Planning is an important facet of management and we apply it in our day-to-day activities in management of our time, resources and inputs/ outputs. At small level of an enterprise operation involving few activities, resources, constraints and inter relationship can be visualised easily by human mind and planned informally.
However, when size and level of operation becomes large, the need for formal planning steps in. Planning is defined as process of setting goals, developing strategies and outlining tasks and schedules to accomplish the goals. The need for formal planning is indeed much greater for business enterprise in the current competitive scenario. The advantages associated with planning are:
It provides a basis for organising the work in an enterprise.
It is a mechanism of communication and coordination between different sub-groups and individuals in an enterprise in the project.
It induces people to look ahead.
It inculcates responsibilities among individuals.
It establishes the basis for monitoring and control.
i.Areas of Planning
(a) Structuring the goals and activities: The first and foremost task for an entrepreneur is to set the goals with the time frame. For example: Capturing 15% of market share of the ice-cream market in the country in a span of two-three years/ setting up of dairy unit for production of quality indigenous dairy products for export in a couple of years. All the probable activities associated to achieve the goals are listed out from production point to consumption level. These activities are grouped within the enterprise into parts and sub-parts such as for a small dairy -procurement, purchase, production, quality control, marketing, services &maintenance, administration and finance, etc. are the major sections, and each section will have corresponding activities. The activities relating to each section are outlined in detail and should be properly scheduled and sequenced. This helps in- (a) dividing the work into manageable elements and
(b) development of control and information system.(b) Defining the objectives and policies: The issues in this context are- What are the technical and performance objectives? What are the time and cost goals? To what extent should the work be given to outside contractors? How many contractors should be employed? What should be the terms of contract? The activities like packaging, transportation, security and maintenance are being outsourced by the dairies.
The well-defined objectives and policies serve as the framework for the decisions to be made by the entrepreneur/ manager. Throughout the span of the business,he has to seek a compromise between the conflicting goals of technical performance, cost standard, and time target. The framework set by the management will be helpful in taking quick decisions. For example, guidelines on product mix for a dairy plant in lean season, acceptance and payment norms for sub-standard raw milk, maintenance of product standards will facilitate decision-making process.
(c) Planning for human resource and organisation: The human resource required for an enterprise ranging from managerial cadre to skilled worker (managers,technologists, technicians/ operators, and others) must be estimated and the responsibility for carrying out the project work must be allocated.
(d) Planning the finance: The financial requirements taking in account the fixed capital and recurring expenditure should be planned. The initial returns from the market shall be slow.
(e) Planning the information system: The information required for monitoring an enterprise must be defined. It is important to set the communication and information network among all the stakeholders of the business enterprise(including consumers).
ii. Tools of Planning
The oldest formal planning tool is the bar chart, also referred to as the Gantt chart or the multiple activity chart. The network techniques have received considerable attention in last few decades. An introduction to the planning tools is made here.
(a) Bar Chart: This is a pictorial device in which the activities are represented by horizontal bars on the time axis. The left-hand end of the bar shows the beginningtime, the right-hand end the completing time. The duration of the activity is indicated by the length of the bar. The manpower requirement for the activity is shown by a numbers on the bar. An illustrative bar chart is shown in below Fig.
The advantages of the bar chart are: (i) it is simple to understand; (ii) it can be used to show progress; and (iii) it can be used for manpower planning. The bar chart, however, suffers from some disadvantages which limit its usefulness: (i) it cannot show interrelationship among activities on large, complex projects; (ii) there may be a physical limit to the size of the bar chart, which may limit the size of the project that can be planned with this technique; and (iii) it cannot easily cope with frequent changes or updating.
(b) Network Techniques: These are more sophisticated than the traditional bar chart.
In these techniques, the activities, events, and their inter-relationships are represented by a network diagram, also called an arrow diagram. An event is a specific accomplishment that occurs at a recognisable point in time. It marks the completion or beginning of the activity and does not require any time or resources.
