Managing Engineering and Managing Engineering and TechnologyTechnology Third EditionThird EditionBabcock and MorseBabcock and Morse

Planning and ForecastingPlanning and Forecasting

Chapter 3Chapter 3

D ecision M aking

P lanning

O rganiz ing

Leading

C ontro lling

M anagem ent Functions

R esearch

D esign

Production

Q uality

M arketing

Pro ject M anagem ent

M anaging T echnology

T im e M anagem ent

E th ics

C areer

Personal T echnology

M anaging Engineering and Technology

Advanced OrganizerAdvanced Organizer

Chapter ObjectivesChapter Objectives

• Explain the needs for planning Explain the needs for planning and analyze a planning modeland analyze a planning model

• Be able to solve forecasting Be able to solve forecasting problemsproblems

PlanningPlanning

• Provides method for identifying Provides method for identifying objectivesobjectives

• Design sequence of programs and Design sequence of programs and activities to achieve objectivesactivities to achieve objectives

• Plan to planPlan to plan

• People implementing plan should People implementing plan should be involved in preparing planbe involved in preparing plan

Planning (Amos and Planning (Amos and Sarchet)Sarchet)

• What must be done?What must be done?

• Who will do it?Who will do it?

• How will it be done?How will it be done?

• When must it be done?When must it be done?

• How much will it cost?How much will it cost?

• What do we need to do it?What do we need to do it?

Planning Process/Decision Planning Process/Decision making process/making process/Scientific MethodScientific Method

(above: names differ depending on application)(above: names differ depending on application)

• Define the problemDefine the problem• Collect dataCollect data• Develop hypothesesDevelop hypotheses• Test hypothesesTest hypotheses• Analyze resultsAnalyze results• Draw conclusionDraw conclusion

Planning ProcessPlanning ProcessDecision Making ProcessDecision Making Process

(this occurs as a diagram in the book & is iterative)(this occurs as a diagram in the book & is iterative)

• Define the decision problemDefine the decision problem• Search for data and informationSearch for data and information• Generate alternative courses of Generate alternative courses of

actionaction• Analyze feasible alternativesAnalyze feasible alternatives• Select best course of actionSelect best course of action• Implement decision and evaluate Implement decision and evaluate

resultsresults

PlanningPlanning

• What is the Problem/Purpose?What is the Problem/Purpose?

• Establish Goal/ObjectivesEstablish Goal/Objectives

• What Client Need Is Being What Client Need Is Being Satisfied by the Project?Satisfied by the Project?

• Identify Success CriteriaIdentify Success Criteria

The Foundation for The Foundation for PlanningPlanning

• VisionVision: what the firm wants to be in the future (when no : what the firm wants to be in the future (when no

vision: Vietnam war ex.)vision: Vietnam war ex.)

• MissionMission: bold goal with clear finish line and specific : bold goal with clear finish line and specific

time frame, what do we want to dotime frame, what do we want to do

• PurposePurpose: fundamental reason for firm’s existence: fundamental reason for firm’s existence

• Goal/AimGoal/Aim: What? Why? For whom? How? Is it : What? Why? For whom? How? Is it

consistent with organization? (official and operative)consistent with organization? (official and operative)

• ObjectivesObjectives: Clarifies goals, how do we go about it?: Clarifies goals, how do we go about it?

Must be reviewed often to see whether they are still validMust be reviewed often to see whether they are still valid

PlanningPlanningDevelop ObjectivesDevelop Objectives

•SSpecificpecific

•MMeasurableeasurable

•AAttainablettainable

•RRealisticealistic

•TTime-ime-

limitedlimited

• Outcome - what is to Outcome - what is to be accomplishedbe accomplished

• Time Frame - Time Frame - expected completion expected completion datedate

• Measure - metrics for Measure - metrics for successsuccess

• Action - how the Action - how the objective will be metobjective will be met

Strategic PlanningStrategic Planning

Business a company is in

Business a company wants to be in

MARKETMARKET Market shareMarket share

SmallSmall LargeLarge

Fast-growthFast-growth ??? (increase market)??? (increase market) Stars (invest more)Stars (invest more)

Slow-growthSlow-growth Dogs (eliminate)Dogs (eliminate) Cash cows (milk Cash cows (milk profits)profits)

Business Portfolio Matrix

Strategic Mgmt. of Tech.Strategic Mgmt. of Tech.(Jan/Feb’06 Q1a)(Jan/Feb’06 Q1a)

• Base tech.:Base tech.: firm must master these to be firm must master these to be effective competitors, invest in R&D to effective competitors, invest in R&D to maintain competencemaintain competence

• Key tech.Key tech.: provides competitive : provides competitive advantage, can embed features to get advantage, can embed features to get better efficiency in production processbetter efficiency in production process

• Pacing tech.Pacing tech.: could become tomorrow’s : could become tomorrow’s key tech.key tech.

Issue is to maintain balance between key and pacing techs.Issue is to maintain balance between key and pacing techs.

