Description
inventory mangement in company
PLANNING
What Is Planning?
? Planning
? Managerial function that involves:
Defining the organization’s goals ? Establishing an overall strategy for achieving those goals ? Developing a comprehensive set of plans to integrate and coordinate organizational work ? Types of planning ? Informal: not written down, short-term focus; specific to an organizational unit ? Formal: written, specific, and long-term focus, involves shared goals for the organization
?
Purposes of Planning
? Provides direction ? Reduces uncertainty
? Minimizes waste
? Sets the standards for controlling
Planning and Performance
? The Relationship Between Planning and Performance ? Formal planning is associated with: ? Higher profits and returns on assets ? Other positive financial results ? The quality of planning and implementation affects performance more than the extent of planning ? The external environment can reduce the impact of planning on performance
How Do Managers Plan?
? Elements of Planning
? Goals (also objectives)
? ?
Desired outcomes for individuals, groups, or entire organizations Provide direction and performance evaluation criteria Documents that outline how goals are to be accomplished Describe how resources are to be allocated
? Plans
? ?
Steps in Planning
1. Being Aware of Opportunities 2. Establishing Objectives or Goals 3. Developing Premises 4: Determining Alternative Courses 5. Evaluating Alternative Courses 6. Selecting a Course 7. Formulating Derivative Plans 8. Quantifying Plans by Budgeting
Types of Plans
Breadth
Strategic
Time Frame
Long Term
Specificity
Frequency of Use
Single use
Directional
Operational
Short Term
Specific
Standing
Types of Plans
? BREADTH ? Strategic Plans
? Apply to the entire organization ? Establish the organization’s overall goals ? Seek to position the organization in terms of its
environment ? Cover extended periods of time
? Operational Plans
? Specify the details of how the overall goals are to be achieved ? Cover short time period
Types of Plans (cont’d)
? TIME FRAME
? Long-Term Plans
? Time frames extending beyond three years
? Short-Term Plans
? Time frames of one year or less
? SPECIFICITY ? Specific Plans
? Clearly defined and leave no room for interpretation
? Directional Plans
? Flexible plans that set out general guidelines, provide focus,
yet allow discretion in implementation
Exhibit 3.4 Specific Vs. Directional Plans
Types of Plans (cont’d)
? FREQUENCY OF USE
? Single-use Plan ? A one-time plan specifically designed to meet the needs of a unique situation ? Standing Plans ? Ongoing plans that provide guidance for activities performed repeatedly
Types of Plans
Plans can be classified as (1) mission or purposes, (2) objectives or goals, (3) strategies, (4) policies, (5) procedures, (6) rules, (7) programs, and (8) budgets
Types of Plans
? The mission, or purpose, identifies the basic purpose ? ?
?
?
or function or tasks of an enterprise or agency or any part of it Objectives, or goals, are the ends toward which activity is aimed Strategy is the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals Policies are general statements or understandings that guide or channel thinking in decision making Procedures are plans that establish a required method of handling future activities
Types of Plans – cont.
? Rules spell out specific required actions or nonactions,
allowing no discretion ? Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action ? A budget is a statement of expected results expressed in numerical terms
Approaches to Establishing Goals (cont’d)
? Management By Objectives (MBO) ? Specific performance goals are jointly determined by employees and managers ? Progress toward accomplishing goals is periodically reviewed ? Rewards are allocated on the basis of progress toward the goals ? Key elements of MBO:
?
Goal specificity, participative decision making, an explicit performance/evaluation period, feedback
Steps in a Typical MBO Program
Jointly Set Objectives
Develop Action Plans to Achieve Objectives
Review Objectives and Provide Feedback
Give Rewards for Achieved Objectives
Overall objectives and strategies of organization
Managers and employees work on action plans together
Objectives allocated to divisional and departmental units
Action plans implemented
Specific objectives collaboratively set with employees
Does MBO Work?
