantly technology driven growth
– TFP contribution being 53 per cent for Japan’s growth and 80 per cent for the USA. Even, for the late
industrializing countries in East Asia (the so-called East Asian Tigers: South Korea, Hong Kong,
Singapore and Taiwan), the contribution of TFP has been observed to be much more moderate than the
US experience. According to World Bank (1993), approximately two-thirds of the observed growth in
these economies may be attributed to accumulation of physical and human capital and the rest came
from total factor productivity growth. This is not to deny that productivity growth did play a very
important role in East Asian success, but it was clearly not the sole (and not even the dominant) factor.
With the prediction of non-sustainability of growth registered by the East Asian countries,
Krugman’s thesis [Krugman 1994] leaves an implicit appeal for most of the developing economies to
examine their positions. In a situation of fragile total factor productivity growth (TFPG), a syndrome
which most of the developing countries encounter, it becomes imperative to undertake an analysis of
growth decomposition
of output in Indian manufacturing industries to identify its major contributing factors. Such a result is
likely to help provide appropriate policy guidelines while projecting the long-run growth trajectory of
the countries.
Theoretically, sources of economic growth are composed of factor accumulation and productivity
growth. The first source may lead to high growth rates, but only for a limited period of time.
Thereafter, the law of diminishing returns inevitably occurs. Consequently, sustained growth can only
be achieved through productivity growth, that is, the ability to produce more and more output with the
same amount of input. Some researchers argued that the Soviet Union of the 1950s and the 1960s, and
the growth of the Asian ‘Tigers’ are as examples of growth through factor accumulation (e.g.
Krugman, 1994). On the other hand, growth in the industrialized countries appears to be as the result of
improved productivity (e.g. Fare et al, 1994).
Therefore, a major focus of the present study is to analyze the contribution of inputs and TFPG to
output growth. On the basis of the methodology outlined earlier, source specific growth of output is
reported in Table 3.


Traditionally (owing to Solow), the sources of output growth are decomposed into two components: a
component that is accounted for by the increase in factors of production and a component that is not
accounted for by the increase in factors of production which is the residual after calculating the first
component. The latter component actually represents the contribution of TFP growth.

Therefore, the pertinent question of whether output growths of these industries are the result of factor
accumulation or productivity-driven has been tested for these energy intensive industries. Table 4
shows the relative contribution of TFP growth and factor input growth for the growth of output during

