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
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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
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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
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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
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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
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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