? Reason for MBO Success
? Top management commitment and
involvement
? Potential Problems with MBO Programs
? Not as effective in dynamic environments that
require constant resetting of goals ? Overemphasis on individual accomplishment may create problems with teamwork
Benefits of Management by Objectives
Clear goals:
? ? ? ? ?
Motivate Improve managing through resultsoriented planning Clarify organizational roles, structures and the delegation of authority Encourage personal commitment to their own and organizational goals. Facilitate effective controlling, measuring results, and leading to corrective actions
Criticisms of Planning
? Planning may create rigidity ? Plans cannot be developed for dynamic environments ? Formal plans cannot replace intuition and creativity ? Planning focuses managers’ attention on today’s
competition, not tomorrow’s survival ? Formal planning reinforces today’s success, which may lead to tomorrow’s failure
Organizational Strategy
? Strategic Management ? The set of managerial decisions and actions that determines the long-run performance of an organization
The Strategic Management Process
External Analysis • opportunities • threats
Identify the organization's current mission, goals, and strategies SWOT Analysis Formulate Strategies Implement Strategies Evaluate Results
Internal Analysis • strengths • weaknesses
Strategic Management Process
? Step 1: Identify the Organization’s Current Mission,
Objectives, and Strategies
? Mission: the firm’s reason for being
The scope of its products and services ? Goals: the foundation for further planning ? Measurable performance targets
?
? Step 2: Conduct an Internal Analysis
? Assessing organizational resources, capabilities, activities, and
culture: ? Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm ? Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage
Strategic Management Process (cont’d)
? Step 3: Conduct an External Analysis ? The environmental scanning of specific and general environments
?
Focuses on identifying opportunities and threats
? Steps 2 and 3 combined are called a SWOT analysis.
(Strengths, Weaknesses, Opportunities, and Threats)
Strategic Management Process (cont’d)
? Step 4: Formulate Strategies ? Develop and evaluate strategic alternatives ? Select appropriate strategies for all levels in the organization that provide relative advantage over competitors ? Match organizational strengths to environmental opportunities ? Correct weaknesses and guard against threats
Strategic Management Process (cont’d)
? Step 5: Implement Strategies
? Implementation: effectively fitting organizational
structure and activities to the environment ? The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements
? Step 6: Evaluate Results
? How effective have strategies been? ? What adjustments, if any, are necessary?
Levels of Organizational Strategy
Corporate Level Business Level Functional Level Research and Development Strategic Business Unit 1
Multibusiness Corporation Strategic Business Unit 2 Strategic Business Unit 3 Human Resources
Manufacturing
Marketing
Finance
Types of Organizational Strategies
? Corporate-level Strategy ? The company’s grand strategy for the entire organization and its strategic business units ? Types of Grand Strategies ? Growth: expansion into new products and markets ? Stability: maintenance of the status quo ? Retrenchment: addresses organizational weaknesses that are leading to performance declines ? Combination: simultaneous pursuit of two or more of the strategies above
Corporate-Level Strategies
? Growth Strategy
? Seeking to increase the organization’s business by
expansion into new products and markets
? Stability Strategy
? A strategy that seeks to maintain the status quo to
deal with the uncertainty of a dynamic environment, when the industry is experiencing slow- or no-growth conditions, or if the owners of the firm elect not to grow for personal reasons
Corporate-Level Strategies (cont’d)
? Retrenchment Strategy
? Reduces the company’s activities or operations ? Retrenchment strategies include: ? Cost reductions ? Closing underperforming units ? Closing entire product lines or services
Corporate-Level Strategies (cont’d)
? Combination Strategy
? Simultaneous pursuit by the organization of
two or more of growth, stability, and retrenchment strategies
Business-Level Strategy
? Business-Level Strategy
? A strategy that seeks to determine how an
organization should compete in each unit within the organization to create a competitive advantage ? Competitive advantage
?