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1979-80 to 2003-04. Observing the growth path, it is apparent that in all the industries under our study,
TFP growth contribution is either negative or negligible and insignificant across the entire time frame.
Therefore, it is true that increase in factor input is responsible for observed output growth and TFP
contribution plays negligible role in enhancing output growth. Therefore, output growth in energy
intensive industries in India was fundamentally dominated by accumulation of factors resulting input-
driven growth and TFP has a negligible or negative contribution to output growth.
5. Summary and Conclusions:
The present exercise attempts to examine the contribution of inputs and total factor productivity growth
to the growth of output by considering the aggregate manufacturing sector and seven selected
manufacturing industries of India during the period 1979-80 to 2003-04. Major findings of the study
indicate that output growth in the selected Indian manufacturing industrial sectors is driven mainly by
inputs accumulation while the contribution of TFP remains either minimal or negative. The growth rate
of total factor productivity in almost all the industries under our study is gradually declining, especially
during the post-reforms period. Therefore, manufacturing sector, being input driven output growth
sector of India, does not remain outside the purview of the sustainability issue raised by Krugman.
The pattern of sources of output growth with respect to source of productivity growth and input
accumulation remains unchanged during two periods but the relative contribution of each source of
growth to output growth from pre-liberalisation to post-liberalisation period has increased for some
other industries but has decreased for some other industries. On the other hand, for some of the
industries the relative contribution has changed from positive during pre-liberalisation period to
negative during post-liberalisation period or from negative during pre-liberalisation period to positive
during post-liberalisation period. The change in pattern of sources of output growth may have taken
place due to liberalization policies and structural reforms undertaken during the 1990s.
References:
Cornwall, J. (1977), Modern Capitalism: It’s Growth and Transformation, New York, St. Martin’s
Press.
Ghosh.A.K (1994), Employment in organized manufacturing in India, Indian Journal of labour
Economics, vol.37, no.2, April-June, pp 141-162.
Goldar, B.N.andAnitaKumari (2003), Import liberalization and productivity growth in Indian
manufacturing industries in the 1990’s, The Developing Economies,vol.41, pp436-59.
Goldar, B.N (2000), Employment growth in organized manufacturing in India, Economic and political
weekly, vol.35, no.14, pp 1191-95.
Hiyami,Y and Ogasawara,J(1999), Changes in the sources of Modern Economic Growth: Japan
compared with the United States, Journal of Japanese and International Economies,vol.13,p1-21.
Krugman,P(1994),The Myth of Asia’s Miracle, Foreign Affairs, Vol.73,no.6,pp62-77.
Kaldor, N. (1967), Strategic Factors in Economic Development, New York, Ithaca.
Kaldor, N(1966), Causes of the Slow Rate of Economic Growth of the United Kingdom, An Inaugural
Lecture.
Solow, R,M(1957), ‘Technical change and the aggregate production function’, Review of Economics
and Statistics, August.
Topalova, Petia (2004), Trade liberalization and firm productivity: The case of India, IMF working
paper WP/04/28, Asia Pacific Department, February.
Uchikawa, S (2001), ‘Investment boom and underutilization of capacity in the 1990s, Economic and
political weekly, August 25, pp3247 – 3253.

Young, A. (1928) Increasing Returns and Economic Progress, The Economic Journal, 38, 527-542.
Table:1:Annual Growth rate of Industrial Production

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Period Index of Industrial Annual Growth rate(%)
Production(IPP)
(Base:1993-94)
1998-99 145.2 4.1
1999-2000 154.9 6.7
2000-01 162.6 5.0
2001-02 167.0 2.7
2002-03 176.6 5.7
2003-04 189.0 7.0
2004-05 204.8 8.4
2005-06 221.5 8.2
2006-07 247.0 11.5
Source: Statistical Abstract,2007-08.
Table: 2: Growth rate of value added, capital, employment and partial factor productivity etc. in
selected manufacturing industries in India (%)

Industry Year/Growth Value Capital Employment Material Capital Labour Capital Total factor
rate added productivity productivity Productivity intensity productivity
growth
Cement 1979-‘80 to 7.94 10.29 3.43 2.93 -1.75 4.88 6.97 -0.0043
2003-‘04 (7.78) (6.05) (0.65) (1.49) (1.64) (7.09) (5.36) (1.24)
1979-‘80 to 10.49 11.97 4.15 4.66 -1.42 6.5 7.96 1.44
1991-‘92 (6.67) (4.34) (0.23) (1.23) (2.23) (6.43) (4.11) (1.53)
1991-‘92 5.74 8.66 2.26 0.71 -2.08 3.80 6.51 1.013
to2003-‘04 (4.38) (4.63) (-0.81) (1.61) (-0.23) (5.24) (5.48) (0.44)
Aluminium 1979-‘80 to 5.21 4.98 3.82 2.39 0.23 1.39 1.16 0.0011
2003-‘04 (7.78) (6.05) (0.65) (1.49) (1.64) (7.09) (5.36) (1.24)
1979-‘80 to 6.27 4.99 2.69 -0.48 2.34 5.10 3.21 -0.2008
1991-‘92 (6.67) (4.34) (0.23) (1.23) (2.23) (6.43) (4.11) (1.53)
1991-‘92 -2.20 0.60 2.09 4.45 7.88 1.89 1.04 -1.43
to2003-‘04 (4.38) (4.63) (-0.81) (1.61) (-0.23) (5.24) (5.48) (0.44)
Iron&steel 1979-‘80 to 6.76 6.00 0.82 1.83 0.80 5.81 5.05 -0.13
2003-‘04 (7.78) (6.05) (0.65) (1.49) (1.64) (7.09) (5.36) (1.24)
1979-‘80 to 6.29 6.18 0.93 1.39 0.26 4.7 4.59 0.5650
1991-‘92 (6.67) (4.34) (0.23) (1.23) (2.23) (6.43) (4.11) (1.53)
1991-‘92 6.90 5.67 0.59 1.76 1.33 7.06 5.50 0.4761
to2003-‘04 (4.38) (4.63) (-0.81) (1.61) (-0.23) (5.24) (5.48) (0.44)
Chemical 1979-‘80 to 7.61 7.33 1.81 3.07 0.34 5.71 5.58 -0.07
2003-‘04 (7.78) (6.05) (0.65) (1.49) (1.64) (7.09) (5.36) (1.24)
1979-‘80 to 8.04 6.94 1.47 1.67 1.07 6.57 5.52 0.65
1991-‘92 (6.67) (4.34) (0.23) (1.23) (2.23) (6.43) (4.11) (1.53)