An activity is the work required to complete a specific event. An activity is a recognisable part of work project that requires time and resource for completion.A network is formed by connecting all activities and events in a logical manner.The activities are represented by arrows and events by a circles. Thus a network consists of arrows and circles. .
Programme Evaluation and Review Technique (PERT) and Critical Path Method(CPM) are two basic network techniques. Normally PERT is used for variable activities while CPM is used for deterministic activities. Variable activities mean the activities which may have never occurred before and/ or which contains a considerable number of chance elements. Deterministic activities are those for which we have considerable experience and whose mean value is accurately known and whose variance in performance time is negligible.
PERT is applied to projects characterised by uncertainty and its orientation is probabilistic. CPM is applied to projects which are relatively risk free. PERT is used where the emphasis is on shortening and monitoring execution time without too much for cost implication. CPM is used on optimising resource allocation and minimizing overall cost of a given project execution. We can say that CPM takes accounts of costs and PERT is concerned with time.
Development of networks: Basic to PERT as well as CPM is the network diagram.The network diagram, also referred to as the project graph, shows the activities and events of the project and their logical relationships. A simplified network diagram for an inauguration function of a dairy plant is shown in Fig.
The network diagram is constructed in terms of activities and events. An activity is a definite task, job, or function to be performed in a project. For example,'Inaugural Site Preparation' (see Fig.) is an activity. An activity is represented by an arrow. The head of the arrow marks the completion of the activity and the tail of the arrow marks its beginning. (The length and 'compass' direction of the arrow have no significance.) An event is a specific point in time indicating the beginning or end of one or more activities. It represents milestone and does not consume time or resources. For example, event 2 in Fig.marks completion of the activity 'send invitation'.
Activity Duration/ Span (Te): In PERT, the activities duration or time is calculated by using three time estimates such as optimistic (to), pessimistic (tp) and most likely time (t m). The activity duration time (Te) is calculated by using the formula:
Te(a + 4 m + b)/6
where:
a = optimistic time (to)
m = most likely time (tm)
b = pessimistic time (tp)
Te = Mean Activity Performance time based on three time estimates
Critical Path: It is the path which takes the longest duration of time to reach the objective event. If it is required to complete the project in less time, the duration of the activities lying in the critical path will be shortened. Time for an activity can be reduced by employing more resources or by using improved technology.
Float/ Slack: We have defined that the critical path is the longest path in time from starting event to the objective event. The other event and in the network lie on the paths which are shorter. This means that along these paths there is a slack or time to spare. These paths are referred to as slack time and are the areaswhere surpluses resources of men, facilities, or time are to be found.
Steps for perting a project: The basic steps are:
Obtaining time estimates for activities
Network Cost Control: We know that project cost is product of time and resources. The amount of priority that should be given to the achievement of a project by a certain date depends on its cost consideration. Selection of certain schedule for project generally involves a comparison of a number of alternatives,each with a different relationship between cost and time of completion of the activity. A certain activity could be expedited by incurring extra cost in the form of assigning more personnel or scheduling overtime for that activity. When an activity is completed in normal time, the associated minimum cost is called as normal cost. When an activity is completed in minimum possible time, the associated time could be called as Crash time and the cost Crash Cost. The network cost system are useful for cost planning and control of projects.
A network diagram is shown in the below Fig.
The advantages of network techniques are: (i) they can effectively handle inter- relationships among project activities; (ii) they identify the activities which are critical to the completion of the project on time and indicate the float (or spare time) for other activities; (iii) they can handle very large and complex projects; and (iv) they can be easily computerised and updated.While the network techniques are a superior tool for project planning, they suffer from several drawback such as: (i) being more complicated than the traditionalbar chart they are not easily understood by the project personnel; and (ii) they do not define an operational schedule which tells who does what and when.
