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Planning and Forecasting

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

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Planning and Forecasting

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  1. Planning and Forecasting

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

  3. 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

  4. 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

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

  6. 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

  7. 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

  8. 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.

  9. 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 ->

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

  11. Why Forecasting? • New facility planning • Production planning • Work force scheduling

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

  13. 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

  14. 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)

  15. 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

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

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

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