An organization’s distinctive competitive edge that is sourced and sustained in its core competencies
Functional-Level Strategy
? Functional-level strategies support the business-level strategy
? i.e., Marketing, human resources, research and
development, and finance all support the business-level strategy ? Problems occur when employees or customers don’t understand a company’s strategy
Forces in an Industry Analysis (Five Forces Model Given by: Porter
New Entrants
Threat of New Entrants
Bargaining Power of Buyers Buyers
Suppliers Bargaining Power of Suppliers
Intensity of Rivalry Among Current Competitors
Threat of Substitutes Substitutes
Five Competitive Forces
? Threat of New Entrants ? The ease or difficulty with which new competitors can enter an industry ? Threat of Substitutes ? The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitute products and services ? Bargaining Power of Buyers ? The degree to which buyers have the market strength to hold away over and influence competitors in an industry
Five Competitive Forces (cont’d)
? Bargaining Power of Suppliers
? The relative number of buyers to suppliers and
threats from substitutes and new entrants affect the buyer-supplier relationship
? Current Rivalry
? Intensity among rivals increases when industry
growth rates slow, demand falls, and product prices descend
Benchmarking
? The search for the best practices among competitors
and noncompetitors that lead to their superior performance
? By analyzing and copying these practices, firms can
improve their performance
Decision Making
? Decision making is defined as the selection of a
course of action from among alternatives
Decision Making Process
1.
2. 3. 4. 5. 6. 7. 8.
Identification of problem Identification of decision Criteria Allocation of weights to criteria Development of alternatives Analysis of alternatives Selection of an alternative Implementation of the Alternative Evaluation of decision effectiveness
Eg:
? Purchase of raw material
? Quantity, Quality, Time of delivery & mode of delivery ? Allocate the weights ? Search for various suppliers ? Analyze all ? Select one supplier ? Place a order
Rationality
Rational Decision Making
(leads to)
• The problem is clear & unambiguous • A single, well defined goal is to be achieved • All alternatives & consequences are known • Preferences are clear • Preferences are constant & stable • No time or cost constraints exist • Final choice will maximize payoff
Limited, or "Bounded," Rationality
? Limitations of information, time, and certainty limit
rationality, even though a manager tries earnestly to be completely rational ? Satisficing is picking a course of action that is satisfactory or good enough under the circumstances
Programmed And Nonprogrammed Decisions
? Structured problems &Programmed decisions: ? Programmed decisions are used for structured or routine work ? Unstructured Problems & Nonprogrammed
decisions:
? Nonprogrammed decisions are used for
unstructured, novel, and ill-defined situations of a nonrecurring nature
Types of decisions at various levels in the organization
Unstructured Top level
Non Programmed Decisions
Programmed Decisions
Structured
Lower Level
Simon’s model of decision making
?
? 1. 2. 3.
Contribution of Herbert Simon The decision making process can be broken into series of three sequential steps: Intelligent activity Design activity Choice activity
Intelligent activity refers to the initial phase of searching the environment for conditions calling for decisions. Design activity refers to the phase of inventing, developing, and analyzing possible course of action to take place. Choice activity refers to the final phase of actual choice selecting a particular course of action from those available.
Creativity and Innovation
? Creativity refers to the ability and power to develop
new ideas
? Conditions necessary for Creativity:
Expertise, Creative thinking skills, Internal Motivation, Environmental need, Tension & Encouragement from others
? Innovation means the use of new ideas
Forecasting
? It is the process of estimating the relevant events of
future, based on the analysis of their past and present behaviour ? Acc to Neter & Wasserman: Business forecasting refers to the statistical analysis of the past & current movement in the given time series so as to obtain clues about the future pattern of those movements
Features of forecasting
? It relates to future events
? Defines the probability of happening of future events ? Analysing the past & present relevant events ? Use of some statistical tools & techniques
Planning & Forecasting
? Planning is more comprehensive and forecasting
involves the estimation of future events & provides parameters to planning
Importance of Forecasting
? Promotion of organisation
? Key to planning ? Coordination & control ? Success in organisation
Premising
? Premises are the assumptions on which plans are
formulated ? A major source of premising is forecasting
doc_952202190.ppt
inventory mangement in company
PLANNING
What Is Planning?