However, when size and level of operation becomes large, the need for formal planning steps in. Planning is defined as process of setting goals, developing strategies and outlining tasks and schedules to accomplish the goals. The need for formal planning is indeed much greater for business enterprise in the current competitive scenario. The advantages associated with planning are:
It provides a basis for organising the work in an enterprise.
It is a mechanism of communication and coordination between different sub-groups and individuals in an enterprise in the project.
It induces people to look ahead.
It inculcates responsibilities among individuals.
It establishes the basis for monitoring and control.
i.Areas of Planning
(a) Structuring the goals and activities: The first and foremost task for an entrepreneur is to set the goals with the time frame. For example: Capturing 15% of market share of the ice-cream market in the country in a span of two-three years/ setting up of dairy unit for production of quality indigenous dairy products for export in a couple of years. All the probable activities associated to achieve the goals are listed out from production point to consumption level. These activities are grouped within the enterprise into parts and sub-parts such as for a small dairy -procurement, purchase, production, quality control, marketing, services &maintenance, administration and finance, etc. are the major sections, and each section will have corresponding activities. The activities relating to each section are outlined in detail and should be properly scheduled and sequenced. This helps in- (a) dividing the work into manageable elements and
(b) development of control and information system.(b) Defining the objectives and policies: The issues in this context are- What are the technical and performance objectives? What are the time and cost goals? To what extent should the work be given to outside contractors? How many contractors should be employed? What should be the terms of contract? The activities like packaging, transportation, security and maintenance are being outsourced by the dairies.
The well-defined objectives and policies serve as the framework for the decisions to be made by the entrepreneur/ manager. Throughout the span of the business,he has to seek a compromise between the conflicting goals of technical performance, cost standard, and time target. The framework set by the management will be helpful in taking quick decisions. For example, guidelines on product mix for a dairy plant in lean season, acceptance and payment norms for sub-standard raw milk, maintenance of product standards will facilitate decision-making process.
(c) Planning for human resource and organisation: The human resource required for an enterprise ranging from managerial cadre to skilled worker (managers,technologists, technicians/ operators, and others) must be estimated and the responsibility for carrying out the project work must be allocated.
(d) Planning the finance: The financial requirements taking in account the fixed capital and recurring expenditure should be planned. The initial returns from the market shall be slow.
(e) Planning the information system: The information required for monitoring an enterprise must be defined. It is important to set the communication and information network among all the stakeholders of the business enterprise(including consumers).
ii. Tools of Planning
The oldest formal planning tool is the bar chart, also referred to as the Gantt chart or the multiple activity chart. The network techniques have received considerable attention in last few decades. An introduction to the planning tools is made here.
(a) Bar Chart: This is a pictorial device in which the activities are represented by horizontal bars on the time axis. The left-hand end of the bar shows the beginningtime, the right-hand end the completing time. The duration of the activity is indicated by the length of the bar. The manpower requirement for the activity is shown by a numbers on the bar. An illustrative bar chart is shown in below Fig.
 |
| An Illustrative Bar Chart |
The advantages of the bar chart are: (i) it is simple to understand; (ii) it can be used to show progress; and (iii) it can be used for manpower planning. The bar chart, however, suffers from some disadvantages which limit its usefulness: (i) it cannot show interrelationship among activities on large, complex projects; (ii) there may be a physical limit to the size of the bar chart, which may limit the size of the project that can be planned with this technique; and (iii) it cannot easily cope with frequent changes or updating.
(b) Network Techniques: These are more sophisticated than the traditional bar chart.
In these techniques, the activities, events, and their inter-relationships are represented by a network diagram, also called an arrow diagram. An event is a specific accomplishment that occurs at a recognisable point in time. It marks the completion or beginning of the activity and does not require any time or resources.
An activity is the work required to complete a specific event. An activity is a recognisable part of work project that requires time and resource for completion.A network is formed by connecting all activities and events in a logical manner.The activities are represented by arrows and events by a circles. Thus a network consists of arrows and circles. .
