Chap09
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The document describes various planning tools and techniques used by managers. It discusses methods for assessing the external environment, such as environmental scanning, forecasting, and benchmarking. Techniques for allocating resources internally include budgets, Gantt and load charts for scheduling, linear programming, and breakeven analysis. Contemporary tools covered are project management, using a team approach led by a project manager, and scenario planning to reduce uncertainty by considering potential future situations.
Chap09
- 1. Chapter 9 PLANNING TOOLS AND TECHNIQUES © Prentice Hall, 2002 9-1
- 2. Learning Objectives You should learn to: – Describe three techniques for assessing the environment – Describe four techniques for allocating resources – Tell why budgets are popular planning tools – Differentiate Gantt and load charts – Identify the steps in developing a PERT network © Prentice Hall, 2002 9-2
- 3. Learning Objectives (cont.) You should learn to: – Describe the requirements for using linear programming – Explain the concept of project planning – Tell how managers might use scenarios in planning © Prentice Hall, 2002 9-3
- 4. Techniques For Assessing The Environment Environmental Scanning – the screening of information to anticipate and interpret changes in the environment – competitor intelligence - gathering information about one’s competitors • a variety of sources of information is easily accessible – reverse engineering - analyze a competitor’s product • becomes illegal corporate spying when proprietary materials or trade secrets are stolen – fine line between what is legal and ethical and what is legal but unethical © Prentice Hall, 2002 9-4
- 5. Assessing The Environment (cont.) Environmental Scanning (cont.) – global scanning - screening of information on global forces that might affect an organization that has global interests • requires more extensive procedures than those used for scanning the domestic environment © Prentice Hall, 2002 9-5
- 6. Assessing The Environment (cont.) Forecasting – used to predict future events to facilitate decision making – Techniques • quantitative - applies a set of mathematical rules to a series of past data to predict outcomes • qualitative - uses the judgment and opinions of knowledgeable individuals to predict outcomes • collaborative forecasting and replenishment (CFAR) – standardized way for businesses to use the Internet to exchange data – information used to calculate a demand forecast for a particular product © Prentice Hall, 2002 9-6
- 7. Forecasting Techniques © Prentice Hall, 2002 9-7
- 8. Assessing The Environment (cont.) Forecasting (cont.) – Effectiveness - managers have had mixed success • forecasts are most accurate in relatively stable environments • forecasts are relatively ineffective in predicting nonseasonal events, unusual occurrences, and the actions of competitors • to improve forecasts - use simple forecasting methods – compare every forecast with “no change” – use several forecasting methods – shorten the length of forecasts – practice forecasting © Prentice Hall, 2002 9-8
- 9. Assessing The Environment (cont.) Benchmarking – the search for the best practices in other organizations that lead to superior performance – standard tool of many organizations in quest for performance improvement – analyze and then copy the methods used by leaders in various fields – important to identify appropriate targets for benchmarking – organizations may share benchmarking information © Prentice Hall, 2002 9-9
- 10. Steps In Benchmarking Form a benchmarking planning team Best Practices Prepare and implement action plan Gather internal and external data Analyze data to identify performance gaps © Prentice Hall, 2002 9-10
- 11. Suggestions for Improving Benchmark Efforts © Prentice Hall, 2002 9-11
- 12. Techniques For Allocating Resources Resources – the assets of the organization – take many forms, including financial, physical, human, intangible, and structural Budgeting – budgets - numerical plans for allocating resources to specific activities • are prepared for revenues, expenses, and large capital expenditures • are applicable to a wide variety of organizations and activities • force financial discipline © Prentice Hall, 2002 9-12
- 13. Suggestions for Improving Budgeting © Prentice Hall, 2002 9-13
- 14. Suggestions For Improving Budgeting • Be flexible • Goals should drive budgets -- budgets should not determine goals • Coordinate budgeting throughout the organization • Use budgeting/planning software when appropriate • Remember that budgets are tools • Remember that profits result from smart management, not because you budgeted for them © Prentice Hall, 2002 9-14
- 15. Techniques For Allocating Resources (cont.) Scheduling – detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed – Gantt Charts - show when tasks are supposed to be done • allow comparison with the actual progress on each task – serve as a control tool • a bar graph with time on the horizontal axis and the activities to be scheduled on the vertical axis • shading represents actual progress © Prentice Hall, 2002 9-15
- 16. A Gantt Chart Activity Month 1 2 3 4 Edit Manuscript Design Sample Pages Draw Artwork Print Galley Proofs Print Page Proofs Design Cover Goals Actual Progress © Prentice Hall, 2002 Reporting Date 9-16
