Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.

Copyright 2005 Pearson Education Canada Inc.

1
Chapter 8
Planning Tools and Techniques
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
2
LEARNING OUTLINE
Follow this Learning Outline as you read and study this chapter.
Techniques for Assessing the Environment
List the three different approaches to environmental
scanning.
Explain what competitor intelligence is and ways that
managers can do it legally and ethically.
Describe how managers can improve the effectiveness of
forecasting.
Explain the steps in the benchmarking process.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
3
LEARNING OUTLINE (contd)
Follow this Learning Outline as you read and study this chapter.
Techniques for Allocating Resources
List the four techniques for allocating resources.
Describe the different types of budgets.
Explain how to create a Gantt chart.
Explain a load chart.
Describe how a PERT network analysis works.
Compute a breakeven point.
Describe how managers can use linear programming.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
4
Contemporary Planning Techniques
Explain why flexibility is so important to todays
planning techniques.
Describe project management.
List the steps in the project planning process.
Discuss why scenario planning has become an important
planning tool for managers.
LEARNING OUTLINE (contd)
Follow this Learning Outline as you read and study this chapter.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
5
Assessing the Environment
Environmental Scanning
The screening of large amounts of information to
anticipate and interpret changes in the environment
Competitor Intelligence
The process of gathering information about competitorswho
they are, what they are doing, and how their actions will affect
the organization
Is not spying but rather careful attention to readily accessible
information from employees, customers, suppliers, the Internet,
and competitors themselves
May involve reverse engineering of competing products to
discover technical innovations
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
6
Assessing the Environment
(contd)
Environmental Scanning
(contd)
Global Scanning
Screening a broad scope of
information on global forces that
might affect the organization
Has value to firms with significant
global interests
Draws information from sources that
provide global perspectives on
worldwide issues and opportunities
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
7
Assessing the Environment
(contd)
Forecasting
The part of organizational planning that involves
creating predictions of outcomes based on
information gathered by environmental scanning
Facilitates managerial decision making
Is most accurate in stable environments
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
8
Assessing the Environment
(contd)
Types of Forecasting
Quantitative forecasting
Applying a set of mathematical rules to a series of hard data to
predict outcomes (e.g., units to be produced)
Qualitative forecasting
Using expert judgments and opinions to predict less than
precise outcomes (e.g., direction of the economy)
Collaborative Planning, Forecasting, and
Replenishment (CPFR) Software
A standardized way for organizations
to use the Internet to exchange data
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
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Exhibit 8.1
Exhibit 8.1 Forecasting Techniques
Quantitative
Time series analysis
Regression models
Econometric models
Economic indicators
Substitution effect
Qualitative
Jury of opinion
Sales force composition
Customer evaluation
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
10
Making Forecasting More
Effective
Use simple forecasting methods
Compare each forecast with its corresponding
no change forecast
Dont rely on a single forecasting method
Dont assume that the turning points in a trend
can be accurately identified
Shorten the time period covered by a forecast
Remember that forecasting is a developed
managerial skill that supports decision making
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
11
Benchmarking
The search for the best practices among competitors
and noncompetitors that lead to their superior
performance
By analyzing and copying these practices, firms can
improve their performance
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
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The Benchmarking Process
Form a benchmarking team
Identify what is to be benchmarked, select comparison
organizations, and determine data collection methods
Collect internal and external data on work methods
Analyze data to identify performance gaps and the
cause of differences
Prepare and implement an action plan to meet or
exceed the standards of others
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
13
Exhibit 8.2 Steps in Benchmarking
Source: Based on Y.K. Shetty, Aiming High: Competitive Benchmarking
for Superior Performance, Long Range Planning. February 1993, p. 42.
BEST
PRACTICES
Analyze data to identify
performance gaps.
Form a benchmarking
planning team.
Gather internal and
external data.
Prepare and implement
action plan.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
14
Allocating Resources
Types of Resources
The assets of the organization
Financial: debt, equity, retained earnings, and other
financial holdings
Physical: buildings, equipment, raw materials, and other
tangible assets
Human: experiences, skills, knowledge, and
competencies
Intangible: brand names, patents, reputation, trademarks,
copyrights, and databases
Structural/cultural: history, culture, work systems,
working relationships, trust, and policies
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
15
Exhibit 8.3 Techniques for Allocating
Resources
Scheduling
Detailing what's to
be done, in what
order, by whom,
and when
Breakeven Analysis
Determining the
point where revenue
and costs of a
project will match
Linear Programming
Using a
mathematical
technique to solve
resource allocation
Budgeting
Creating a numerical
plan for allocating
resources to
specific activities
Revenue Expense Profit Cash Gantt Load PERT
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
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Allocating Resources: Budgeting
Budgets
Numerical plans for allocating resources (e.g., revenues,
expenses, and capital expenditures)
Used to improve time, space, and use of material
resources
Are the most commonly used
and most widely applicable
planning technique for
organizations
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
17
Exhibit 8.4 Types 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.
Variable Budget
Takes into account
the costs that vary
with volume
Fixed Budget
Assumes fixed
level of sales
or production
Cash Budget
Forecasts cash on hand
and how much will
be needed
Revenue Budget
Projects future sales
Profit Budget
Combines revenue and expense
budgets of various units to determine
each unit s profit contribution
Expense Budget
Lists primary activities
and allocates dollar
amount to each
OR
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
18
Tips for Managers: Improving
Budgeting
Be flexible.
Understand that 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.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
19
Allocating Resources: Scheduling
Schedules
Plans that allocate resources by 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
Represent the coordination of various activities
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
20
Allocating Resources: Charting
Gantt Chart
A bar graph with time on the horizontal axis and activities
to be accomplished on the vertical axis
Shows the expected and actual progress of various tasks
Load Chart
A modified Gantt chart that lists entire departments or
specific resources on the vertical axis
Allows managers to plan and control capacity utilization
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
21
Exhibit 8.5 A Gantt Chart
Copy-edit manuscript
Design sample pages
Draw artwork
Print first pages
Print final pages
Design cover
1 2
Month
Reporting Date
Activity
3 4
Actual progress
Goals
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
22
Exhibit 8.6 A Load Chart
Ling
Antonio
Kim
Maurice
Dave
Rashid
1 2
Month Editors
3 4 5 6
Work scheduled
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
23
Allocating Resources: Analysis
Program Evaluation and Review Technique (PERT)
A flow chart diagram that depicts the sequence of
activities needed to complete a project and the time or
costs associated with each activity
Events: endpoints for completion
Activities: time required for each activity
Slack time: the time that a completed activity waits for another
activity to finish so that the next activity, which depends on the
completion of both activities, can start
Critical path: the path (ordering) of activities that allows all
tasks to be completed with the least slack time
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
24
Exhibit 8.7 Steps 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.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
25
Exhibit 8.8 Outline of Major Events
for Constructing an Office Building
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
26
Exhibit 8.9 A PERT Network for
Constructing an Office Building
Critical Path: A - B - C - D - G - H - J - K
K J
H G E
F
10 6 14 5
3
3
1
6
4
5
5 3
3 5
I D
C B A Start
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
27
Allocating Resources: Analysis
(contd)
Break-even Analysis
Is used to determine the point at which all fixed costs
have been recovered and profitability begins
Fixed costs (FC)
Variable costs (VC)
Total Fixed Costs (TFC)
Price (P)
The Break-even Formula:
Costs Variable Unit - Price Unit
Costs Fixed Total
Break-even :
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
28
Exhibit 8.10 Break-even Analysis
70 000
60 000
50 000
40 000
30 000
20 000
10 000
100 200 300
Output (in thousands)
400 500 600
Breakeven
Point
Variable Costs
Fixed Costs
Profit
Area
Total
Revenue
Loss
Area
Total
Costs
R
e
v
e
n
u
e
/
C
o
s
t