Programme Evaluation and Review Technique (PERT) and Critical Path Method(CPM) are two basic network techniques. Normally PERT is used for variable activities while CPM is used for deterministic activities. Variable activities mean the activities which may have never occurred before and/ or which contains a considerable number of chance elements. Deterministic activities are those for which we have considerable experience and whose mean value is accurately known and whose variance in performance time is negligible.
PERT is applied to projects characterised by uncertainty and its orientation is probabilistic. CPM is applied to projects which are relatively risk free. PERT is used where the emphasis is on shortening and monitoring execution time without too much for cost implication. CPM is used on optimising resource allocation and minimizing overall cost of a given project execution. We can say that CPM takes accounts of costs and PERT is concerned with time.
Development of networks: Basic to PERT as well as CPM is the network diagram.The network diagram, also referred to as the project graph, shows the activities and events of the project and their logical relationships. A simplified network diagram for an inauguration function of a dairy plant is shown in Fig.
 |
| Network Diagram for an Inaugural Function of a Dairy Plant |
The network diagram is constructed in terms of activities and events. An activity is a definite task, job, or function to be performed in a project. For example,'Inaugural Site Preparation' (see Fig.) is an activity. An activity is represented by an arrow. The head of the arrow marks the completion of the activity and the tail of the arrow marks its beginning. (The length and 'compass' direction of the arrow have no significance.) An event is a specific point in time indicating the beginning or end of one or more activities. It represents milestone and does not consume time or resources. For example, event 2 in Fig.marks completion of the activity 'send invitation'.
Activity Duration/ Span (Te): In PERT, the activities duration or time is calculated by using three time estimates such as optimistic (to), pessimistic (tp) and most likely time (t m). The activity duration time (Te) is calculated by using the formula:
Te(a + 4 m + b)/6
where:
a = optimistic time (to)
m = most likely time (tm)
b = pessimistic time (tp)
Te = Mean Activity Performance time based on three time estimates
Critical Path: It is the path which takes the longest duration of time to reach the objective event. If it is required to complete the project in less time, the duration of the activities lying in the critical path will be shortened. Time for an activity can be reduced by employing more resources or by using improved technology.
Float/ Slack: We have defined that the critical path is the longest path in time from starting event to the objective event. The other event and in the network lie on the paths which are shorter. This means that along these paths there is a slack or time to spare. These paths are referred to as slack time and are the areaswhere surpluses resources of men, facilities, or time are to be found.
Steps for perting a project: The basic steps are:
- Deciding the objectives and project structure
- Listing out key events and their sequencing
- Listing out activities and their relationship
- Construction of net work
Obtaining time estimates for activities
- Calculating critical path and floats
- Allotting resources
- Evaluation
- Control
Network Cost Control: We know that project cost is product of time and resources. The amount of priority that should be given to the achievement of a project by a certain date depends on its cost consideration. Selection of certain schedule for project generally involves a comparison of a number of alternatives,each with a different relationship between cost and time of completion of the activity. A certain activity could be expedited by incurring extra cost in the form of assigning more personnel or scheduling overtime for that activity. When an activity is completed in normal time, the associated minimum cost is called as normal cost. When an activity is completed in minimum possible time, the associated time could be called as Crash time and the cost Crash Cost. The network cost system are useful for cost planning and control of projects.
A network diagram is shown in the below Fig.
 |
| A Network Diagram |
The advantages of network techniques are: (i) they can effectively handle inter- relationships among project activities; (ii) they identify the activities which are critical to the completion of the project on time and indicate the float (or spare time) for other activities; (iii) they can handle very large and complex projects; and (iv) they can be easily computerised and updated.While the network techniques are a superior tool for project planning, they suffer from several drawback such as: (i) being more complicated than the traditionalbar chart they are not easily understood by the project personnel; and (ii) they do not define an operational schedule which tells who does what and when.
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