PLANNING TOOLS AND

TECHNIQUES

R.Arun Kumar, AP/Mech, RIT

There are three categories of planning tools and techniques:

 Techniques for assessing the environment

 Techniques for allocating resources

 Contemporary planning

R.Arun Kumar, AP/Mech, RIT

Techniques for assessing the environment:

 Many larger accounting firms have setup external analysis

departments to study the wider environment in which they
and their clients operate.

R.Arun Kumar, AP/Mech, RIT

 Three techniques helps managers to do that:

1. Environmental scanning

2. Forecasting

3. Benchmarking
Techniques for assessing the environment:

1. Environmental scanning:

 Managers used to screen large amount of information to anticipate

and interpret changes in the environment.

R.Arun Kumar, AP/Mech, RIT

Techniques for assessing the environment:

1. Environmental scanning:

 Analyzing what is the need of customers and the market survival

strategy of the competitors.

R.Arun Kumar, AP/Mech, RIT

Techniques for assessing the environment:

1. Environmental scanning:

1.1 Competitive Intelligence:

 Process by which the organizations gather information about their

R.Arun Kumar, AP/Mech, RIT

competitors and get answers to questions Who they are? What
they are doing? How will they affect us?
Techniques for assessing the environment:

1. Environmental scanning:

1.2 Global Scanning:

 World markets are complex and dynamic.

R.Arun Kumar, AP/Mech, RIT

 Managers must focus how he should update the business.
Techniques for assessing the environment:

2. Forecasting:

 Predict the future events effectively.

1. Quantitative forecasting

R.Arun Kumar, AP/Mech, RIT

2. Qualitative forecasting
Techniques for assessing the environment:

2. Forecasting:

2.1 Quantitative forecasting:

 Set of mathematical rules to a series of past data to predict

R.Arun Kumar, AP/Mech, RIT

outcomes.
Techniques for assessing the environment:

2. Forecasting:

2.2 Qualitative forecasting:

 Uses judgment and opinions of knowledgeable individuals to

R.Arun Kumar, AP/Mech, RIT

predict outcomes.
Techniques for assessing the environment:

2. Forecasting:

 CPRF (Collaborative Planning, Forecasting and

Replenishment)

R.Arun Kumar, AP/Mech, RIT

 Provides frame work for the flow of information, goods and services
between retailers and manufacturers.
Techniques for assessing the environment:

Effectiveness of forecasting:

 Helps the managers in decision making.

R.Arun Kumar, AP/Mech, RIT

Techniques for assessing the environment:

Quantitative

 Time series analysis (Duration to complete)

 Regression models (Predicting a variable by assuming another

R.Arun Kumar, AP/Mech, RIT

variable)

 Econometric models (Sales change due to taxation)

 Economic indicators (Using a factor to predict. e.g. GDP)

 Substitution effect (DVD vs Pen drive)

Qualitative

 Jury of opinion (Recruiting)

 Sales force composition (Predicting next year sales)

 Customer evaluation (Surveying dealers.)

Techniques for assessing the environment:

3. Benchmarking:

 The search for the best practices among competitors and non-
competitors that lead to their superior performance.

R.Arun Kumar, AP/Mech, RIT

Techniques for assessing the environment:

Steps in Benchmarking:

R.Arun Kumar, AP/Mech, RIT

Techniques for allocating resources:

 Managers must focus on the resource allocation before the

execution of a work.

Examples:

R.Arun Kumar, AP/Mech, RIT

 Financial (equity, debts)

 Human (skilled labors)

 Physical (raw materials, equipment)

 Intangible (brand names, reputation)

Techniques for allocating resources:

 Managers must focus on the resource allocation before the

execution of a work.

1. Budgeting:

R.Arun Kumar, AP/Mech, RIT

 Numerical plans for allocating resources to specific activities.

 Used to improve time, space and use of material resources.

 e.g. revenues, expenses and capital expenditures.

