Definition of Planning

Defining the organizations objectives or goals Establishing an overall strategy for achieving these goals Developing a comprehensive hierarchy of plans to integrate and coordinate activities

It is concerned with both ends and means

Purposes of Planning
It gives direction Reduces the impact of change Minimizes waste and redundancy Sets the standards used in controlling

Types of Plans
Breadth Strategic Operational Time Frame Long term Short term Specificity Directional Specific

Strategic Planning
It covers a longer period of time which may extend from 5 to 20 or more years It takes into consideration the totality of activities of the company Objective-Future Profits Rewards- Development of future potential

Operational Planning
Shorter period of time Plans are prepared in more specific terms.Plans deal with various functional areas like finance, marketing, R &D etc Objective- Present profits Rewards- Efficiency, Stability

Short -Term Versus Long-Term Plans

Short term- less than one year Long term- any time more than 5 years Intermediate term- any period in between

Specific Versus Directional Plans

Specific Plans Advantages Clearly defined objectives No ambiguity Disadvantages They require clarity and a sense of predictability that often doesnt exist Ex- Increase cos sales by 20% over 1 year might establish specific procedures, budget allocations and schedule of activities to reach that objective

Single-use Plan

A one-time plan thats specifically designed to meet the needs of a unique situation and is created in response to non programmed decisions that managers make

Standing Plans

Ongoing plans that provide guidance for activities repeatedly performed in organisation and that are created in response to programmed decisions that managers make

Contingency Factors in Planning

Managers level in the organization Degree of environmental uncertainty Length of future commitment

Contingency Factors in Planning..cont

Managers level in the organization Operational planning dominates planning activities of lower level managers. As managers move up the organization, their planning role becomes more strategy oriented Small business : owner manager does both

Contingency Factors in Planning..cont

Degree of Environmental Uncertainty The greater the environmental uncertainty, the more plans need to to be directional and emphasis placed on the short term The greater the change, the less likely it is that plans are accurate Well managed organizations are developing multiple scenarios of future

Contingency Factors in Planning..cont

Length of Future Commitments Plans should extend far enough to meet those commitments made today Planning for too long long or for too short a period is inefficient Decisions made today become a commitment to some future action or expenditure.

Operational Planning
While designing the corporate planning control system it is indeed needed to chart out both the long range and short term plans, programmes, procedure and policies. Using all the insight, foresight, experience at disposal, it should take care of feelings, objective, assumption and risks, it should be planned keeping in mind the kind of business (seasonal or otherwise), its should utilize inputs information of the market and economy, in short utilize all information and inputs at your disposal.

Organising
External grouping of activities and resources for facilitating attainment of specific organisational activities Objectives are achieved in shortest possible time, in an orderly manner with maximum utilization of given resources

Organization Structure
Formal established patterns of relationships amongst the various parts of a firm

Deliberately specified and adopted and do not evolve on their own Established- Relationships are clearly spelled out and accepted by everyone

Structure
Complexity Formalization Centralisation

Elements of Organisation Structure

(i) Network of formal relationships and duties i.e. organisation chart plus job descriptions (ii) The manner in which various tasks and activities are assigned to different people and departments (differentiation) (iii) The manner in which separate tasks and activities are coordinated (integration)

Elements of Organisation Structure..cont

(iv) The power, status and hierarchical relationships within the organisation (authority system) (v)The planned and formalised policies, procedures and controls that guide the activities and relationships (admin system)

(vi)The flow of information and communication network

Departmentalization
Functional Product Customer Geographic Process

Line Authority & Staff Authority

Line Authority- Authority to direct the work of subordinate Staff Authority- Gives advice and service to line but they have no authority to put their recommendations into actions

Various departments in PDA of an organisation

Transportation Warehousing Inventory control Material handling Order processing Packaging Information system Locational analysis

LOCATION STRATEGY / DECISIONS

Location includes decision of site, plant, equipment etc.

LOCATION AND SITE

Location and site are two separate entities quite often mistaken as one! Location refers to a city / town or an industrial zone and is used in broader sense while site refers to a specific plot of land, where the project would be set up. Choice of location has to be taken after careful consideration of a number of factors such as proximity to markets and sources of raw materials, availability of infrastructure, Government policies, incentives offered, labor situation, etc.

