Forecasting and Environmental Scanning

Environmental Scanning

• Aims to identify emerging trends and interpret environmental changes.
• Includes gathering competitor intelligence.
• Managers are expanding their scope to consider global factors affecting organizations.

Forecasting

• Forecasting is predicting future outcomes.
• Quantitative forecasting uses mathematical rules on past data.
• Qualitative forecasting relies on expert judgment and opinion.

Forecasting Techniques (Quantitative)

• Time series analysis: Fits a trend line to a mathematical equation and projects into the future.
• Regression models: Predicts one variable based on other variables.
• Econometric models: Uses regression equations to simulate economic segments.
• Economic indicators: Predicts future states based on current economic conditions; used to assess the impact of a new product or service.

Forecasting Techniques (Qualitative)

• Jury of opinion: Combines expert opinions.
• Sales force composition: Combines sales personnel estimates from customers' opinions.
• Customer evaluation: Combines estimates from established customers regarding their purchases.

Benchmarking

• Identifies best practices among competitors or non-competitors.
• Focuses on achieving superior performance.
• Steps involve identifying benchmarks, forming a planning team, gathering data, and analyzing to find performance gaps for improvements.

Allocating Resources

• Resources include: financial, physical, human, intangible, and structural/cultural assets.
• These assets are used in developing, manufacturing, and delivering products to customers.

Budgeting

• Budget: a numerical plan for allocating resources to specific activities.
• Budgeting: the process of allocating resources to pay for future costs.

Budgeting Approaches

• Incremental budgeting: Starts with the current budget and managers decide if additional resources are needed and justify requests.
• Zero-based budgeting: Starts with a zero base and plans based on justifying each element needed for the project.

Budget Types

• Cash budget: Forecasts cash on hand and needed.
• Revenue budget: Projects future sales.
• Variable budget: Accounts for costs that vary with volume.
• Fixed budget: Assumes a fixed level of sales or production.
• Profit budget: Combines revenue and expense budgets for various units to determine profits.
• Expense budget: Lists primary activities and allocates dollar amounts to each.

Improving Budgeting

• Collaborate and communicate effectively.
• Be flexible, and ensure goals drive budgeting decisions instead of the other way around.
• Coordinate and use planning software appropriately.
• Remember budgets are tools for smart management, and profits come from effective management not just budget processes.

Scheduling

• Scheduling involves detailing activities, their order, personnel responsible, and completion times.
• Gantt chart: A scheduling chart illustrating planned and actual output over a period.

Load Charts

• A modified Gantt chart that schedules capacity using departments or specific resources.

PERT Network Analysis

• PERT network: A flowchart showing the sequence and associated time/cost of project activities.
• Events: End points representing major activity completion in the project.
• Activities: Time/resources needed to advance from one event to another.
• Slack time: Delays allowed in individual activities without delaying an entire project.
• Critical path: The longest sequence of project activities.

Project Planning Process

• Defines objectives.
• Identifies and establishes activities/sequences and resources.
• Estimates times for activities, and determines project completion dates.
• Compares with pre-defined objectives and ensures resource requirements are met.

Scenario Planning

• Scenarios are consistent views of potential future outcomes.

Break-Even Analysis

• Break-even analysis identifies the point where total revenue exactly covers total costs.
• This point can be calculated graphically or using a specific formula.

Linear Programming

• Linear programming is a mathematical technique for solving resource allocation problems.

Project Management

• A project is a unique, temporary endeavor with a definite beginning and ending.
• Project management involves getting project activities completed on time, within budget, and according to specifications.