Planning and Forecasting Chapter Objectives Explain the needs

Planning and Forecasting

Chapter Objectives Explain the needs for planning and analyze a planning model Be able to solve forecasting problems

Planning Provides method for identifying objectives Designs a sequence of programs and activities to achieve objectives Plan to plan (a continuous process & evaluation) People implementing plan should be involved in preparing plan

The Planning Process & the Decision Making Process Iterative, interactive and interdependent processes Define the decision problem Search for data and information Generate alternative courses of action Analyze feasible alternatives Select best course of action (most feasible route) Implement “the selected” decision and evaluate results

Planning What is the Problem/Purpose? Establish Goal/Objectives What Client Need Is Being Satisfied by the Project? Identify Success Criteria

The Foundation for Planning -Vision : what the firm wants to be in the future (no vision leads to a disaster in most cases) -Mission : bold goal with clear finish line and specific time frame, what do we want to do -Purpose : fundamental reason for firm’s existence -Goal/Aim : What? Why? For whom? How? Is it consistent with organization? (official and operative) -Objectives : Clarifies goals, how do we go about it? Note: ALL of the above parameters must be reviewed often to see whether they are still valid or need updating

Planning Develop Objectives Specific Measurable Attainable Realistic Time-limited Outcome - what is to be accomplished Time Frame - expected completion date Measure - metrics for success Action - how the objective will be met

Strategic Management of Technology Base technology: firm must master it to be effective competitors, invest in R&D to maintain competence Key technology: provides competitive advantage, can embed features to get better efficiency in production process Pacing technology: could become tomorrow’s key tech. It is a critical issue to maintain balance between key and pacing techs.

Some planning concepts Responsibility for planning: rests with top and middle level mgrs. Must establish enterprise objectives, overall strategy, planning guidelines, review and redirect planning effort Planning premises: the anticipated environment 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 ->

Forecasting Forecast sales Essential preliminary to effective planning Engineering manager must be concerned with both future markets and future technology

Why Forecasting? New facility planning Production planning Work force scheduling

Long Range Forecasts Design new products Determine capacity for new product Long range supply of materials

Short Range Forecasts Amount of inventory for next month Amount of product to produce next week How much raw material delivered next week Workers schedule next week

Forecasting Methods Quantitative Methods Expert/executive Opinion, Delphi Historical (sales force composite): regional managers ask their salesmen User expectation: ask customers, good if few customers Choice of method: many methods can be combined Qualitative Methods Simple moving average Weighted moving average Exponential smoothing Regression models (simple/multiple regressions)

Delphi Method Eliminates effects of interactions between members Experts do not need to know who other experts are Delphi coordinator asks for opinions, forecasts on subject

Delphi Method, cont Develop objective of forecast Determine number of participants Select and contact participants Develop first questionnaire and submit Coordinator analyzes responses

Delphi Method, cont Develop second questionnaire based on results of first Analyze responses Rounds continue until consensus reached or experts’ opinions cease to change