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Engineering Management 2 - Planning
Engineering Management 2 - Planning
2: Management Functions:
Planning
Introduction
Introduction
PLANNING
(& DECISION MAKING)
Setting the organisation’s ORGANISING
goals and deciding how
best to achieve them
CONTROLLING LEADING
Introduction
Planning process
2. Listing 3. Selecting best
1. Setting
alternative ways way to achieve
company goals
of achieving the the goals
(objectives)
goals (objectives) (objectives)
4. Developing
plans to pursue 5. Putting plans
chosen into action
alternative
Types of Planning
Types of Planning
Operational Plans
Who Should Do the Planning?
Who Should Do the Planning?
Company’s Customer
offerings F A E needs
B
D C
G Competitors’
offerings
Inexact Nature of Strategic Planning
• A: Area representing our advantages. How big and sustainable
are our advantages? Are they based on distinctive capabilities?
• B: Area designating points at parity. This area indicates that we
are on par with our competitors. Are we delivering effectively in
the area of parity?
• C: Areas depicting our competitor’s strength. How can we counter
our competitor’s advantages?
• E: White space. This is the area for growth. Ask customers how
our strengths can be made useful to them?
• D, F, and G: Areas denoting values produced by the company and
the competitors that the customers do not need.
Inexact Nature of Strategic Planning
• Planning Tools:
1. Market Research
2. SWOT Analysis
3. Financial What-If Analysis and Modelling
4. Scenario Planning
5. Performance Benchmarks
6. Technology Forecasting
Tools for Planning
• Market Research
• The market research establishes the company’s
current marketing position and future growth
opportunities in the marketplace.
• Market research tries to discover the preference of
customers and brand reputation in the marketplace.
• Examples of such tools include focus groups, polling
by questionnaires, product concept testing and pilot
testing.
Tools for Planning
• SWOT Analysis
• A well performed SWOT analysis will bring to the fore
an assessment of the company’s current position.
• The analysis answers questions such as (a) What
does the company have in place today? (b) In which
direction is the company headed in the next three to
five years, and (c) What is the company’s process of
managing changes?
Tools for Planning
Scan External Identify Strategic
Environment: Factors:
National Opportunities
Global Threats
• SWOT Analysis
• What are some of the outcomes of the Strategic
Planning:
1. Portfolio strategy
2. Differentiation
3. Cost leadership
4. Focus strategy
5. Innovation from Within
6. Strategic Partnerships (Alliances)
Tools for Planning
• Scenario Planning
• Scenario planning defines the major forces that may
move a company in different directions, maps out a
small number of alternatives futures (scenarios)
• Whenever the future needs to be assessed, scenario
planning is applicable.
• Scenario Planning applies generally to decision-
making under uncertainty.
Tools for Planning
Tools for Planning
• Performance Benchmarks
• During planning, it is important to define benchmarks
for the purpose of measuring corporate progress.
• These metrics serve well as industrial benchmarks
against which to assess the current status of a
specific company and to define its new strategic
direction.
Tools for Planning
• Performance Benchmarks
• Hubbard (2014) suggests a set of broad-based benchmarks:
1. Customer-related measures: Product defects, customer satisfaction score,
order processing efficiency, percentage sales from new customers,
service quality,
2. Process-related measures: Time to market, quality standards, unit product
cost,, labour hours per product
3. Financial measures: Gross margin, net income-to-sales ratio, sales per
employees, return on equity, sales growth rate, market share percentage,
4. Employee-related measures: Turnover ratio, employee satisfaction score,
skill building and development expenses per employee
5. Competition-related measures: Market share, cost of innovation,
acquisition cost per new customer, number of new products
commercialized per year
Tools for Planning
• Technology Forecasting
• Engineering managers need to understand the value
that any of the emerging technologies may have on
the products and services offered by their employers
and plan accordingly.
• Another technological example is the speed of
computing.
Planning Activities
Planning Activities
• Forecasting
• The objective of forecasting is to estimate and predict
future conditions and events.
• All forecasting activities centre on assessing future
conditions in technology, products, marketplace etc.
affecting the business success of the company.
• Forecasting also involves new facility planning, work
force scheduling and production planning,
• Forecasting helps to define potential obstacles and
opportunities.
Planning Activities
• Forecasting
• The farther an event is projected into the future, the
greater the probability of significant deviations
between the forecast and reality.
• Certain future events tend to result from current and
past occurrences, as long as there are no disruptive
changes in technology or society, such as wars,
natural disasters, or major incidents.
Planning Activities
• Forecasting
• Engineering managers are likely to get involved primarily in
technology forecasting.
• Forecasting the impact of new technologies on future
businesses is particularly difficult.
• E.g. in the past, few companies understood the significance of
the Internet to company operations and the marketplace.
• Teams with diverse backgrounds in engineering, product
design, manufacturing, marketing are better equipped in
handling technology forecasting because they benefit from the
divergent experience and insights of team members.
Planning Activities
• Action Planning
• The process of establishing specific objectives, action
steps, and a schedule and budget related to a
predetermined program, task, or project (Kerzner 2013).
• It helps to focus on critical projects that need attention
and action.
• It states specific results to be accomplished.
• It also permits an effective delegation of responsibilities,
encourages teamwork, and ensures an evaluation of the
overall performance on a continuous basis.
Planning Activities
• Issuing Policies
• For companies to operate smoothly and consistently,
corporate rules and regulations are used to prescribe
acceptable practices.
• Company policies address important issues such as
employee hiring, employment termination, equal
employment opportunity (EEO) policies, annual
performance appraisals, savings plans, benefits,
medical insurance, pension plans, sick leave, safety,
contact with representatives of competitors etc.
Planning Activities
• Issuing Policies
• Managers may write policies to offer uniform
answers to questions of common concern.
• In general, policies are continuing directives
promulgated to address repetitive issues, tasks, and
problems in an organization.
Planning Activities
• An effective Policy:
1. Applies uniformly to the organization (or unit) at large
2. Remains relatively permanent, unless and until repealed
3. Fosters the objectives of the company
4. Frees managers and employees to focus on important
matters
5. Encourages effective teamwork by reducing conflicts,
disagreements, and differences in interpretation
6. Is issued by top management or authorized managers
with perspective, balance, and objectivity.
Planning Activities
• Establishing Procedures
• Companies perform many important tasks e.g. plant
operation, product design, project management,
equipment installation, facility maintenance, parts
procurement, manufacturing etc.
• Companies preserve the “tried-and-true” procedures
in manuals in order to preserve the best way to
perform repetitive work (& achieve high productivity).
• Establishing and preserving procedures is part of the
planning responsibility of managers.
Planning Activities
• Establishing Procedures
• Developing procedures is also of critical importance
because it:
1. Provides the basis for method improvements
2. Ensures standardized action e.g. quality control,
resource saving, and work reproducibility
3. Simplifies training
4. Retains corporate memory e.g. proven safety
practices, problem-solving techniques etc.
Considerations when Planning
Considerations when Planning
1. Assumptions
• Plans are typically built on both hard data and
assumptions.
2. Resistance to Change
• Change may induce business instability, technology
obsolescence, organizational restructuring, and other
unwanted disruptions.
• As such, most people resist particularly sudden changes.
• People may be more amenable to gradual changes if they
occur at a rate that they can understand and accept.
Considerations when Planning