Planning

Planning Planning means looking ahead and chalking out future courses of action to be followed. “Well plan is half done”. According to Koontz & O’Donell, “Planning is deciding in advance what to do, how to do and who is to do it.

Reasons for Planning

Steps in Planning Function Assumptions about the lively shape of events in future. Establishment of objectives Establishment of Planning Premises Choice of alternative course of action Follow up/Appraisal of plans Formulation of derivative plans Securing Co-operation

Establishment of Objectives Objectives: SMART Goals: Go, Qualitative Targets:

Establishment of Planning Premises: Internal Capital Investment Policy Labor Management Relationships External PEST LDG

Planning premises: Material, Machine, Money, M. Strategy, PEST Goodwill. Morale, Attitude, PR Union Management Relationships

Choice of alternative course of action: Choice of alternatives based In light with Resource available Risk Effort required Selecting from alternatives : Experience R & D Experimentation Collective decision making

Formulation of derivative Plan: Sub Plans Securing Co-Operation: Subordinate May feel motivated, Valuable Suggestions, Improvement Follow Up: Appraise its effectiveness received from departments

Decision Making: “Decision-making involves The selection of a course of action From among two or more possible alternatives In order to arrive at a solution for a given problem”.

Types of Decision Making Policy decisions Tactical and routine decisions: policy, rules and procedure

Decision Making Process Defining and analyzing the problem Gathering information and collecting data Developing and weighing the options Choosing best possible option Plan and execute Take follow up action

Defining and analyzing the problem The nature of the problem and decision to be taken? The impact of the decision to be taken? The strategic factor limiting to the decision

Techniques of Decision Making Marginal Cost Analysis Cost Benefit Analysis Operational research Linear programing Network Analysis

Cascading of Objectives

Elements of MBO Goal specificity Participative decision making Explicit time period for performance Performance feedback

“Prediction is very difficult, especially if it's about the future.” Forecasting “Prediction is very difficult, especially if it's about the future.” Nils Bohr

What is forecasting? Forecasting is a tool used for predicting future demand based on past demand information.

Why is forecasting important? Demand for products and services is usually uncertain. Forecasting can be used for… Strategic planning (long range planning) Finance and accounting (budgets and cost controls) Marketing (future sales, new products) Production and operations

Predicted demand looking back six months What is forecasting all about? We try to predict the future by looking back at the past Demand for Mercedes E Class Time Jan Feb Mar Apr May Jun Jul Aug Predicted demand looking back six months Actual demand (past sales) Predicted demand

Key issues in forecasting A forecast is only as good as the information included in the forecast (past data) History is not a perfect predictor of the future (i.e.: there is no such thing as a perfect forecast)

Example: Mercedes E-class vs. M-class Sales Month E-class Sales M-class Sales Jan 23,345 - Feb 22,034 Mar 21,453 Apr 24,897 May 23,561 Jun 22,684 Jul ? Question: Can we predict the new model M-class sales based on the data in the table? Answer: Maybe... We need to consider how much the two markets have in common

What should we consider when looking at past demand data? Trends Seasonality Cyclical elements Autocorrelation Random variation

Types of forecasting methods Qualitative methods Quantitative methods Rely on subjective opinions from one or more experts. Rely on data and analytical techniques.

Qualitative forecasting methods Market Research: trying to identify customer habits; new product ideas. Panel Consensus: deriving future estimations from the synergy of a panel of experts in the area. Historical Analogy: identifying another similar market. Delphi Method

Quantitative forecasting methods Time Series: models that predict future demand based on past history trends Causal Relationship: models that use statistical techniques to establish relationships between various items and demand