Robbins9 ppt09

ninth editionninth edition

STEPHEN P. ROBBINSSTEPHEN P. ROBBINS

© 2007 Prentice Hall, Inc. © 2007 Prentice Hall, Inc. All rights reserved.All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

MARY COULTERMARY COULTER

Planning Tools Planning Tools and Techniquesand Techniques

ChapterChapter

99

© 2007 Prentice Hall, Inc. All rights reserved. 9–2

L E A R N I N G O U T L I N E L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

Techniques for Assessing the EnvironmentTechniques for Assessing the Environment• List the different approaches to assess the environment.List the different approaches to assess the environment.

• Explain what competitor intelligence is and ways that Explain what competitor intelligence is and ways that managers can do it legally and ethically.managers can do it legally and ethically.

• Describe how managers can improve the effectiveness of Describe how managers can improve the effectiveness of forecasting.forecasting.

• List the steps in the benchmarking process.List the steps in the benchmarking process.

Techniques for Allocating ResourcesTechniques for Allocating Resources• List the four techniques for allocating resources.List the four techniques for allocating resources.

• Describe the different types of budgets.Describe the different types of budgets.

• Explain what a Gantt chart and a load chart do.Explain what a Gantt chart and a load chart do.


L E A R N I N G O U T L I N E (cont’d) L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

Techniques for Allocating Resources (cont’d)Techniques for Allocating Resources (cont’d)• Describe how PERT network analysis works.Describe how PERT network analysis works.

• Understand how to compute a breakeven point.Understand how to compute a breakeven point.

• Describe how managers can use linear programming.Describe how managers can use linear programming.

Contemporary Planning TechniquesContemporary Planning Techniques • Explain why flexibility is so important to today’s planning Explain why flexibility is so important to today’s planning

techniques.techniques.

• Describe project management.Describe project management.

• List the steps in the project planning process.List the steps in the project planning process.

• Discuss why scenario planning is an important planning Discuss why scenario planning is an important planning tool.tool.


Assessing the EnvironmentAssessing the Environment

• Environmental ScanningEnvironmental Scanning The screening of large amounts of information to The screening of large amounts of information to

anticipate and interpret change in the environment.anticipate and interpret change in the environment.

Competitor IntelligenceCompetitor Intelligence The process of gathering information about competitorsThe process of gathering information about competitors——

wwho they are; what they are doingho they are; what they are doing

– Is not spying but rather careful attention to readily Is not spying but rather careful attention to readily accessible information from employees, customers, accessible information from employees, customers, suppliers, the Internet, and competitors themselves.suppliers, the Internet, and competitors themselves.

May involve May involve reverse engineeringreverse engineering of competing products to of competing products to discover technical innovations.discover technical innovations.


Assessing the Environment (cont’d)Assessing the Environment (cont’d)

• Environmental Scanning (cont’d)Environmental Scanning (cont’d) Global ScanningGlobal Scanning

Screening a broad scope of information on global forces that Screening a broad scope of information on global forces that might affect the organization.might affect the organization.

Has value to firms with significant global interests.Has value to firms with significant global interests.

Draws information from sources that provide global Draws information from sources that provide global perspectives on world-wide issues and opportunities.perspectives on world-wide issues and opportunities.


Effective planning premisesEffective planning premises

• Anticipation about the environment ( both Anticipation about the environment ( both external and internal) is referred to as planning external and internal) is referred to as planning premises.premises.

• Following are the prerequisites for effective Following are the prerequisites for effective planning:planning:

1.1. Selection of premisesSelection of premises

2.2. Develop alternative plansDevelop alternative plans

3.3. Verify premisesVerify premises

4.4. Communicate premisesCommunicate premises


Effective implementation of strategyEffective implementation of strategy

• Effective implementation of strategy has seven Effective implementation of strategy has seven prerequisites:prerequisites:

1.1. Communicate strategiesCommunicate strategies

2.2. Develop and communicate planning premisesDevelop and communicate planning premises

3.3. Develop organization cultureDevelop organization culture

4.4. MonitoringMonitoring

5.5. Develop contingency strategies and programsDevelop contingency strategies and programs

6.6. Emphasize on planning and implementationEmphasize on planning and implementation

7.7. Create proper organizational climateCreate proper organizational climate



• ForecastingForecasting

The part of organizational planning that involves The part of organizational planning that involves creating predictions of outcomes based on creating predictions of outcomes based on information gathered by environmental scanning.information gathered by environmental scanning. Facilitates managerial Facilitates managerial

decision making.decision making.

Is most accurate in Is most accurate in stable environments.stable environments.



• Forecasting TechniquesForecasting Techniques Quantitative forecastingQuantitative forecasting

Applying a set of mathematical rules to a series of hard data Applying a set of mathematical rules to a series of hard data to predict outcomes (e.g., units to be produced).to predict outcomes (e.g., units to be produced).