Techniques for allocating resources:

1. Budgeting:

Types of budgets:

R.Arun Kumar, AP/Mech, RIT

Techniques for allocating resources:

1. Budgeting:

Methods to improve budgeting:

 Collaborate and communicate.

R.Arun Kumar, AP/Mech, RIT

 Be flexible.

 Goals should drive budgets—budgets should not determine goals.

 Use budgeting/planning software when appropriate.

Techniques for allocating resources:

2. Scheduling:

 Plans that allocate resources by detailing what activities have to

be done, the order in which they are to be completed, who is to do

R.Arun Kumar, AP/Mech, RIT

each, and when they are to be completed.
Techniques for allocating resources:

2. Scheduling:

2.1 Gantt Charts:

R.Arun Kumar, AP/Mech, RIT

Techniques for allocating resources:

2. Scheduling:

2.2 Load Charts:

R.Arun Kumar, AP/Mech, RIT

Techniques for allocating resources:

2. Scheduling:

2.3 PERT Analysis:

 A flow chart diagram that depicts the sequence of activities

R.Arun Kumar, AP/Mech, RIT

needed to complete a project and the time or costs associated
with each activity.

 To understand this one must know the following terms:

1. Events: endpoints for completion.

2. Activities: time required for each activity.
3. Slack time: Time an individual activity can be delayed.
4. Critical path: Most time consuming sequence of events.
Techniques for allocating resources:

2. Scheduling:

Steps in PERT Analysis:

1. Identify every significant activity that must be achieved for a

R.Arun Kumar, AP/Mech, RIT

project to be completed.

2. Determine the order in which these events must be completed.

3. Diagram the flow of activities from start to finish

4. Compute a time estimate for completing each activity.

5. Determine a schedule for the start and finish dates of each

activity and for he entire project.
Techniques for allocating resources:

2. Scheduling:

E.g.: Construction of an office building:

R.Arun Kumar, AP/Mech, RIT

Techniques for allocating resources:

2. Scheduling:

E.g.: Construction of an office building:

R.Arun Kumar, AP/Mech, RIT

Critical Path: A - B - C - D - G - H - J - K
Techniques for allocating resources:

3. Break – Even Analysis:

 Used to determine the point at which all fixed costs have been
recovered and profitability begins.

R.Arun Kumar, AP/Mech, RIT

Total Fixed Costs
Breakeven :
Unit Price - Unit Variable Costs
Techniques for allocating resources:

4. Linear Programming:

 Helps in selecting which is the most suitable or optimistic

method to find the solution.

R.Arun Kumar, AP/Mech, RIT

Techniques for allocating resources:

4. Linear Programming:
No. of hours required No. of hours required Monthly production
Department
for one potpourri bag for one scented candle capacity
Manufacturing 2 hours 4 hours 1,200 hours

R.Arun Kumar, AP/Mech, RIT

Assembly 2 hours 2 hours 900 hours

Profit per unit Rs.10 Rs.18

Contemporary Planning Techniques:

 Much suited for dynamic and complex situation.

R.Arun Kumar, AP/Mech, RIT

Contemporary Planning Techniques:

1. Project Management:

 The task of getting a project’s activities done on time, within

budget, and according to specifications.

R.Arun Kumar, AP/Mech, RIT

 Project is defined as one-time-only set of activities that has a
definite beginning and ending point time.
Contemporary Planning Techniques:

2. Scenario Planning:
Scenario Planning

 An attempt not try to predict the future but to reduce uncertainty

R.Arun Kumar, AP/Mech, RIT

by playing out potential situations under different specified conditions.

Scenario

 A consistent view of what the future is likely to be.

Contemporary Planning Techniques:

2. Scenario Planning:

Preparing for unexpected events:

 Identify potential unexpected events.

R.Arun Kumar, AP/Mech, RIT

 Determine if any of these events would have early indicators.

 Set up an information gathering system to identify early

indicators.

 Have appropriate responses (plans) in place if these unexpected

events occur.