? Planning
? Managerial function that involves:
Defining the organization’s goals ? Establishing an overall strategy for achieving those goals ? Developing a comprehensive set of plans to integrate and coordinate organizational work ? Types of planning ? Informal: not written down, short-term focus; specific to an organizational unit ? Formal: written, specific, and long-term focus, involves shared goals for the organization
?
Purposes of Planning
? Provides direction ? Reduces uncertainty
? Minimizes waste
? Sets the standards for controlling
Planning and Performance
? The Relationship Between Planning and Performance ? Formal planning is associated with: ? Higher profits and returns on assets ? Other positive financial results ? The quality of planning and implementation affects performance more than the extent of planning ? The external environment can reduce the impact of planning on performance
How Do Managers Plan?
? Elements of Planning
? Goals (also objectives)
? ?
Desired outcomes for individuals, groups, or entire organizations Provide direction and performance evaluation criteria Documents that outline how goals are to be accomplished Describe how resources are to be allocated
? Plans
? ?
Steps in Planning
1. Being Aware of Opportunities 2. Establishing Objectives or Goals 3. Developing Premises 4: Determining Alternative Courses 5. Evaluating Alternative Courses 6. Selecting a Course 7. Formulating Derivative Plans 8. Quantifying Plans by Budgeting
Types of Plans
Breadth
Strategic
Time Frame
Long Term
Specificity
Frequency of Use
Single use
Directional
Operational
Short Term
Specific
Standing
Types of Plans
? BREADTH ? Strategic Plans
? Apply to the entire organization ? Establish the organization’s overall goals ? Seek to position the organization in terms of its
environment ? Cover extended periods of time
? Operational Plans
? Specify the details of how the overall goals are to be achieved ? Cover short time period
Types of Plans (cont’d)
? TIME FRAME
? Long-Term Plans
? Time frames extending beyond three years
? Short-Term Plans
? Time frames of one year or less
? SPECIFICITY ? Specific Plans
? Clearly defined and leave no room for interpretation
? Directional Plans
? Flexible plans that set out general guidelines, provide focus,
yet allow discretion in implementation
Exhibit 3.4 Specific Vs. Directional Plans
Types of Plans (cont’d)
? FREQUENCY OF USE
? Single-use Plan ? A one-time plan specifically designed to meet the needs of a unique situation ? Standing Plans ? Ongoing plans that provide guidance for activities performed repeatedly
Types of Plans
Plans can be classified as (1) mission or purposes, (2) objectives or goals, (3) strategies, (4) policies, (5) procedures, (6) rules, (7) programs, and (8) budgets
Types of Plans
? The mission, or purpose, identifies the basic purpose ? ?
?
?
or function or tasks of an enterprise or agency or any part of it Objectives, or goals, are the ends toward which activity is aimed Strategy is the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals Policies are general statements or understandings that guide or channel thinking in decision making Procedures are plans that establish a required method of handling future activities
Types of Plans – cont.
? Rules spell out specific required actions or nonactions,
allowing no discretion ? Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action ? A budget is a statement of expected results expressed in numerical terms
Approaches to Establishing Goals (cont’d)
? Management By Objectives (MBO) ? Specific performance goals are jointly determined by employees and managers ? Progress toward accomplishing goals is periodically reviewed ? Rewards are allocated on the basis of progress toward the goals ? Key elements of MBO:
?
Goal specificity, participative decision making, an explicit performance/evaluation period, feedback
Steps in a Typical MBO Program
Jointly Set Objectives
Develop Action Plans to Achieve Objectives
Review Objectives and Provide Feedback
Give Rewards for Achieved Objectives
Overall objectives and strategies of organization
Managers and employees work on action plans together
Objectives allocated to divisional and departmental units
Action plans implemented
Specific objectives collaboratively set with employees
Does MBO Work?
