2. Learning Objectives
You should learn to:
â Describe three techniques for assessing the
environment
â Describe four techniques for allocating resources
â Tell why budgets are popular planning tools
â Differentiate Gantt and load charts
â Identify the steps in developing a PERT network
Š Prentice Hall, 2002
9-2
3. Learning Objectives (cont.)
You should learn to:
â Describe the requirements for using linear
programming
â Explain the concept of project planning
â Tell how managers might use scenarios in
planning
Š Prentice Hall, 2002
9-3
4. Techniques For Assessing The Environment
Environmental Scanning
â the screening of information to anticipate and interpret
changes in the environment
â competitor intelligence - gathering information about
oneâs competitors
⢠a variety of sources of information is easily accessible
â reverse engineering - analyze a competitorâs
product
⢠becomes illegal corporate spying when proprietary
materials or trade secrets are stolen
â fine line between what is legal and ethical and
what is legal but unethical
Š Prentice Hall, 2002
9-4
5. Assessing The Environment (cont.)
Environmental Scanning (cont.)
â 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
Š Prentice Hall, 2002
9-5
6. Assessing The Environment (cont.)
Forecasting
â used to predict future events to facilitate decision making
â 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)
â standardized way for businesses to use the Internet
to exchange data
â information used to calculate a demand forecast for
a particular product
Š Prentice Hall, 2002
9-6
8. Assessing The Environment (cont.)
Forecasting (cont.)
â 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
â compare every forecast with âno changeâ
â use several forecasting methods
â shorten the length of forecasts
â practice forecasting
Š Prentice Hall, 2002
9-8
9. Assessing The Environment (cont.)
Benchmarking
â the search for the best practices in other organizations
that lead to superior performance
â standard tool of many organizations in quest for
performance improvement
â analyze and then copy the methods used by leaders in
various fields
â important to identify appropriate targets for
benchmarking
â organizations may share benchmarking information
Š 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
Š Prentice Hall, 2002
9-10
12. Techniques For Allocating Resources
Resources
â the assets of the organization
â take many forms, including financial, physical, human,
intangible, and structural
Budgeting
â 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
Š Prentice Hall, 2002
9-12
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
Š Prentice Hall, 2002
9-14
15. Techniques For Allocating Resources (cont.)
Scheduling
â 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
â Gantt Charts - show when tasks are supposed to be done
⢠allow comparison with the actual progress on each
task
â 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
Š Prentice Hall, 2002
9-15
17. Techniques For Allocating Resources (cont.)
Scheduling (cont.)
â Load Charts - modified Gantt Chart
⢠schedule capacity by work areas
â vertical axis lists either entire departments or
specific resources
⢠allow managers to plan and control capacity
utilization
Š Prentice Hall, 2002
9-17
19. Techniques For Allocating Resources (cont.)
Scheduling (cont.)
â 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
Š Prentice Hall, 2002
9-19
20. Techniques For Allocating Resources (cont.)
Scheduling (cont.)
â 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
â delays on critical path will delay completion of the
entire project (zero slack time)
Š Prentice Hall, 2002
9-20
22. A PERT Network for Constructing an Office Building
Š 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
Š Prentice Hall, 2002
9-23
24. Techniques For Allocating Resources (cont.)
Scheduling (cont.)
â 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
â breakeven point - total revenue is just
enough to equal total costs
Š Prentice Hall, 2002
9-24
25. Techniques For Allocating Resources (cont.)
Scheduling (cont.)
â 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 â VC
Š Prentice Hall, 2002
9-25
27. Techniques For Allocating Resources (cont.)
Scheduling (cont.)
â Linear Programming
⢠requirements
â resources are limited
â outcome optimization is the goal
â alternative methods exist for combining
resources to produce a number of output
mixes
â a linear relationship exists between variables
⢠technique has a variety of applications
Š Prentice Hall, 2002
9-27
28. Techniques For Allocating Resources (cont.)
Scheduling (cont.)
â 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
â acts as a constraint on overall capacity
â constraints define the feasibility region
⢠feasibility region - defines the optimal resource
allocation
Š Prentice Hall, 2002
9-28
30. Quantity of Selected Candles
Graphical Solution To Linear Programming
Problem
700
600
500
400
F
300 B
200
100
A
Š 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
â the task of getting a projectâs 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
â standardized planning procedures often are not
appropriate for projects
â 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
Š 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
Š Prentice Hall, 2002
9-32
33. Contemporary Planning Techniques (cont.)
Project Management (cont.)
â 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
â members may be assigned to several projects
simultaneously
⢠managers must rely on their communication
skills and powers of persuasion
Š Prentice Hall, 2002
9-33
34. Contemporary Planning Techniques (cont.)
Scenario Planning
â scenario - a consistent view of what the future is
likely to be
â contingency planning - developing scenarios
⢠if this is what happens, then these are the
actions we need to take
â intent is to reduce uncertainty by playing out
potential situations under different specified
conditions
Š Prentice Hall, 2002
9-34