Goals and Objectives (G&O) Goals and Objectives (G&O) again (again (May/Jun’ 06 Q1aMay/Jun’ 06 Q1a))

• Drucker’s Objectives for Organizational SurvivalDrucker’s Objectives for Organizational Survival• Market ShareMarket Share: company $sales/total $sales of everyone in market: company $sales/total $sales of everyone in market

• InnovationInnovation: want more sales in new products: want more sales in new products

• ProductivityProductivity: more goods+services per input: more goods+services per input

• Physical and Financial ResourcesPhysical and Financial Resources: goals for resources: goals for resources

• Manager Performance and DevelopmentManager Performance and Development: availability of managers : availability of managers in required quality and quantityin required quality and quantity

• Worker Performance and AttitudeWorker Performance and Attitude: respect for individual employee: respect for individual employee

• ProfitabilityProfitability: so as to measure enterprise success: so as to measure enterprise success

• Social ResponsibilitySocial Responsibility: effect on the environment: effect on the environment

Management by Objectives (MBO)Management by Objectives (MBO)

1. Sup. and sub. understand G&O of organization

2. Sup. and sub. meet to estb. G&O of sub’s focus in next 6 months

3. Sub. then carries out the job wrt objectives for next 6 months

4. Sup. and sub. meet to evaluate sub’s success

Advs: >commitment/satisfaction for sub. Involving. Rational method of performance evaluation

Disadvs: >paperwork, misuse, focusing on only few objectives

Should need effort to attain, quantifiable/verifiable, resources needed by sub. must be made available by sup., shouldn’t be for sole benefit of sup.

Shouldn’t be to place blame on sub. Can estb. new objectives.

Some planning conceptsSome planning concepts

•Responsibility for planning: rests with top and middle level mgrs. Must estb. enterprise objectives, overall strategy, planning guidelines, review and redirect planning effort

•Planning premises: the anticipated env. in which plans are expected to operate. Future economic conditions, govt. decisions, competition and markets. Develop contingency plans if premises go wrong

•Planning horizon: how far one should plan. Depends on nature of business and plan. Ex. Nuclear power plant

•System of plans: yearly forecasts

•Policies and procedures: policies -> clear, flexible, communicated, procedures -> SOP

ForecastingForecasting

• Forecast salesForecast sales

• Essential preliminary to effective Essential preliminary to effective planningplanning

• Engineering manager must be Engineering manager must be concerned with both future markets concerned with both future markets and future technologyand future technology

Why Forecasting?Why Forecasting?

• New facility planningNew facility planning

• Production planningProduction planning

• Work force schedulingWork force scheduling

Long Range ForecastsLong Range Forecasts

• Design new productsDesign new products

• Determine capacity for new Determine capacity for new productproduct

• Long range supply of materialsLong range supply of materials

Short Range ForecastsShort Range Forecasts

• Amount of inventory for next Amount of inventory for next monthmonth

• Amount of product to produce Amount of product to produce next weeknext week

• How much raw material How much raw material delivered next weekdelivered next week

• Workers schedule next weekWorkers schedule next week

Forecasting MethodsForecasting Methods

• Quantitative MethodsQuantitative MethodsExpert/executive Opinion, DelphiExpert/executive Opinion, DelphiHistorical (sales force composite): regional managers ask their Historical (sales force composite): regional managers ask their salesmensalesmen

User expectation: ask customers, good if few customersUser expectation: ask customers, good if few customers

Choice of method: many methods can be combinedChoice of method: many methods can be combined

• Qualitative Methods Qualitative Methods Simple moving averageSimple moving average

Weighted moving averageWeighted moving average

Exponential smoothingExponential smoothing

Regression models (simple/multiple regressions)Regression models (simple/multiple regressions)

Jan/Feb’06 Q1b andJan/Feb’06 Q1b and

Pg82 textbook, 3-12, 3-13. 3-14Pg82 textbook, 3-12, 3-13. 3-14

May/Jun’ 06 Q1bMay/Jun’ 06 Q1b

Delphi MethodDelphi Method

• Eliminates effects of interactions Eliminates effects of interactions between membersbetween members

• Experts do not need to know Experts do not need to know who other experts arewho other experts are

• Delphi coordinator asks for Delphi coordinator asks for opinions, forecasts on subjectopinions, forecasts on subject

Delphi Method, contDelphi Method, cont

• Develop objective of forecastDevelop objective of forecast

• Determine number of Determine number of participantsparticipants

• Select and contact participantsSelect and contact participants

• Develop first questionnaire and Develop first questionnaire and submitsubmit

• Coordinator analyzes responsesCoordinator analyzes responses

Delphi Method, contDelphi Method, cont

• Develop second questionnaire Develop second questionnaire based on results of firstbased on results of first

• Analyze responsesAnalyze responses

• Rounds continue until Rounds continue until consensus reached or experts’ consensus reached or experts’ opinions cease to changeopinions cease to change

Technological ForecastingTechnological Forecasting

Normative forecasting: desired future goal is set and process is

worked back

Exploratory forecasting: begins with current state of technology

and extrapolates into the future. Ex.: Delphi method

Good model for forecasting: S-curve method. Performance from

new technology starts slowly, grows exponentially and

eventually levels out