Factors Affecting Site

Site size and cost Air, rail, highway, and waterway systems Zoning restrictions Nearness of services/supplies needed Environmental impact issues

Objective of Location Strategy

Maximize the benefits of location to the firm

Industrial Location Decisions

Cost focus
Revenue varies little between locations

Location is a major cost factor

Affects shipping & production costs (e.g., labor) Costs vary greatly between locations
1995 Corel Corp.

Industrial Location Decisions

It is helpful to begin this discussion by asking students how and under what conditions location impacts costs and revenues. Once they have begun to consider these issues, then the decision for industrial or service organizations can be explored.

Service Location Decisions

Revenue focus
Costs vary little between market areas

Location is a major revenue factor

Affects amount of customer contact Affects volume of business

In General - Location Decisions

Long-term decisions Difficult to reverse Affect fixed & variable costs
Transportation cost As much as 25% of product price Other costs: Taxes, wages, rent etc.

Objective: Maximize benefits of location to the firm

Factors Affecting Country Locations

Government rules, attitudes, stability, incentives Culture & economy Market location Labor availability, attitudes, productivity, and cost Availability of supplies, communications, energy Exchange rate & its stability
Ranking factors are available for different countries from various sources

Region Location Decisions

Corporate desires Attractiveness of region (culture, taxes, climate, etc.) Labor, availability, costs, attitudes towards unions Costs and availability of utilities Environmental regulations of state and town Government incentives Proximity to customers & suppliers Cost of Land, Development and construction

1. PROXIMITY TO MARKETS
Proximity to the markets is an important criteria for deciding on the location. This is particularly true of bulky products for which the transportation costs are likely to be considerable e.g. plastic products (big containers, fuel tanks, which may occupy more space resulting in higher costs). For certain products like refined sugar the reason for locating a stand alone sugar refining plant near the market would be different. Unit manufacturing perishable products should also be located near the center of consumption.

Organizations That Need To Be Close to Markets

Government agencies Police & fire departments Post Offices Development Agencies / Corporations Retail Sales and Service Fast food restaurants, supermarkets, gas stations Drug stores, shopping malls Bakeries Services Doctors, lawyers, accountants Banks, auto repair, motels

2. PROXIMITY TO RAW MATERIALS

Projects which are resource based should be located near the sources of raw materials for economies of transportation. - Cement Plants, - Steel Plants, - Alumina refineries, - Thermal Power Plants, Fly Ash Aggregates, etc.

FOOT LOOSE INDUSTRIES!!

They do not require nearness to either raw materials or markets. They do not require face-to-face contact with customers Availability of infrastructure, Govt. Incentives and trained manpower are the only criteria for such units. Electronics Industry Software Development BPOs, Call Centers, Telemarketing, etc.

3. AVAILABILITY OF INFRASTRUCTURE
Availability of:
Power: - Availability, investment required, power tariff and stability of power supply Water: - Quality and Quantity, reliability of supply, possibility of ground sources (tube wells) Communications: - Telephones, Internet (bandwidth?), possibility of leasing lines, etc. Transport: - Rail, Road, Air and sea or inland water

6. OTHER MISCELLANEOUS FACTORS:

General living conditions (cost of living, cost of housing, education facilities, entertainment / recreation facilities, healthcare facilities, security, political environment, etc.) Climatic conditions, Nearness to ancillary units, Cost of mitigating environmental pollution

4. Transportation Model
Used primarily for industrial locations Logistics is the name of the game! Finds amount to be shipped from several sources to several destinations Used primarily for industrial locations Type of linear programming model Objective: Minimize total production & shipping costs Constraints Production capacity at source (factory) Demand requirement at destination

Summary of Methods of Solving Location Problems

Weighted index method which: Assigns weights and points to various factors Determines tangible costs Investigates intangible costs Center of Gravity Method Finds best distribution center location Location breakeven methods Special case of breakeven analysis Transportation method A specialized linear programming method

Geographic Information Systems

Latest tool to help in location analysis Enables combination of many parameters

ONE OF THE POSSIBILITIES?

The ideal location for many companies in the future will be perhaps a floating factory ship that will go from port to port, from country to country wherever the cost per unit is the lowest.

1995 Corel Corp.