(
$
)

Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
29
Allocating Resources: Analysis
(contd)
Linear Programming
A technique that seeks to solve resource allocation
problems using the proportional relationships between
two variables
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
30
Exhibit 8.11 Production Data for
Cinnamon-Scented Products
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
31
Exhibit 8.12
Graphical
Solution to
Linear
Programming
Problem
700
600
500
400
300
200
100
100
Feasibility
Region
200 300
Quantity of Potpourri Bags
400 500 600
A D
C
E
B
F
Q
u
a
n
t
i
t
y

o
f

S
c
e
n
t
e
d

C
a
n
d
l
e
s

Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
32
Contemporary Planning Techniques
Project
A one-time-only set of activities that has a
definite beginning and ending point time
Project Management
The task of getting a projects activities done on
time, within budget, and according to
specifications
Define project goals
Identify all required activities, materials, and labour
Determine the sequence of completion
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
33
Exhibit 8.13 Project 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.
Define
objectives
Identify
activities
and
resources
Establish
sequences
Estimate
time for
activities
Determine
project
completion
date
Compare
with
objectives
Determine
additional
resource
requirements
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
34
Contemporary Planning Techniques
(contd)
Scenario
A consistent view of what the future is likely to be
Scenario Planning
An attempt not to try to predict the future but to reduce
uncertainty by playing out potential situations under
different specified conditions
Contingency Planning
Developing scenarios that allow managers to determine in
advance what their actions should be should a considered
event actually occur
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright 2005 Pearson Education Canada Inc.
35
Tips for Managers: Preparing 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.