1. PLANNING TOOLS AND TECHNIQUES
Chapter 9
PLANNING TOOLS
AND
TECHNIQUES
© 2003 Pearson Education Canada Inc.
9.1 1

2. LEARNING OBJECTIVES You should be able to:
Describe three techniques for assessing the environment
Describe four techniques for allocating resources
Tell why budgets are popular planning tools
Differentiate Gantt and load charts
Identify the steps in developing a PERT network
9.2 2

3. LEARNING OBJECTIVES (continued)
You should be able to (continued):
State the factors that determine the breakeven point
Describe the requirements for using linear programming
Explain the concept of project management
Tell how managers might use scenarios in planning
9.3 3

4. TECHNIQUES FOR ASSESSING THE ENVIRONMENT
Environmental Scanning
The screening of information to anticipate and interpret changes in the environment
Competitor intelligence - gathering information about one’s competitors
Global scanning - screening of information on global forces that might affect an organization that has global interests
9.4 4

5. TECHNIQUES FOR ASSESSING THE ENVIRONMENT (continued)
Forecasting
Used to predict future events to facilitate decision making
Techniques
quantitative - applies a set of mathematical rules to a series of past data to predict outcomes
qualitative - uses the judgment and opinions of knowledgeable individuals to predict outcomes
9.5 5

6. FORECASTING TECHNIQUES (Figure 9.1)
9.6 6

7. TECHNIQUES FOR ASSESSING THE ENVIRONMENT (continued)
Forecasting (continued)
Effectiveness - managers have had mixed success
forecasts are most accurate in relatively stable environments
forecasts are relatively ineffective in predicting nonseasonal events, unusual occurrences, and the actions of competitors
to improve forecasts - use simple forecasting methods
9.7 7

8. TECHNIQUES FOR ASSESSING THE ENVIRONMENT (continued)
Benchmarking
The search for the best practices in other organizations that lead to superior performance
Standard tool of many organizations in quest for performance improvement
Analyze and then copy the methods used by leaders in various fields
Important to identify appropriate targets for benchmarking
Organizations may share benchmarking information
9.8 8

9. © 2003 Pearson Education Canada Inc.
STEPS IN BENCHMARKING (Exhibit 9.2)
Form a benchmarking
planning team
Gather internal and
external data
BEST
PRACTICES
Prepare and
implement
action plan
Analyze data to
identify performance
gaps
© 2003 Pearson Education Canada Inc.
9.9 9

10. TECHNIQUES FOR ALLOCATING RESOURCES
The assets of the organization
take many forms, including financial, physical, human, intangible, and structural/cultural
Budgeting
Budgets - numerical plans for allocating resources to specific activities
9.10 10

11. TYPES OF BUDGETS (Exhibit 9.4)
Revenue Budget
Projects Future Sales
Cash Budget
Forecasts cash on hand and
how much will be
needed
Expense
Budget
Lists primary
activities
and allocates
dollar amount to
each
Variable Budget Fixed Budget
Takes into account Assumes fixed
the costs that vary level of sales
with volume or projection
Profit Budget
Combines revenue and expense budgets of
various units to determine each unit’s profit
9.11 11

12. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Budgeting (continued)
Ways to improve budgeting process:
Be flexible
Goals should drive budgets
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
9.12 12

13. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Scheduling
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
Gantt Charts
show when tasks are supposed to be done
actual and planned output over period of time
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14. © 2003 Pearson Education Canada Inc.
A GANTT CHART (Exhibit 9.6)
Activity
Copyedit manuscript
Design sample pages
Draw artwork
Print galley proofs
Print page proofs
Design cover
Month 1 2 4 3
Reporting Date
Goals
Actual Progress
© 2003 Pearson Education Canada Inc.
9.14 14

15. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Scheduling (continued)
Load Charts - modified Gantt Chart
schedule capacity by work areas
vertical axis lists either entire departments or specific resources
allow managers to plan and control capacity utilization
9.15 15

16. © 2003 Pearson Education Canada Inc.
A LOAD CHART (Exhibit 9.7)
Editors
Anne
Antonio
Kim
Maurice
Dave
Penny
Month 1 2 3 4 5 6
Work scheduled
© 2003 Pearson Education Canada Inc.
9.16 16

17. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Scheduling (continued)
PERT (Program Evaluation and Review Technique) Network Analysis
used to schedule complex projects
flowchart diagram that depicts the sequence of activities needed to complete a project
indicates the time or costs associated with each activity
can compare the effects alternative actions might have on scheduling and costs
9.17 17

18. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Scheduling (continued)
PERT (continued)
events - end points that represent the completion of major activities
activities - time or resources required to progress from one event to another
slack time - amount of time an activity can be delayed without delaying the entire project
critical path - the most time-consuming sequence of events and activities in a PERT network
9.18 18

19. STEPS IN DEVELOPING A PERT NETWORK (Exhibit 9.8)
9.19 19

20. © 2003 Pearson Education Canada
A PERT NETWORK FOR CONSTRUCTING AN OFFICE BUILDING (Exhibit 9.10) A E B D F C H I G J K
Start 10 6 14 3 5 4 1
© 2003 Pearson Education Canada
9.20 20

21. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Breakeven Analysis - used to determine how many units must be sold to have neither profit nor loss
Used to make profit projections
Points out relationships between revenues, costs, and profits
9.21 21

22. © 2003 Pearson Education Canada Inc.
BREAKEVEN ANALYSIS (Exhibit 9.11)
$90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
Revenue/Cost($)
Profit
Area
Total Revenue
Breakeven Point
Variable
Costs
Total Costs
Loss
Area
Fixed
Costs
Output (in thousands)
© 2003 Pearson Education Canada Inc.
9.22 22

23. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Breakeven Analysis (continued)
P - unit price of product
VC - variable cost per unit
TFC - total fixed costs
Fixed costs - costs that do not change as volume increases
Variable costs - costs that change in proportion to output
9.23 23

24. TECHNIQUES FOR ALLOCATING RESOURCES (continued)
Linear Programming
Mathematical technique that solve resource allocation problems
Requirements
resources are limited
outcome optimization is the goal
alternative methods exist for combining resources to produce a number of output mixes
a linear relationship exists between variables
technique has a variety of applications
9.24 24

25. CONTEMPORARY PLANNING TECHNIQUES
Project Management
The task of getting a project’s activities done on time, within budget, and according to specifications
project - a one-time-only set of activities that has a definite beginning and ending point in time
Standardized planning procedures often are not appropriate for projects
9.25 25

26. CONTEMPORARY PLANNING TECHNIQUES (continued)
Project Management (continued)
Project Management Process
team created from appropriate work areas
team reports to a project manager
project manager coordinates activities
team disbands when project is completed
9.26 26

27. © 2003 Pearson Education Canada Inc.
PROJECT MANAGEMENT PROCESS (Exhibit 9.14)
Define
objectives
Establish
sequences
Identify activities
and resources
Compare with
Estimate time
for activities
Determine
project
completion date
additional
resource
requirements
© 2003 Pearson Education Canada Inc.
9.27 27

28. CONTEMPORARY PLANNING TECHNIQUES (continued)
Project Management (continued)
Role of the Project Manager
role is affected by the one-shot nature of the project
role is difficult because team members still linked to their permanent work areas
managers must rely on their communication skills and powers of persuasion
9.28 28

29. CONTEMPORARY PLANNING TECHNIQUES (continued)
Scenario Planning
Scenario - an imagined sequence of future events
Contingency planning - “if this happens, then these are the actions to take”
Intent is to reduce uncertainty by playing out potential situations under different specified conditions
9.28 29