Planning and Control Spring 2007 Planning and Control

Planning and Control Spring 2007 Planning and Control 1

Planning and Control • Control – the overlooked management function • Types of control • Planning and control tools • TQM • Is too much control a bad idea? Spring 2007 Planning and Control 2

Control – The Overlooked Management Function Plan Organize Lead Control Feedback Spring 2007 Planning and Control 3

Managerial Decisions in the Control Process Compare Performance to Standard Attained? Do Nothing No Variance Acceptable? Objectives Yes Do Nothing No Standard Acceptable? Measure Performance Spring 2007 Yes Identify Causes No Revise Standard Planning and Control Correct Performance 4

Efficiency vs. Effectiveness • Efficiency is making the best use of resources • Effectiveness is achieving the goal • Productivity = the amount of output from a unit of input Spring 2007 Planning and Control 5

Productivity • Which is a better deal? • Worker A @ $6 / hour • Worker B @ $10 / hour • Worker A produces 6 items per hour • Worker B produces 12 items per hour Spring 2007 Planning and Control 6

Types of Control • Feedforward • Prevent anticipated problems • Quality control before problems arise • Example: fire drills • Concurrent control • Assess activity while it is in process • Correct problem before process completed • Example: warning lights on equipment • Feedback • Correct problems after they occur • Example: product inspection Spring 2007 Planning and Control 7

A Simple Automatic Control Mechanism Feedback Detects high temperature (information) Turns off furnace (control) Detects low temperature (information) Turns on furnace (control) Thermostat tests air (sensor) Feedback Spring 2007 Planning and Control 8

Philosophies of Control • Bureaucratic • Based on rules, policies procedures • Market • Based on outcomes and results • Clan • All employees share common goals and values, so less control needed Spring 2007 Planning and Control 9

Planning and Control Tools • • Spring 2007 Information gathering Budgets and financial controls Operational planning People Planning and Control 10

Information Gathering • Environmental scanning • Competition • Overall environment • Benchmarking • Forecasting Spring 2007 Planning and Control 11

Budgets • Defined: a quantitative plan for allocating resources to specific activities • Types of budgets • • • Revenue (i. e, sales forecast) Expense Profit Cash Capital expenditure • Variable vs. fixed Spring 2007 Planning and Control 12

Financial Controls • Financial statements • Balance Sheet • Income statement • Cash flow statement • Other financial statements • Accounts receivable listings • Inventories Spring 2007 Planning and Control • Ratio analysis • • Liquidity Debt Assets Return on investment • Auditing (internal and external) 13

Operational Planning • • Spring 2007 Scheduling Breakeven analysis Linear programming Supply chain management Planning and Control 14

Scheduling • Gantt chart • PERT (Program Evaluation and Review) • CPM (Critical Path Method) Spring 2007 Planning and Control 15

A Sample Gantt Chart Activity Month 1 2 3 4 Edit Manuscript Design Sample Pages Draw Artwork Print Galley Proofs Print Page Proofs Design Cover Actual Progress Goals Spring 2007 Planning and Control Reporting Date 16

PERT Chart 3 Start Spring 2007 1 2 4 6 5 7 Planning and Control Finish 17

Breakeven Analysis Profit = (Sales x ($5 - $3)) - $1000 Spring 2007 Planning and Control 18

Linear Programming • The situation: • Multiple output mixes • Alternative resource combinations • The problem: • Allocate limited resources • Maximize outcomes Spring 2007 Planning and Control 19

Linear Programming: Example Spring 2007 Planning and Control 20

Supply Chain Management • The process of managing operations control, resource and inventory acquisition and purchasing in order to improve overall efficiency and effectiveness. • Operations Management as Control • Operations management can be used as a control by coordinating it with other organizational functions to insure that the system focuses on the elements that are most crucial to goal attainment. Spring 2007 Planning and Control 21

Purchasing and Inventory Controls • Purchasing Management • Controlling the buying of the materials and resources is at the heart of effective supply chain management. • Inventory Management • Inventory control (materials control) • Managing the organization’s raw materials, work-inprocess, finished goods, and products in-transit. • Just-in-time (JIT) method • An inventory system than has necessary materials arriving as soon as they are needed (just in time) so that the production process is not interrupted. Spring 2007 Planning and Control 22

Types of Inventory Management Spring 2007 Planning and Control 23

People • Forecasting HR needs • How many employees? • What skills? Where? • When (seasonal, shifts)? • Training needs assessment • Performance appraisal Spring 2007 Planning and Control 24

Managing Total Quality • The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. • Quality is both a relative and absolute concept. • Quality is relevant to both products and services. Spring 2007 Planning and Control 25

The Importance of Quality • Competition • Quality has become one of the most important competitive points in business today. • Productivity • Quality enhancement programs decrease the number of defects, reduce resources dedicated to rework, and reduces the need for inspectors as employees become responsible for quality. • Costs • Improved quality reduces costs from customer returns, warranty, and lawsuits for faulty products, and lost sales to future customers. Spring 2007 Planning and Control 26

Eight Dimensions of Quality Spring 2007 Planning and Control Source: Van Fleet, David D. , and Tim Peterson, Contemporary Management, Second Edition. Copyright © 1991 by Houghton Mifflin Company. Used with permission. 27

Eight Dimensions of Quality 1. Performance. A product’s primary operating characteristic. Examples are automobile acceleration and a television’s picture clarity. 2. Features. Supplements to a product’s basic functioning characteristics, such as power windows on a car. 3. Reliability. A probability of not malfunctioning during a specified period. 4. Conformance. The degree to which a product’s design and operating characteristics meet established standards. 5. Durability. A measure of product life. 6. Serviceability. The speed and ease of repair. 7. Aesthetics. How a product looks, feels, tastes, and smells. 8. Perceived quality. As seen by a customer. Source: Adapted and reprinted by permission of Harvard Business Review, from “Competing on the Eight Dimensions of Quality, ” by David A. Garvin, November/December 1987. Copyright © 1987 by the President and Fellows of Harvard College, all rights reserved. Spring 2007 Planning and Control 28

TQM Tools and Techniques • ISO 9000: a set of quality standards created by the International Organization for Standardization by which firms can be certified. • Statistical Quality Control (SQC): a set of statistical techniques that can be used to monitor quality; includes acceptance sampling and in-process sampling. • Benchmarking • The process of learning how and what other firms do in an exceptionally high-quality manner. Spring 2007 Planning and Control 29