Operative Planning and Control PDF

# Operative Planning and Control ## Introduction ### The role of operative planning and control * To manage a company, one must use a great variety of management tools. * These systems, approaches, and policies interact with each other. * It is dangerous to omit any of the major parts. * Operativ...

# Operative Planning and Control ## Introduction ### The role of operative planning and control * To manage a company, one must use a great variety of management tools. * These systems, approaches, and policies interact with each other. * It is dangerous to omit any of the major parts. * Operative planning and control have at least two main linkages with other management systems: * Strategic planning * Organization Development * The linkage between strategic & operative planning means that there must be clear & concrete strategies to be used as a foundation for planning operations. * The interaction between organizational & operative planning means that there must be clear & well-understood responsibilities within the organization. * **If any of these key parts is missing or the performance is poor, there will be troubles in managing the company.** * **It is necessary to ensure that:** * Participants understand the main strategies and their roles and responsibilities within the organization. * A clear system for operative planning exists. * All three subsystems are in at least moderate condition. ### Planning and control in a multi-industry company * **The majority of forest industry companies are constructed to operate as a collection of units, for example:** * A sawmill * A plywood factory * A chipboard line. * **The use of raw material in this way is more effective than in separate production units.** * **It is presumed in this section that:** * Operative planning and control occur in a corporation consisting of many production companies with a head office that coordinates and monitors. ## The main parts of operative planning and control * Operative planning is often considered equivalent to budgeting. * Budgeting is an important part, but it is a larger concept. * **Operative planning is short-term or annual planning with two major parts:** * Planning of actions * Planning of the financial consequences of those actions (budgeting). * **Major elements in operative planning & control:** 1. Strategic basis for planning 2. Clear organization 3. Operative planning (planning the performance and financial side of the operations) 4. Reporting ## Planning and control of actions ### Preliminary balancing * **This is the first stage and is necessary to create a basic picture in which the needs of the market and the possibilities of the company are balanced.** * **The stage includes considering:** * Demand expectations * Production capacities * Possibilities of material supply * **Only by balancing needs and possibilities can the detailed plans remain sound.** ### Planning of actions * **There are two major stages:** 1. Preliminary balancing 2. Planning of actions ### Examples of planning actions * **Logging activities:** * Logging area or compartment allocation * Use of own crew/private contractor policy * Felling and transportation programmes * Resource plans and efficiency targets * Stock and delivery plans * **Sawmilling:** * Plan of log allocation * Recovery rate targets * Degree of utilization targets * Productivity targets * Dimensional distribution of finished products * Need of resources for different resource groups. * **Plywood production:** * Log consumption plan * Production targets and programs * Plan for thickness distribution * Resource plan for each resource group * **Board product manufacturing:** * Making sure of the supply of raw materials * Planning the total production and the thickness distribution for a year * Reserving human and material resources for the planned production * **Production of further processed products:** * Planning may differ greatly from product to product. * Manufacturing based on specific customer orders is common. * **Sales and marketing:** * Realistic planning of sales and marketing must balance the needs of internal and export markets. * **Key subjects in operative planning for sales and marketing include:** * Customer mix and volumes * Sales programmes for each major group * Plans for sales promotion tools * Sales resources. * **Maintenance:** * **A scheduled maintenance plan should be in place and include:** * Preventive maintenance, equipment, and vehicles * A reserve of maintenance resources * An inventory plan for critical spares * Manpower management * **Administration:** * **The planning of action in administration is mainly needed for:** * Manpower management * Training programs * Development plans * Improvement of accounting system ## Controlling of actions * **The basic ideas in controlling are as follows:** * Follow planned items * Focus on key figures instead of detailing information * Use reports to help transform data quickly * Use a hierarchical system of reporting ## Financial planning and control ### Financial planning and budgeting * **The second major part of operational planning is to plan the economic and financial results of actions, which involves budgeting.** * **The purpose of budgeting is financial integration of operations:** * Geared to profitability * Generating cash flow ### General framework of financial planning * **Financial planning and control can be divided into:** * Financial accounting system — collects information mainly for official use of the corporation. * Management accounting system — collects information for management's own purpose. ### Types of Management Accounting * **Profit & Cost Centre Accounting:** * Keeps management informed of the effect of the organization on profitability by indicating the revenues yielded and costs incurred by each center. * **Product Profitability Accounting:** * Concerns itself with the profitability of specific products or product groups. ### Linkage between financial and management accounting * **Good coordination is needed between the two.** * **Both systems have different needs but work together.** ### Interaction between financial and management accounting * **The interaction between financial & management accounting systems can be arranged with the following auxiliary systems:** * Sales Statistics * Stock Accounting * Payroll accounting * **These systems link the two main types of accounting.** ### Financial accounting * **This type of accounting is governed by national laws.** * **It is used for:** * Official reporting and tax filings ### Management accounting * **This type of accounting is more flexible than financial accounting.** * **It is used to collect information for internal management use and focuses on:** * Organizational responsibilities for incomes & costs * Profitability of products. ### Budgeting Procedure * **These procedures are generally used in corporations with several companies.** * **Main steps include:** * Corporation Level Instructions * Preliminary Balancing Overview * Sales Budget Allocation * Production and Inventory Budgets * Logging Budget * Maintenance Budget * Administration Budget * Company Summaries * Head Office sub-budgets * Corporation Summaries ### Basic data collection * **Systems are needed to divide incomes & costs among different categories of accounts.** * **Two basic systems are used:** * Chart of accounts code * Profit & cost centre codes ### General structure of account codes * **These are based on a decimal system with three digits.** * **The system is used to identify items of profit or loss, and items of the balance sheet.** ### General structure of profit & cost centre codes * **These are connected to accounting codes and are used to give information from smaller units rather than the entire company.** ### Reporting * **This should be analytical and include actual figures, deviations, and reports.** * **Good tools include graphs.** # Strategic Human Resources Management ## Introduction * **Three core elements are necessary for companies to function effectively:** * Purpose & Strategy * Human Resource Management * Political Forces * Economic Forces * Cultural Forces * Mission & Strategy * Organization Structure * Human Resource Management ## The role of Human Resource Management * **People are recruited to achieve an organization's goals and objectives, forming units and performing functions to achieve targets.** * **Performance must be regularly monitored, and both monetary & non-monetary rewards should be given to keep individuals motivated & productive.** ## The environment * **Economic, political, and cultural forces all impact an organization's success.** * **The diagram shows the interconnectedness of these elements in the work environment.**