? Reason for MBO Success
? Top management commitment and
involvement
? Potential Problems with MBO Programs
? Not as effective in dynamic environments that
require constant resetting of goals ? Overemphasis on individual accomplishment may create problems with teamwork
Benefits of Management by Objectives
Clear goals:
? ? ? ? ?
Motivate Improve managing through resultsoriented planning Clarify organizational roles, structures and the delegation of authority Encourage personal commitment to their own and organizational goals. Facilitate effective controlling, measuring results, and leading to corrective actions
Criticisms of Planning
? Planning may create rigidity ? Plans cannot be developed for dynamic environments ? Formal plans cannot replace intuition and creativity ? Planning focuses managers’ attention on today’s
competition, not tomorrow’s survival ? Formal planning reinforces today’s success, which may lead to tomorrow’s failure
Organizational Strategy
? Strategic Management ? The set of managerial decisions and actions that determines the long-run performance of an organization
The Strategic Management Process
External Analysis • opportunities • threats
Identify the organization's current mission, goals, and strategies SWOT Analysis Formulate Strategies Implement Strategies Evaluate Results
Internal Analysis • strengths • weaknesses
Strategic Management Process
? Step 1: Identify the Organization’s Current Mission,
Objectives, and Strategies
? Mission: the firm’s reason for being
The scope of its products and services ? Goals: the foundation for further planning ? Measurable performance targets
?
? Step 2: Conduct an Internal Analysis
? Assessing organizational resources, capabilities, activities, and
culture: ? Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm ? Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage
Strategic Management Process (cont’d)
? Step 3: Conduct an External Analysis ? The environmental scanning of specific and general environments
?
Focuses on identifying opportunities and threats
? Steps 2 and 3 combined are called a SWOT analysis.
(Strengths, Weaknesses, Opportunities, and Threats)
Strategic Management Process (cont’d)
? Step 4: Formulate Strategies ? Develop and evaluate strategic alternatives ? Select appropriate strategies for all levels in the organization that provide relative advantage over competitors ? Match organizational strengths to environmental opportunities ? Correct weaknesses and guard against threats
Strategic Management Process (cont’d)
? Step 5: Implement Strategies
? Implementation: effectively fitting organizational
structure and activities to the environment ? The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements
? Step 6: Evaluate Results
? How effective have strategies been? ? What adjustments, if any, are necessary?
Levels of Organizational Strategy
Corporate Level Business Level Functional Level Research and Development Strategic Business Unit 1
Multibusiness Corporation Strategic Business Unit 2 Strategic Business Unit 3 Human Resources
Manufacturing
Marketing
Finance
Types of Organizational Strategies
? Corporate-level Strategy ? The company’s grand strategy for the entire organization and its strategic business units ? Types of Grand Strategies ? Growth: expansion into new products and markets ? Stability: maintenance of the status quo ? Retrenchment: addresses organizational weaknesses that are leading to performance declines ? Combination: simultaneous pursuit of two or more of the strategies above
Corporate-Level Strategies
? Growth Strategy
? Seeking to increase the organization’s business by
expansion into new products and markets
? Stability Strategy
? A strategy that seeks to maintain the status quo to
deal with the uncertainty of a dynamic environment, when the industry is experiencing slow- or no-growth conditions, or if the owners of the firm elect not to grow for personal reasons
Corporate-Level Strategies (cont’d)
? Retrenchment Strategy
? Reduces the company’s activities or operations ? Retrenchment strategies include: ? Cost reductions ? Closing underperforming units ? Closing entire product lines or services
Corporate-Level Strategies (cont’d)
? Combination Strategy
? Simultaneous pursuit by the organization of
two or more of growth, stability, and retrenchment strategies
Business-Level Strategy
? Business-Level Strategy
? A strategy that seeks to determine how an
organization should compete in each unit within the organization to create a competitive advantage ? Competitive advantage
?