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1991-‘92 6.85 7.84 2.39 4.59 -0.05 5.10 5.50 -0.32
to2003-‘04 (4.38) (4.63) (-0.81) (1.61) (-0.23) (5.24) (5.48) (0.44)
Fertilizer 1979-‘80 to 8.93 8.71 2.23 2.55 -1.06 10.02 11.12 -0.05
2003-‘04 (7.78) (6.05) (0.65) (1.49) (1.64) (7.09) (5.36) (1.24)
1979-‘80 to 15.33 8.79 6.61 1.90 3.20 10.13 15.17 0.44
1991-‘92 (6.67) (4.34) (0.23) (1.23) (2.23) (6.43) (4.11) (1.53)
1991-‘92 3.74 10.14 -1.67 2.70 -5.52 10.21 8.32 -1.12
to2003-‘04 (4.38) (4.63) (-0.81) (1.61) (-0.23) (5.24) (5.48) (0.44)
Paper&pulp 1979-‘80 to 6.47 7.08 1.62 2.12 -0.61 4.86 -0.14 -0.002
2003-‘04 (7.78) (6.05) (0.65) (1.49) (1.64) (7.09) (1.24) (1.24)
1979-‘80 to 7.79 7.38 1.70 2.28 -0.60 4.71 0.64 0.64
1991-‘92 (6.67) (4.34) (0.23) (1.23) (2.23) (6.43) (1.53) (1.53)
1991-‘92 4.50 6.58 1.21 2.48 -1.83 3.02 0.94 0.58
to2003-‘04 (4.38) (4.63) (-0.81) (1.61) (-0.23) (5.24) (0.44) (0.44)
Glass 1979-‘80 to 6.19 9.52 -0.32 1.52 -3.08 7.18 10.06 -0.104
2003-‘04 (7.78) (6.05) (0.65) (1.49) (1.64) (7.09) (5.36) (1.24)
1979-‘80 to 10.34 0.23 1.53 -0.50 2.39 8.92 6.36 -0.09
1991-‘92 (6.67) (4.34) (0.23) (1.23) (2.23) (6.43) (4.11) (1.53)
1991-‘92 4.76 0.09 -0.26 2.80 -5.27 5.30 12.52 -0.68
to2003-‘04 (4.38) (4.63) (-0.81) (1.61) (-0.23) (5.24) (5.48) (0.44)
# Growth rates for the entire period are obtained from semi-log trend.
# # Figures in the parenthesis indicate growth rates of respective parameters in aggregate
manufacturing.
Source: Own estimate.