Qualitative forecastingQualitative forecasting Using expert judgments and opinions to predict less than Using expert judgments and opinions to predict less than

precise outcomes (e.g., direction of the economy).precise outcomes (e.g., direction of the economy).

• Collaborative Planning, Forecasting, and Collaborative Planning, Forecasting, and Replenishment (CPFR) SoftwareReplenishment (CPFR) Software A standardized way for organizations A standardized way for organizations

to use the Internet to exchange data.to use the Internet to exchange data.


Exhibit 9–1Exhibit 9–1 Forecasting TechniquesForecasting Techniques

• Quantitative

• Time series analysis

• Regression models

• Econometric models

• Co-relation analysis

• Qualitative

• Jury of opinion

• Sales force composition

• Customer evaluation

• Brain storming

• Delphi method


Making Forecasting More EffectiveMaking Forecasting More Effective

1.1. Use simple forecasting methods.Use simple forecasting methods.

2.2. Compare each forecast with its corresponding Compare each forecast with its corresponding “no change” forecast.“no change” forecast.

3.3. Don’t rely on a single forecasting method.Don’t rely on a single forecasting method.

4.4. Don’t assume that the turning points in a trend Don’t assume that the turning points in a trend can be accurately identified.can be accurately identified.

5.5. Shorten the time period covered by a forecast.Shorten the time period covered by a forecast.

6.6. Remember that forecasting is a developed Remember that forecasting is a developed managerial skill that supports decision making.managerial skill that supports decision making.


BenchmarkingBenchmarking

• The search for the best practices among The search for the best practices among competitors and noncompetitors that lead to competitors and noncompetitors that lead to their superior performance.their superior performance.

• By analyzing and copying these practices, firms By analyzing and copying these practices, firms can improve their performance.can improve their performance.


Exhibit 9–2Exhibit 9–2 Steps in BenchmarkingSteps in Benchmarking

Source: Based on Y.K. Shetty, “Aiming High: Competitive Benchmarking for Superior Performance,” Long Range Planning. February 1993, p. 42.


Allocating ResourcesAllocating Resources

• Types of ResourcesTypes of Resources

The assets of the organizationThe assets of the organization Financial:Financial: debt, equity, and retained earnings debt, equity, and retained earnings

Physical:Physical: buildings, equipment, and raw materials buildings, equipment, and raw materials

Human:Human: experiences, skills, knowledge, and competencies experiences, skills, knowledge, and competencies

Intangible:Intangible: brand names, patents, reputation, trademarks, brand names, patents, reputation, trademarks, copyrights, and databasescopyrights, and databases


Allocating Resources: BudgetingAllocating Resources: Budgeting

• BudgetsBudgets

Are numerical plans for allocating resources (e.g., Are numerical plans for allocating resources (e.g., revenues, expenses, and capital expenditures).revenues, expenses, and capital expenditures).

Are used to improve time, space, and use of material Are used to improve time, space, and use of material resources.resources.

Are the most commonly used Are the most commonly used and most widely applicable and most widely applicable planning technique for planning technique for organizations.organizations.


Exhibit 9–3Exhibit 9–3 Types of BudgetsTypes of Budgets

Source: Based on R.S. Russell and B.W. Taylor III. Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.


Exhibit 9–4Exhibit 9–4 Suggestions for Improving BudgetingSuggestions for Improving Budgeting

• Collaborate and communicate.

• 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.


Allocating Resources: SchedulingAllocating Resources: Scheduling

• SchedulesSchedules

Plans that allocate resources by detailing what Plans that allocate resources by detailing what activities have to be done, the order in which they are activities have to be done, the order in which they are to be completed, who is to do each, and when they to be completed, who is to do each, and when they are to be completed.are to be completed.

Represent the coordination of various activities.Represent the coordination of various activities.


Allocating Resources: ChartingAllocating Resources: Charting

• Gantt ChartGantt Chart A bar graph with time on the horizontal axis and A bar graph with time on the horizontal axis and

activities to be accomplished on the vertical axis.activities to be accomplished on the vertical axis.

Shows the expected and actual progress of various Shows the expected and actual progress of various tasks.tasks.

• Load ChartLoad Chart A modified Gantt chart that lists entire departments or A modified Gantt chart that lists entire departments or

specific resources on the vertical axis.specific resources on the vertical axis.

Allows managers to plan and control capacity Allows managers to plan and control capacity utilization.utilization.


Exhibit 9–5Exhibit 9–5 A Gantt ChartA Gantt Chart


Exhibit 9–6Exhibit 9–6 A Load ChartA Load Chart


Allocating Resources: AnalysisAllocating Resources: Analysis

• Program Evaluation and Review Technique (PERT)Program Evaluation and Review Technique (PERT)

A flow chart diagram that depicts the sequence of activities A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs needed to complete a project and the time or costs associated with each activity.associated with each activity.

Events:Events: endpoints for completion. endpoints for completion.