- 17. Techniques For Allocating Resources (cont.) Scheduling (cont.) – Load Charts - modified Gantt Chart • schedule capacity by work areas – vertical axis lists either entire departments or specific resources • allow managers to plan and control capacity utilization © Prentice Hall, 2002 9-17
- 18. A Load Chart Editors Month 1 2 3 4 5 6 Anne Antonio Kim Maurice Dave Penny Work scheduled © Prentice Hall, 2002 9-18
- 19. Techniques For Allocating Resources (cont.) Scheduling (cont.) – Program Evaluation and Review Technique (PERT) Network Analysis • used to schedule complex projects • flowchartlike diagram that depicts the sequence of activities needed to complete a project • indicates the time or costs associated with each activity • can compare the effects alternative actions might have on scheduling and costs © Prentice Hall, 2002 9-19
- 20. Techniques For Allocating Resources (cont.) Scheduling (cont.) – PERT (cont.) - nomenclature • events - end points that represent the completion of major activities • activities - time or resources required to progress from one event to another • slack time - amount of time an activity can be delayed without delaying the entire project • critical path - the most time-consuming sequence of events and activities in a PERT network – delays on critical path will delay completion of the entire project (zero slack time) © Prentice Hall, 2002 9-20
- 21. Steps in Developing a PERT Network © Prentice Hall, 2002 9-21
- 22. A PERT Network for Constructing an Office Building © Prentice Hall, 2002 9-22
- 23. A PERT Network For Constructing An Office Building 4 D Start A 6 B 14 3 C 3 5 6 10 I E 3 5 J G 5 H 1 K 3 5 F © Prentice Hall, 2002 9-23
- 24. Techniques For Allocating Resources (cont.) Scheduling (cont.) – Breakeven Analysis - used to determine how many units must be sold to have neither profit nor loss • used to make profit projections • points out relationships between revenues, costs, and profits – breakeven point - total revenue is just enough to equal total costs © Prentice Hall, 2002 9-24
- 25. Techniques For Allocating Resources (cont.) Scheduling (cont.) – Breakeven Analysis (cont.) - nomenclature • P - unit price of product • VC - variable cost per unit • TFC - total fixed costs • Fixed costs - costs that do not change as volume increases • Variable costs - costs that change in proportion to output TFC BE = P − VC © Prentice Hall, 2002 9-25
- 26. Breakeven Analysis $90,000 80,000 Profi t Total RevenueArea Revenue/Cost($) 70,000 60,000 Breakeven Point 50,000 Total Costs 40,000 30,000 20,000 10,000 Loss Area 100 Variable Costs Fixed Costs 200 300 400 500 600 Output (in thousands) © Prentice Hall, 2002 9-26
- 27. Techniques For Allocating Resources (cont.) Scheduling (cont.) – Linear Programming • requirements – resources are limited – outcome optimization is the goal – alternative methods exist for combining resources to produce a number of output mixes – a linear relationship exists between variables • technique has a variety of applications © Prentice Hall, 2002 9-27
- 28. Techniques For Allocating Resources (cont.) Scheduling (cont.) – Linear Programming (cont.) - nomenclature • objective function - a mathematical equation that predicts the outcome of all proposed alternatives • production capacity of departments involved in producing the outputs – acts as a constraint on overall capacity – constraints define the feasibility region • feasibility region - defines the optimal resource allocation © Prentice Hall, 2002 9-28
- 29. Production Data for Cinnamon Scented Products © Prentice Hall, 2002 9-29
- 30. Quantity of Selected Candles Graphical Solution To Linear Programming Problem 700 600 500 400 F 300 B 200 100 A © Prentice Hall, 2002 Feasibility Region 100 C D 200 300 400 500 Quantity of Potpourri Bags E 600 9-30
- 31. Contemporary Planning Techniques Project Management – the task of getting a project’s activities done on time, within budget, and according to specifications • project - a one-time-only set of activities that has a definite beginning and ending point in time – standardized planning procedures often are not appropriate for projects – Project Management Process • team created from appropriate work areas • team reports to a project manager • project manager coordinates activities • team disbands when project is completed © Prentice Hall, 2002 9-31
- 32. Project Management Process Define objectives Identify activities and resources Establish sequences Estimate time for activities Determine project completion date Compare with objectives Determine additional resource requirements © Prentice Hall, 2002 9-32
- 33. Contemporary Planning Techniques (cont.) Project Management (cont.) – Role of the Project Manager • role is affected by the one-shot nature of the project • role is difficult because team members still linked to their permanent work areas – members may be assigned to several projects simultaneously • managers must rely on their communication skills and powers of persuasion © Prentice Hall, 2002 9-33
- 34. Contemporary Planning Techniques (cont.) Scenario Planning – scenario - a consistent view of what the future is likely to be – contingency planning - developing scenarios • if this is what happens, then these are the actions we need to take – intent is to reduce uncertainty by playing out potential situations under different specified conditions © Prentice Hall, 2002 9-34
- 35. Preparing for Unexpected Events © Prentice Hall, 2002 9-35