Table -3: Contribution of TFPG to output growth under liberalized trade regime

Industry Contribution Phase 1 Phase 2 Phase 3 Phase 4 Pre- Post-reform Entire
of TFPG and (1979-‘80 to (1986-‘87 to (1992-‘93 (1998-‘99 reform period period
inputs to ‘85-‘86) ‘91-‘92) to ‘97-‘98) to2003-04) period (1991-‘92 to (1979-‘80
output (1979-‘80 2003-‘04) to03-‘04)
growth to 1991-
‘92)
Cement Output 11.05 9.93 6.03 4.75 10.49 5.74 7.94
growth

Contribution 10.05 8.74 5.12 5.29 9.62 4.73 7.944
of Input (95.02%) (88.02%) (84.91%) (111.37%) (91.71%) (82.35%) (100.054%)
growth
Contribution 0.55 1.19 0.91 -0.54 0.87 1.013 -0.0043
of TFPG (4.98%) (11.98%) (15.09%) (-11.37%) (8.29%) (17.65%) (-0.054%)
Aluminium Output 5.89 6.65 -3.66 -1.23 6.27 -2.20 5.21
growth
Contribution 3.09 10.19 -5.41 -0.18 6.64 -2.23 5.32
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of Input (52.46 %) (153.23%) (-147.81%) (-14.63%) (105.9%) (-101.36%) (102.11%)
growth
Contribution 2.80 -3.54 1.75 -1.05 -0.37 0.03 -0.11
of TFPG (47.53%) (-53.23%) (47.81%) (-85.37%) (-5.90%) (1.36%) (-2.11%)
Iron&steel Output 4.43 7.33 7.79 6.91 6.29 6.9 6.76
growth
Contribution 3.69 6.51 7.09 6.2 5.72 6.42 6.89
of Input (83.21%) (88.81%) (90.98%) (89.67%) (91.02%) (93.1%) (101.92%)
growth
Contribution 0.74 0.82 0.70 0.71 0.57 0.48 -0.13
of TFPG (16.79%) (11.19%) (9.02%) (10.33%) (8.98%) (6.90%) (-1.92%)
Chemical Output 7.29 8.06 9.15 5.20 8.04 7.68 7.61
growth
Contribution 7.64 6.4 11.04 5.74 7.39 8.0 7.68
of Input (104.80%) (79.40%) (111.59%) (110.38%) (91.92%) (104.17%) (100.92%)
growth
Contribution -0.35 1.66 -1.06 -0.54 0.65 -0.32 -0.07
of TFPG (-4.80%) (20.60%) (-11.59%) (-10.38%) (8.08%) (-4.17%) (-0.92%)
Fertilizer Output 3.67 26.99 7.09 -2.05 15.33 3.74 8.93
growth
Contribution 3.95 25.82 7.43 -1.30 14.89 4.86 8.98
of Input (107.63%) (95.66%) (100.46%) (63.41%) (97.13%) (127.08%) (127.63%)
growth
Contribution -0.28 1.17 -0.34 -0.75 0.44 -1.12 -0.05
of TFPG (-7.63%) (4.34%) (-0.46%) (36.59%) (2.87%) (-27.08%) (-27.63%)
Paper&pulp Output 6.38 9.40 5.70 2.72 7.79 4.5 6.47
growth
Contribution 4.67 9.83 5.55 3.43 7.15 3.56 6.472
of Input (73.2%) (104.58%) (97.37%) (100.71%) (91.78%) (79.11%) (100.03%)
growth
Contribution 1.71 -0.43 0.15 -0.71 0.64 0.94 -0.002
of TFPG (26.80) (-4.58) (2.63) (-26.10) (8.22%) (20.89%) (-0.03%)
Glass Output 7.92 12.77 2.62 2.86 10.34 4.76 6.19
growth
Contribution 8.38 12.48 1.86 2.25 10.43 5.44 6.29
of Input (105.81%) (97.73%) (70.99%) (78.67%) (100.87%) (114.29%) (101.62%)
growth
Contribution -0.46 0.29 0.76 0.61 -0.09 -0.68 -0.10
of TFPG (-5.81%) (2.27%) (29.01%) (21.33%) (0.87 %) (-14.29%) (-1.62%)