Activities:Activities: time required for each activity. time required for each activity.

Slack time:Slack time: the time that a completed activity waits for another the time that a completed activity waits for another activity to finish so that the next activity, which depends on the activity to finish so that the next activity, which depends on the completion of both activities, can start.completion of both activities, can start.

Critical path:Critical path: the path (ordering) of activities that allows all the path (ordering) of activities that allows all tasks to be completed with the least slack time.tasks to be completed with the least slack time.


Exhibit 9–7Exhibit 9–7 Steps in Developing a PERT NetworkSteps in Developing a PERT Network

1. Identify every significant activity that must be achieved for a project to be completed.

2. Determine the order in which these events must be completed.

3. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities.

4. Compute a time estimate for completing each activity.

5. Using the network diagram that contains time estimates for each activity, determine a schedule for the start and finish dates of each activity and for the entire project.


Exhibit 9–8Exhibit 9–8 Events and Activities in Constructing an Office BuildingEvents and Activities in Constructing an Office Building


Exhibit 9–9Exhibit 9–9 A Visual PERT Network for Constructing an Office BuildingA Visual PERT Network for Constructing an Office Building

Critical Path: A - B - C - D - G - H - J - K


Allocating Resources: Analysis (cont’d)Allocating Resources: Analysis (cont’d)

• Breakeven AnalysisBreakeven Analysis Is used to determine the point at which all fixed costs Is used to determine the point at which all fixed costs

have been recovered and profitability begins.have been recovered and profitability begins. Fixed cost (FC)Fixed cost (FC) Variable costs (VC)Variable costs (VC) Total Fixed Costs (TFC)Total Fixed Costs (TFC) Price (P)Price (P)

• The Break-even Formula:The Break-even Formula:

Costs Variable Unit-Price Unit

Costs Fixed TotalBreakeven :


Exhibit 9–10Exhibit 9–10 Breakeven AnalysisBreakeven Analysis


Allocating Resources: Analysis (cont’d)Allocating Resources: Analysis (cont’d)

• Linear ProgrammingLinear Programming A technique that seeks to solve resource allocation A technique that seeks to solve resource allocation

problems using the proportional relationships between problems using the proportional relationships between two variables.two variables.


Exhibit 9–11Exhibit 9–11 Production Data for Cinnamon-Scented ProductsProduction Data for Cinnamon-Scented Products


Exhibit 9–12Exhibit 9–12 Graphical Solution to Linear Programming ProblemGraphical Solution to Linear Programming Problem

Max. Assembly

Max. Manufacturing

Max. Manufacturing

Max. Assembly

Max. Profits


Contemporary Planning TechniquesContemporary Planning Techniques

• ProjectProject

A one-time-only set of activities that has a definite A one-time-only set of activities that has a definite beginning and ending point time.beginning and ending point time.

• Project ManagementProject Management

The task of getting a project’s activities done on time, The task of getting a project’s activities done on time, within budget, and according to specifications.within budget, and according to specifications. Define project goalsDefine project goals

Identify all required activities, materials, and laborIdentify all required activities, materials, and labor

Determine the sequence of completionDetermine the sequence of completion


Exhibit 9–13Exhibit 9–13 Project Planning ProcessProject Planning Process

Source: Based on R.S. Russell and B.W. Taylor III, Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.


Contemporary Planning Techniques Contemporary Planning Techniques (cont’d)(cont’d)

• ScenarioScenario A consistent view of what the future is likely to be.A consistent view of what the future is likely to be.

• Scenario PlanningScenario Planning An attempt not try to predict the future but to reduce An attempt not try to predict the future but to reduce

uncertainty by playing out potential situations under uncertainty by playing out potential situations under different specified conditions.different specified conditions.

• Contingency PlanningContingency Planning Developing scenarios that allow managers determine Developing scenarios that allow managers determine

in advance what their actions should be should a in advance what their actions should be should a considered event actually occur.considered event actually occur.


Exhibit 9–14Exhibit 9–14 Preparing for Unexpected EventsPreparing for Unexpected Events

• Identify potential unexpected events.

• Determine if any of these events would have early indicators.

• Set up an information gathering system to identify early indicators.

• Have appropriate responses (plans) in place if these unexpected events occur.

Source: S. Caudron, “Frontview Mirror,” Business Finance, December 1999, pp. 24–30.


Terms to KnowTerms to Know

• environmental scanningenvironmental scanning• competitor intelligencecompetitor intelligence• forecastsforecasts• quantitative forecastingquantitative forecasting• qualitative forecastingqualitative forecasting• benchmarkingbenchmarking• resourcesresources• budgetbudget• schedulingscheduling• Gantt chartGantt chart• load chartload chart

• PERT networkPERT network• eventsevents• activitiesactivities• slack timeslack time• critical pathcritical path• breakeven analysisbreakeven analysis• linear programminglinear programming• projectproject• project managementproject management• scenarioscenario

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