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Chapter 3 Lecture Notes on slides

Chapter 3 Lecture Notes on slides - Chapter 3 Planning and...

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Unformatted text preview: Chapter 3 Planning and Forecasting Chapter • Objectives • Understand classical Understand planning/forecasting methods planning/forecasting • Understand what and why Understand associated with Vision, Mission, Objectives Mission, Importance of Planning Importance Basic function of managers • Planning • Organizing • Leading (directing or motivating) • Controlling Planning needs to come first. Without Planning a plan, the others have no direction. plan, Abraham Lincoln (1809-1865) Abraham If I had eight hours to chop down If a tree, I’d spend six hours tree, spend sharpening my ax. sharpening Planning – understanding where Planning understanding you want to go you Hsun Tzu (298-238 B.C.) Hsun 238 The Art of War The “The general who wins a battle makes The many calculations in his temple ere the battle is fought. the The general who loses a battle makes The few calculations beforehand. few It is by attention to this point that I can It see who is likely to win or lose.” see Planning Planning Provides method for identifying Provides objectives and designing a sequence of programs and activities to achieve these objectives objectives The planning decisionThe making process • “If you always do If what you always did, you’ll always get what you ll you always got.” you • “If good decisions are If just common sense, why aren’t they more why they common?” common? Models of the ProblemModels Solving Process • • • • Figure 3-1 Classical model PDCA DMAIC The General Classic Model of Problem Solving of Define problem not s do lts ctation esu If r t expe e me Gather information Develop alternative solutions Select best solution Implement solution Monitor progress PDCA PDCA Known as the Deming Cycle or the Shewhart Cycle Plan an improvement. Do the improvement. Check that the process actually improved. Act to standardize or modify the improvement. Plan Plan • What is the problem? Where do we want to go? What How do we get there? This is Gap Analysis. Gap • Address who, what, where, when, why, and how • Establish SMART goals (simple, measurable, Establish achievable, reasonable, timely) achievable, • Try an IS / IS NOT analysis • Create a simple Gantt Chart Don’t let planning immobilize you. You can’t steer a parked car IS / IS NOT Analysis IS • This is a simple approach to help an individual or team define the scope of a project. • On one side, list what it is. • On the other side, list what it is not. • Compile the information into the required sentence, description, list, etc. Do Do • This step may contain its own, mini PDCA cycle • Assess your capabilities. • Train you people if needed. • Add people to the team if needed. • Execute your plan. Revise your plan. • Keep the team coordinated. Check Check Follow the W’s and H: • Who checks • What to check • Where to check – Gemba, place of Where place action action • When to check • Understand why you are checking • How (frequency and method) to check Act Act • Reflect on the outcome and take appropriate action • Standardize when results are on target • Repeat PDCA when the results are not – get to root cause • Take counter measures when the results are not to “stop the bleeding” DMAIC DMAIC • Define the problem and the improvement. • Measure variables associated with the problem. • Analyze the data to better understand the problem. • Improve the process. • Control the process by standardizing the change. Which is Best? Which Define problem Gather information Do Develop alt solutions Select best solution Implement solution Monitor progress Act Check Improve Control Analyze Plan Define Measure The Foundation for Planning Planning •Leadership provides and communicates direction. •Direction is provided in a number of ways, such as: •Vision •Mission •Strategy •Goals and Objectives Organizational Direction Organizational • Leadership provides and Leadership communicates direction. communicates • Direction is provided in a Direction number of ways, such as: number • Vision • Mission • Strategy • Goals and Objectives Vision Vision -A picture of what the organization wants to be sometime in the future -Highlights a tangible or stretch goal -The vision communicates direction to everyone. To be a top 5 producer of composite materials in the country by 2015. To have the best 5S area in the company by February. Mission Mission • Provides the path to accomplish the vision • It describes purpose, a reason for being, what you do We move with purpose and urgency to continuously improve all that we do. Strategy Strategy • Answers the how to accomplish the how vision; how to carry out the mission how • Traditionally the organization creates a Strategic Plan and below that, an Operational Plan • Strategic Plans often fail because of disconnects in the organization • Some organizations are beginning to introduce Hoshin Planning Hoshin Planning Hoshin • Short term and long term process to identify and address critical business needs; and extension of Management by Objectives • Focuses on just a few critical problems • Aligning resources to apply the PDCA cycle • Targets are set by catchball catchball • Company officers set a vision and toss it to senior management • Senior management catches vision, translates it into plans and tosses back to officers • Consensus is reached • Process continues to each subordinate until everyone knows what they are doing. Goals and Objectives Goals • These terms are usually used interchangeably • One Perspective • goal: a single, general aim of some effort • Objective(s): specific aims to accomplish the goal • Goals and objectives are intermediate steps to achieving the vision G: Reduce cost O1: Hold labor cost constant O2: Decrease lead time by 15% O3: Reduce rejects by 20% Change is Required in Planning Planning Sears 1895 Julius Rosenwald Isolated Farmers 1920-1954 General Robert E. Wood Middle America Failed to Change, lost customers 1994 Arthur Martinez Sell to the working woman Planning for the future Planning • Future business Business Portfolio Matrix Market Share Small Large ?? Stars Dogs Cash cows Market Fast growth Slow growth Planning for technology Planning • Planning is a part of business strategy • Base technology – invest only enough to keep Base invest market share market • Key technologies – these are your differentiator Key these (why HP rather than Cannon printers?) Invest heavily here. heavily • Pacing technologies – these become the future. Pacing these Managing this mix is tricky business. Managing Goals and Objectives Goals • Drucker’s Key Objectives for Organizational Key Survival • • • • • • • • Market Share Innovation Productivity Physical and Financial Resources Manager Performance and Development Worker Performance and Attitude Profitability Social Responsibility Management by Objectives Management • Commonly Referred to as MBO (Drucker) • Advantages: Commitment, planning, rational Advantages: performance management performance • Disadvantages: performance manipulation • Corollary MBWA (Management by Walking Around) • Adv.: Listen to employees, availability, “seen Adv.: seen as in the trenches”, trust as • Disadv.: dishonest if management just doing it .: to do it, takes time to Effective Planning Concepts Effective • Responsibility for planning • Major activity of managers • Ensure “buy in” Ensure • Planning Premises • Know the assumptions that the Know plan was based on plan • Future economic conditions, competition, future markets • Planning Horizon • How far to look into the future Forecasting Forecasting • Essential preliminary to effective Essential planning planning • Engineering manager must be Engineering concerned with both future markets and future technology markets Why Forecasting? Why • New facility planning • Production planning • Work force scheduling • Future sales Long Range Forecasts Long • Design new products • Determine capacity for new Determine product product • Long range supply of materials Short Range Forecasts Short • Amount of inventory for next Amount month month • Amount of product to produce Amount next week next • How much raw material How delivered next week delivered • Workers schedule next week Forecasting Methods Forecasting • Qualitative Methods Expert Opinion Historical • Quantitative Methods Time models Causal models Simple Moving Average Simple • premise: future value is based on past premise: values values • Ft+1 = Avg(nX) Ft+1 Avg(nX • F = future value for time t+1 • X = historical value • A large n results in a smooth curve. A large small n gives the most recent time periods more control over the forecast. more Example Example Year Demand 1987 9 1988 11 For a 6 year moving average: 1989 10 F = (12+16+19+23+18+26)/6 = 19 1990 12 1991 16 25 1992 19 20 1993 23 15 1994 18 3 yr 10 6 yr 1995 26 5 What is the predicted demand 0 1993 1994 1995 1996 for 1996? For a 3 year moving average: F = (23+18+26)/3 = 22.3 Weighted Moving Average Weighted Year 1989 1990 1991 1992 1993 1994 1995 Weight 0 0 0 .15 .20 .30 .35 Demand 22 15 16 19 23 14 15 4 year weighted moving average F = (.15*19+.20*23+.30*14+.35*15) = 16.9 4 year moving average with no weight F = (19+23+14+15)/4 = 17.8 Actually, we are using equal weights Exponential Smoothing Another form of weighted moving average. Ft+n = A(Xt+n-1) + (1-A)Ft+n-1 where 0<A<1, exponential smoothing factor Actual Forecast, A=.6 Forecast, A=.1 As A approaches 0, the curve gets flat. As A approaches 1, the curve lags past data. Variations Variations • Seasonal - fluctuations of less than a Seasonal fluctuations year tied to weather, "back to school" school" • Cyclical - fluctuations over one year Cyclical fluctuations housing starts and DOW are somewhat tied to interest rates somewhat • Secular - fluctuations that reflect Secular fluctuations long term changes aging population increases demand on health care Causal Forecasting Causal No correlation Perfect correlation The Model The Y=a+bX b = (nΣXY -ΣX ΣY) / (nΣX2 - (ΣX)2) a = ΣY/n - bΣX/n R = (nΣXY -ΣX ΣY) / ((nΣX2 - (ΣX)2)( nΣY2 - (ΣY)2)0.5 Y = the dependent variable, such as demand, cost X = the independent variable, such as price, supply n = number of data points in the sample R = coefficient of correlation Example Example You must predict the stocking requirements of inventory for a pump motor. The marketing manager gives you data on the advertising expenses. The following data for the past five years is: Year Sales (thous units)Y Advertising (thous $)X 1 264 2.5 2 116 1.3 3 165 1.4 4 101 1.0 5 209 2.0 Develop a linear model Develop Year Sales (Y) Advertising (X) XY X2 Y2 1 264 2.5 660 6.25 69,696 2 116 1.3 151 1.69 13,456 3 165 1.4 231 1.96 27,225 4 101 1.0 101 1.00 10,201 5 209 2.0 418 4.00 43,681 Sums 855 8.2 1561 14.9 164,259 b = (nΣXY -ΣX ΣY) / (nΣX2 - (ΣX)2) = (5*1561- 8.2*855) / (5*14.9 - 8.22) = 109.3 a = ΣY/n - bΣX/n = 855/5 - 109.3/5 = -8.14 Therefore, Y = -8.14 + 109.3 X = -8.14 + 109.3 (1.75) = 183 or 183,000 pump motors Check the correlation Check R = (nΣXY -ΣX ΣY) / ((nΣX2 - (ΣX)2)( nΣY2 - (ΣY)2)0.5 = 0.96 which is an excellent correlation Homework: 3-1, 3, 12, 13 ...
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