Source: Own estimate

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A Study of the Recruitment and Selection process: SMC
Global
Neeraj Kumari
Manav Rachna International University, Faridabad, India.
Email: neerajnarwat@gmail.com
Abstract

Better recruitment and selection strategies result in improved organizational outcomes. With reference
to this context, the research paper entitled Recruitment and Selection has been prepared to put a light
on Recruitment and Selection process. The main objective is to identify general practices that
organizations use to recruit and select employees and, to determine how the recruitment and selection
practices affect organizational outcomes at SMC Global Securities Ltd. The research methodology
applied is the exploratory. The data was collected through well structured questionnaires. The source of
data was both primary and secondary. Sample size was 30. Data analysis has been done with the help
of SPSS software. The company considered portals as the most important medium of hiring employees.
The employees working in the company consider the employee references are one of the most reliable
source of hiring the new employees. Company always takes in consideration the cost-benefit ratio.
Keywords: Recruitment, Selection, Reference, Interview, Hiring, Performance.

1. Introduction
1.1Recruitment and selection
Successful human resource should identify human resource needs in the organization. Once the needs
are identified, the process of recruitment or acquisition function starts.
Recruitment is the discovering of potential candidates for actual or anticipated organizational
vacancies. Or, from another perspective, it is a linking activity bringing together those with jobs to fill
and those seeking job. The ideal recruitment effort will attract a large number of qualified applicants
who will take the job if it is offered. It should also provide information so that unqualified applicants
can self select themselves out of job candidacy; this is, a good recruiting program should attract the
qualified and not attract the unqualified. This dual objective will minimize the cost of processing
unqualified candidates.

Definition of Recruitment
• Recruitment is the process of attracting prospective employees and stimulating them for
applying job in an organization.
• Recruitment is the process of hiring the right kinds of candidates on the right job.

Methods of Recruitment
There are various methods of recruitment but for the sake of simplicity, they have been categorized
under two broad headings.
• Internal Recruitment
• External Recruitment

Benefits and Importance of Recruitment:
(1).Helps to create a talent pool of potential candidates for the benefits of the organization.
(2).To increases the pool of job seeking candidates at minimum cost.
(3).It helps to increase the success rate of selection process by decreasing the no of visits qualified or
over qualified job applicants.
(4).Helps in identifying and preparing potential job applicants who will be the appropriate candidature
for the job.

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(5).Finally it helps in increasing organization and individual effectiveness of various recruiting
techniques and for all the types of job applicants. .

1.2Selection:
Selection is the process of picking individuals who have relevant qualifications to fill jobs in an
organization. Selection is much more than just choosing the best candidate. It is an attempt to strike a
happy balance between what the applicant can and wants to do and what the organization requires.

Importance of Selection
Selecting the right employees is important for three main reasons: performance, costs and legal
obligations.

Performance: At first, our own performance depends in part of our own subordinates. Employees with
right skills will do a better job for any company and for the owner. Employees without these requisite
skills or who are abrasive would not perform effectively and the company performance will suffer to a
great extent. So there is a time to screen out undesirables and to choose the better and perfect candidate
that can effectively contribute to company success.

Cost: Second, it is important because it is costly to recruit and hire employees so cost-benefit ratio
have to be considered while hiring of employees in order to avoid any unnecessary wastage of money
and the valuable resources .The total cost of hiring a manager could easily be 10 times as high as once
one add search fees, interviewing time, reference checking, and travel and moving expenses.
Legal Obligations: Thirdly it is important because of the two legal implications of incompetent hiring.
Firstly equal employment law requires nondiscriminatory selection procedures for selected groups.
Secondly, courts will find the employer liable when employees with criminal records or other problems
use access to customers’ homes to commit crimes. Lawyers call hiring workers with such backgrounds,
without proper safeguards, negligent hiring. So the negligent hiring highlights the need to think through
what the job human requirements are. So in order to avoid the concept of negligent hiring, it is
necessary to make a systematic effort in order to gain relevant information about the applicant and
verify all the documentation.

