Planning Tools and Techniques

Tools and Techniques
Appendix B
Management


Stephen P. Robbins Mary Coulter


tenth

edition

Outcomes Follow this Learning Outline as you read and study this

chapter.

Techniques for Assessing the Environment
List the different approaches to assess the environment.
Explain what competitor intelligence is and ways that managers can do it legally and ethically.
Describe how managers can improve the effectiveness of forecasting.
List the steps in the benchmarking process.

Outcomes
Techniques for Allocating Resources
List the four techniques for allocating resources.
Describe

the different types of budgets.
Explain what a Gantt chart and a load chart do.
Describe how PERT network analysis works.
Understand how to compute a breakeven point.
Describe how managers can use linear programming.

the Environment
Environmental Scanning
The screening of large amounts of information to

anticipate and interpret change in the environment.
Competitor Intelligence
The process of gathering information about competitors—who they are; what they are doing
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.

the Environment
Environmental Scanning (cont’d)
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.

the Environment (cont’d)
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.

the Environment (cont’d)
Forecasting Techniques
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.

B–1 Forecasting Techniques
Quantitative
Time series analysis
Regression models
Econometric models
Economic indicators
Substitution effect
Qualitative
Jury of

opinion
Sales force composition
Customer evaluation

Forecasting More Effective
Use simple forecasting methods.
Compare each forecast with its

corresponding “no change” forecast.
Don’t rely on a single forecasting method.
Don’t 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.

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.

B–2 Steps in Benchmarking
Source: Based on Y.K. Shetty, “Aiming High: Competitive

Benchmarking for Superior Performance,” Long Range Planning. February 1993, p. 42.

Resources
Types of Resources
The assets of the organization
Financial: debt, equity, and

retained earnings
Physical: buildings, equipment, and raw materials
Human: experiences, skills, knowledge, and competencies
Intangible: brand names, patents, reputation, trademarks, copyrights, and databases

Resources: Budgeting
Budgets
Are numerical plans for allocating resources (e.g., revenues, expenses,

and capital expenditures).
Are used to improve time, space, and use of material resources.
Are the most commonly used and most widely applicable planning technique for organizations.

B–3 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.

B–4 Suggestions 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.

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.

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.

B–5 A Gantt Chart

B–6 A Load Chart

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.

B–7 Steps in Developing a PERT Network
Identify every significant activity that

must be achieved for a project to be completed.
Determine the order in which these events must be completed.
Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities.
Compute a time estimate for completing each activity.
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.

B–8 Events and Activities in Constructing an Office

Building

B–9 A Visual PERT Network for Constructing an

Office Building

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

Resources: Analysis (cont’d)
Breakeven Analysis
Is used to determine the point at

which all fixed costs have been recovered and profitability begins.
Fixed cost (FC)
Variable costs (VC)
Total Fixed Costs (TFC)
Price (P)
The Break-even Formula:

B–10 Breakeven Analysis

Resources: Analysis (cont’d)
Linear Programming
A technique that seeks to solve resource

allocation problems using the proportional relationships between two variables.

B–11 Production Data for Cinnamon- Scented Products

B–12 Graphical Solution to Linear

Programming Problem

Max. Assembly

Max. Manufacturing

Max. Manufacturing

Max. Assembly

Max. Profits

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 project’s activities done on time, within budget, and according to specifications.
Define project goals
Identify all required activities, materials, and labor
Determine the sequence of completion

B–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.

Planning Techniques (cont’d)
Scenario
A consistent view of what the future is

likely to be.
Scenario Planning
An attempt not 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 determine in advance what their actions should be should a considered event actually occur.

to Know
environmental scanning
competitor intelligence
forecasts
quantitative forecasting
qualitative forecasting
benchmarking
resources
budget
scheduling
Gantt chart
load chart
PERT network
events
activities
slack time
critical

path
breakeven analysis
linear programming
project
project management
scenario

rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.