An organization’s distinctive competitive edge that is sourced and sustained in its core competencies
Functional-Level Strategy
? Functional-level strategies support the business-level strategy
? i.e., Marketing, human resources, research and
development, and finance all support the business-level strategy ? Problems occur when employees or customers don’t understand a company’s strategy
Forces in an Industry Analysis (Five Forces Model Given by: Porter
New Entrants
Threat of New Entrants
Bargaining Power of Buyers Buyers
Suppliers Bargaining Power of Suppliers
Intensity of Rivalry Among Current Competitors
Threat of Substitutes Substitutes
Five Competitive Forces
? Threat of New Entrants ? The ease or difficulty with which new competitors can enter an industry ? Threat of Substitutes ? The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitute products and services ? Bargaining Power of Buyers ? The degree to which buyers have the market strength to hold away over and influence competitors in an industry
Five Competitive Forces (cont’d)
? Bargaining Power of Suppliers
? The relative number of buyers to suppliers and
threats from substitutes and new entrants affect the buyer-supplier relationship
? Current Rivalry
? Intensity among rivals increases when industry
growth rates slow, demand falls, and product prices descend
Benchmarking
? The search for the best practices among competitors
and noncompetitors that lead to their superior performance
? By analyzing and copying these practices, firms can
improve their performance
Decision Making
? Decision making is defined as the selection of a
course of action from among alternatives
Decision Making Process
1.
2. 3. 4. 5. 6. 7. 8.
Identification of problem Identification of decision Criteria Allocation of weights to criteria Development of alternatives Analysis of alternatives Selection of an alternative Implementation of the Alternative Evaluation of decision effectiveness
Eg:
? Purchase of raw material
? Quantity, Quality, Time of delivery & mode of delivery ? Allocate the weights ? Search for various suppliers ? Analyze all ? Select one supplier ? Place a order
Rationality
Rational Decision Making
(leads to)
• The problem is clear & unambiguous • A single, well defined goal is to be achieved • All alternatives & consequences are known • Preferences are clear • Preferences are constant & stable • No time or cost constraints exist • Final choice will maximize payoff
Limited, or "Bounded," Rationality
? Limitations of information, time, and certainty limit
rationality, even though a manager tries earnestly to be completely rational ? Satisficing is picking a course of action that is satisfactory or good enough under the circumstances
Programmed And Nonprogrammed Decisions
? Structured problems &Programmed decisions: ? Programmed decisions are used for structured or routine work ? Unstructured Problems & Nonprogrammed
decisions:
? Nonprogrammed decisions are used for
unstructured, novel, and ill-defined situations of a nonrecurring nature
Types of decisions at various levels in the organization
Unstructured Top level
Non Programmed Decisions
Programmed Decisions
Structured
Lower Level
Simon’s model of decision making
?
? 1. 2. 3.
Contribution of Herbert Simon The decision making process can be broken into series of three sequential steps: Intelligent activity Design activity Choice activity
Intelligent activity refers to the initial phase of searching the environment for conditions calling for decisions. Design activity refers to the phase of inventing, developing, and analyzing possible course of action to take place. Choice activity refers to the final phase of actual choice selecting a particular course of action from those available.
Creativity and Innovation
? Creativity refers to the ability and power to develop
new ideas
? Conditions necessary for Creativity:
Expertise, Creative thinking skills, Internal Motivation, Environmental need, Tension & Encouragement from others
? Innovation means the use of new ideas
Forecasting
? It is the process of estimating the relevant events of
future, based on the analysis of their past and present behaviour ? Acc to Neter & Wasserman: Business forecasting refers to the statistical analysis of the past & current movement in the given time series so as to obtain clues about the future pattern of those movements
Features of forecasting
? It relates to future events
? Defines the probability of happening of future events ? Analysing the past & present relevant events ? Use of some statistical tools & techniques
Planning & Forecasting
? Planning is more comprehensive and forecasting
involves the estimation of future events & provides parameters to planning
Importance of Forecasting
? Promotion of organisation
? Key to planning ? Coordination & control ? Success in organisation
Premising
? Premises are the assumptions on which plans are
formulated ? A major source of premising is forecasting
doc_952202190.ppt