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Modern Management9th edition

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Objectives

• A complete definition of a plan

• Insights regarding various dimensions of plans

• An understanding of various types of plans

• Insights into why plans fail

• A knowledge of various planning areas within an organization

• A definition of forecasting

• An ability to see the advantages and disadvantages of various methods of sales forecasting

• A definition of scheduling

• An understanding of Gantt charts and PERT.

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PLANS: A DEFINITION

Dimensions of Plans

Repetitiveness

Time

Scope

Level

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Figure 9.1Four major dimensions to consider when developing a plan

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PLANS: A DEFINITION

Types of Plans

Standing Plans: Policies, Procedures, and Rules

Single-Use Plans: Programs and Budgets

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PLANS: A DEFINITION

Figure 9.2Standing plans and single-use plans

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Figure 9.3A successful standing plan program with

mutually supportive policies, procedures, and rules

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PLANS: A DEFINITION

Why Plans Fail1. Corporate planning is not integrated into the total management system

2. There is a lack of understanding of the different steps of the planning process

3. Management at different levels has not properly contributed to planning activities

4. Responsibility for planning is wrongly vested solely in the planning department

5. Management expects that plans developed will be realized with little effort

6. In starting formal planning, too much is attempted at once

7. Management fails to operate by the plan

8. Financial projections are confused with planning

9. Inadequate inputs are used in planning

10. Management fails to grasp the overall planning process

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PLANS: A DEFINITION

Planning Areas: Input Planning

Plant Facilities PlanningSite selection

1. Deciding on a set of variables critical to obtaining an appropriate site2. Assigning each of these variables a weight reflecting its relative importance3. Ranking alternative sites according to how they reflect these different variables

Human Resource PlanningQuestions for personnel planners

1. What types of people does the organization need to reach its objectives?2. How many of each type are needed?3. What steps should the organization take to recruit and select such people?4. Can present employees be further trained to fill future needed positions?5. At what rate are employees being lost to other organizations?

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PLANS: A DEFINITION

Table 9.1Major Areas of Consideration When Selecting a Plant Site

and Sample Exploratory Questions to Be AskedMajor Areas Sample Questions

ProfitMarket Location Where are our customers in relation to the site?Competition What competitive situation exists at the site?

Operating costsSuppliers Are materials available near the site at reasonable cost?Utilities What are utility rates at the site? Are utilities available in sufficient amounts?Wages What wage rates are paid by comparable organizations near the site?Taxes What are tax rates on income, sales, property, and so on for the site?

Investment costsLand/development How expensive are land and construction at the site?

OthersTransportation Are airlines, railroads, highways, and so on accessible from the site?LawsWhat laws related to zoning, pollution, and so on will influence operations if the site is chosen?Labor Does an adequate labor supply exist around the site?Unionization What is the degree of unionization in the site area?Living conditions Are housing, schools, and so on around the site appropriate?Community relations Does the community support the organization’s moving into the area?

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PLANS: A DEFINITION

Table 9.2 Results of Weighting Seven Site Variables for Six Countries

Sites MaximumCriteria Value Assigned Japan Chile Jamaica Australia Mexico France

Living conditions 100 70 40 45 50 60 60Accessibility 75 55 35 20 60 70 70Industrialization 60 40 50 55 35 35 30Labor availability 35 30 10 10 30 35 35Economics 35 15 15 15 15 25 25Community capability & attitude 30 25 20 10 15 25 15Effect on company reputation 35 25 20 10 15 25 15Total 370 260 190 165 220 275 250

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PLANS: A DEFINITION

Figure 9.4The human resource planning process

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PLANNING TOOLS

Forecasting

How Forecasting Works

Insect Control Services forecasts by attempting to do the following:

1. Establish relationships

2. Determine the impact government restrictions

3. Evaluate sales growth potential, profitability, resources required, and risks

4. Evaluate the potential for expansion of marketing efforts

5. Determine the likelihood of technological breakthroughs

Types of Forecasts.

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PLANNING TOOLS

Forecasting (con’t)Methods of Sales Forecasting

Jury of Executive Opinion Method1. Experts answer questions about area being forecasted

2. First summary of all the answers is prepared3. Experts get copies of first summary to modify as necessary4. Distribute second summary of these modifications to experts

Must justify opinions that deviate significantly from norm5. Distribute third summary of opinions and justifications to experts

Justification for all answers is now required6. Generate forecast from opinions and justifications from 5

Salesforce Estimation Method

Time Series Analysis MethodProduct Stages: introduction, growth, maturity, saturation, and

decline.

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PLANNING TOOLS

Figure 9.5Time series analysis method

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Figure 9.6Stages of the product life cycle

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Forecasting (con’t)

Evaluating Sales Forecasting Methods

Scheduling

Gantt Charts

Features

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Figure 9.7Completed Gantt chart

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PLANNING TOOLS

Forecasting (con’t)Program Evaluation and Review Technique (PERT)

Defining PERTActivities

Events

Features

Critical Path

Steps in Designing a PERT Network1. List all the activities/events for project and their sequence

2. Determine time needed to complete each activity/event

3. Design PERT reflecting all information contained in 1 and 2

4. Identify the critical path.

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PLANNING TOOLS

Figure 9.8PERT network designed for building a house

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Chapter Nine

Questions