Essentials and Prerequisites for Selection:
(1) Picking individuals possessing relevant qualifications.
(2) Matching job requirements with the profile of the candidates.
(3) Using multiple tools and techniques to find the most suitable candidate suitable.
(4) Of achieving success on the job

The Process of Selection:
(1) Reception
(2) Screening Interview
(3) Application Blank
(4) Selection Tests
(5) Selection Interview
(6) Medical Examination
(7) Reference Checks
(8) Hiring Decisions

Selection is usually a series of hurdles or steps. Each one must be successfully cleared before the
applicant proceeds to the next.

2.Literature review

According to Edwin B Flippo
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Recruitment is nothing but the process of searching the candidates for employment and then
stimulating them for jobs in the organization. It is the activity that links the employees and the job
seekers. It is also defined as the process of finding and attracting capable applicants for employment. It
is the pool of applicants from which the new employees are selected. It can also be defined as a process
to discover sources of manpower to meet the requirement of the staffing schedule and to employ
effective measures for attracting the manpower in adequate numbers in order to facilitate the effective
selection of an efficient working force.

According to David A De Cenzo
The recruitment needs are of three types which are as follow:
(a) First one is Planned Needs: These are the needs that arise from the changes in the organization and
retirement policy creating vacancy for new jobs.
(b).Second one is Anticipated Needs: These are those movements in personal which an organization
can predict by studying trends both in external as well as internal environment.
(c) Last one is Unexpected Needs:
These needs arise due to various reasons like deaths, resignations, accidents, illness, relocation etc.

Taylor, P. (1998). Seven staff selection myths
This article outlines seven commonly held misconceptions about recruitment
And selection practices. Areas discussed include the validity of various
Recruitment and selection measures (e.g., interviewing, reference checks), the
Conditions necessary to maximize the effectiveness of these practices, and
Common mistaken perceptions of the interview process. This article is most
Useful for readers interested in workforce development theory and research.

3.Research methodology
The purpose of this section is to describe the methodology carried out to complete the work. The
methodology plays a dominant role in any research work. The effectiveness of any research work
depends upon the correctness and effectiveness of the research methodology.

Objectives of the study
• To identify general practices that organizations use to recruit and select employees.
• To determine which recruitment and selection practices are most effective.
• To determine how the recruitment and selection practices affect organizational outcomes.

Research design:-
Exploratory research:-The research design used in this project is the exploratory type. Exploratory
type of research is used because the sources of information are relatively few and the purpose is merely
to find and to understand the possible actions.
The exploratory study is often used as an introductory phase of a larger study and results are used in
developing specific technique for larger study.

Sampling technique:-
Judgmental Sampling
Judgmental sampling is a form of convenience sampling in which the population elements are selected
based on the judgment of the researcher.
Target population and Sample size
• The target population was the employees of the HR department of SMC Global Securities Ltd.
The employees targeted were of all age group.
• A sample size of 30 employees of SMC has been taken.

4.Analysis
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Vol 2, No.1, 2012

Data analysis is very important aspect of project, as it basically involves the analysis of all the
information that we collected. The information collected needs to be analyzed so that we can interpret
the information and provides the justification for the work we have done during our research. Data
analysis is a body of methods that help to describe facts, detect patterns, develop explanations and test
hypothesis.
Data analysis has been done with the help of SPSS software. After the respondents had filled in the
questionnaires, the data was entered into the software and the analysis was made thereby.
The data has been presented in the form of graphs, bar charts, pie charts etc.
After analysis of each of the question in a questionnaire the interpretation of the same is also being
provided which includes the reason about the particular aspect of the organization and we can also
judge the frequency and application of the same in a particular context so that we are able to find out
the exact fact behind the particular aspect of an organization on which are whole project report is
based.

