Appendix B: Planning Tools and Techniques

Key Terms:
Environmental Scanning The screening of large amounts of information to anticipate and interpret changes in the environment Competitor Intelligence An environmental scanning activity by which organizations gather information about competitors Forecasts Predictions of outcomes Quantitative Forecasting Forecasting that applies a set of mathematical rules to a series of past data to predict outcomes Qualitative Forecasting Forecasting that uses the judgment and opinions of knowledgeable individuals to predict outcomes Benchmarking The search for the best practices among competitors or noncompetitors that lead to their superior performance Resources The assets of an organization, including financial, physical, human, intangible, and structured/cultural assets Budget A numerical plan for allocating resources to specific activities 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 Gnat Chart A scheduling chart developed by Henry Gnatt that shows actual and planned output over a period of time Load Chart A modified Gnatt chart that schedules capacity by entire departments of specific resources Pert Network A flowchart diagram showing the sequence of activities needed to complete a project and the time or cost associated with each Events End points that represent the completion of major activities in a PERT network Activities The time or resources needed to progress from one event to another in a PERT network Slack Times The amount of time an individual activity can be delayed without delaying the whole project Critical Path The longest sequence of activities in a PERT network

Break-Even Analysis A technique for identifying the point at which total revenue is just sufficient to cover total costs Linear Programming A mathematical technique that solves resources allocation problems Project A one-time only set of activities that has definite beginning and end points in time Project Management The task of getting a projects activities done on time, within budget, and according to specifications Scenario A consistent view of what the future is likely to be

Chapter Summary:
Planning tools and Techniques: The three categories of planning tools and techniques
I) Appendix B-1: Techniques for Assessing the Environment Environmental Scanning: Assessing the environment is important for every organization because events that occur in one area of the world have the potential to impact operations of a company far away. Assessments can be done using one of three techniques; environmental scanning, forecasting, and benchmarking. While environmental scanning assesses threats and opportunities in the general environment, a subset of environment scanning, competitor intelligence is a process by which organizations get information on competitors. Research has shown companies using environmental scanning have higher performance. Research also suggests 80% of what managers need to know about competitors can be found out from their own employees, suppliers and customers. Another subset of environment scanning on a broader scale is global scanning; in which managers analyze the impact from global trends and world markets. Forecasting & Benchmarking: Forecasting is important because accurate forecasts will help managers predict future events effectively and in a timely manner. Environmental scanning provides the basis for forecasts. There are two types of forecasting techniques, quantitative, which uses numbers and qualitative, which relies on judgment and experience. Some suggestions for effective forecasting are: a) Forecasting techniques are most accurate when the environment is not rapidly changing b) Simple forecasting methods work better complex ones c) The more people involved in the forecasting process the more detailed it will be

Lastly, benchmarking is the process of copying proven methods as demonstrated by the top companies and can serve as an important assessment tool. II) Appendix B-2: Techniques for Allocating Resources Budgeting & Scheduling: Resources are necessary for an organization to achieve its goals. Four important techniques for the effective use of resources are budgeting, scheduling, break-even analysis, and linear programming. Budgeting is important because it is a plan that is universal among many types of organizations and among the many managerial levels within an organization. Scheduling is a necessary process in the efficient use of resources. Some useful techniques for scheduling include Gnatt charts, load charts and PERT analysis. A Gnatt Chart is a simple bar graph that graphs time against scheduled activities to monitor progress. Load Charts are modified Gnatt charts, but where capacity is scheduled by work areas not activities. A PERT Network analysis is useful for larger projects where the activities are interdependent. It helps with the scheduling of the activities and determining the time of completion of projects. Break-even Analysis & Linear Programming: Two more techniques useful for resource allocation are break-even analysis and linear programming. A break-even analysis is a simple calculation that helps to determine the breakeven point of resources. Linear Programming is an especially useful technique when the resources are limited, combinations among resources are plentiful and outcome optimization is the goal. III) Appendix B-3: Contemporary Planning Techniques Project Management & Scenario Planning: Todays environment is more dynamic and complex than ever, that is why it is important to use flexible planning techniques. Many projects within an organization do not fit into the standardized planning procedures that guide an organizations other routine work activities. Therefor more and more organizations are using project management because the approach fits well with the need for flexible and rapid response to perceived market opportunities. The project management process comes in some variation of the following sequence; define objectives, identify activities and resources, establish sequences, estimate time for activities, determine project completion date, compare with objectives, determine additional resource requirements. Because of the temporary nature of projects, project managers need a different skill set than typical managers. Scenario planning or contingency planning is useful in anticipating random events that cannot be forecasted. Multiple scenarios should be created for potential problems identified in the environmental scanning process.