Analysis of Questionnaire

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5.Findings
The findings from the analysis including charts, bars, and graphs are listed as follows:-
• The company considered portals as the most important medium of hiring employees and then
employee references are also act as the important source of recruiting people and also with my working
experience with the company I found them most effective.
• The employees working in the company consider the employee references are one of the most
reliable source of hiring the new employees and also to some extent portals, but before hiring from
portals the references provided there are need to be confirmed as I did during my training period.
• The most important feature in company’s recruitment &selection policy is that we need to
take in consideration the ratio between the turn-up and line-up candidates, and after analysis I found it
most of the employees are also holding the same opinion.
• The existing recruitment process of company is good but it has some shortcomings that is
being Covered in recommendations and on overall the recruitment department has pressure on it.
• After analysis of the company selection procedure I found out the company is using quite
effective method of doing selection of candidates and they always take in consideration the cost-benefit
ratio which is quite important from the long perspective of hiring employees.
• The ratio of selected candidates to joining candidates is quite effective and highest in number
as the employees being selected are also of the view that they are analyzed properly and effectively.

6.Conclusions

The main thing that I want to conclude firstly is that with the help of analysis, feedback generated
through questionnaire I found that the company is following an effective Recruitment and Selection
process to maximum extent.
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As per my study, out of the various methods of sourcing candidates, the best one is – getting references
via references and networking. In the process, I came across various experiences where the role of an
HR and the relevant traits he finds in the candidates were displayed. The structure of the financial
sector (as well as that of SMC Ltd) was known along with the analysis that recruitment is an ongoing
process in this industry and therefore new innovative methods have to be thought of and applied to
meet the demand. Company should focus on long term consistent performance rather then short term.
The emphasis towards training and enhancing skills of recruiters needs to be more and also consistent.
Even though an HR manager has many challenges to face in order to ensure that the human resource
department contributes to the bottom-line and emerges as a strategic partner in the business, it is
“Talent acquisition”, that is the key determining factor in how well an Human resource department
contributes towards the achievement of the overall objective of the organization and therefore is a
daunting task for any HR manager

7.References

Alvesson, M. (1990) ‘On the Popularity of Organizational Culture’, Acta Sociologica , 1: 31–49.
Babita , and Bhavana,2008 The impact of OCTAPACE culture on total productive maintenance, Vistas
P 20-23
Braun, S.A. (1995). Helping managers become effective job interviewers. Industrial Management, 37,
5-8.
Breaugh, J.A., and M. Starke. (2000). Research on employee recruitment: So many studies, so many
remaining questions. Journal of Management, 26, 405-434.
Organizational climate and culture: competing dynamics for transformational leadership Review of
Business Research(2007), Gerard F. Becker
Stoykov, Lubomir. (1995) Corporate culture and communication, Stopanstvo , Sofia.
Sheridan, John E.(2092) “Organizational culture and employee retention.” ,Academy of Management
Journal.
Schein, Edgar H. (1999). The Corporate Culture Survival Guide: Sense and Nonsense about Cultural
Change.
Thompson , K. R. & Luthans, F. (1990), "Organizational Culture: A behavioral Perspective", In:
Schneider, B. (ed.), Organizational Climate and Culture, Oxford: Jessey-Bass, Chapter 9
Wanous, J.P., and Reichers, A.E. (2000). New employee orientation Programs. Human Resource
Management Review, 10, 435-451.

Figures

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<Figure 1>

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<Figure 3>

<Figure 4>

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<Figure 5>

<Figure 6>

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<Figure 7>

<Figure 8>

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<Figure 9>

<Figure 10>

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