QUANTITATIVE TOOLS FOR PLANNING

There are a number of quantitative tools that managers can use to enhance the efficiency and effectiveness of planning. The important quantitative tools and techniques for planning are as follows:

(1) Forecasting

Forecasting is an important part of organizational planning. Forecasting is the process of developing assumption about the future. It means estimating future on a systematic basis. Environmental scanning creates the foundation for forecasts, which are predictions of outcomes. Almost every manager makes forecasts of one thing or the other.

To carry out various kinds of forecasting, managers use several different techniques. Time series analysis and causal modeling are two common quantitative techniques.

a. Time-Series Analysis
b. Causal Modeling

(2) Linear Programming

Linear Programming is a procedure for calculating the optimal combination of resources and activities. It is appropriate when there is some objective to met within a set of constraints. It can be used to schedule production, select an optimal portfolio of investment or allocate sales representative to territories.

(3) Break even Analysis

Break even analysis is the procedure that estimates profit and loss figures for different levels of output. It also identifies the point of no profit or no loss. This technique can determine the specific impact on profit as a result of changes in cost, price, and volume. Production cost includes three types of costs: fixed costs, variable costs, and total costs.

(4) Simulations

The word simulate means to copy or to represent. A simulation is a model of a real-world situation that can be manipulated to discover how it functions. It is more useful in very complex situations characterized by diverse constraints and opportunities. The development of sophisticated simulation models may require the expertise of outside specialists or consultants.

(5) PERT

PERT is an acronym for Program Evaluation and Review Technique. A PERT is like a flow chart that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity. The purpose of PERT is to develop network of activities and their interrelationships so as to highlight critical time intervals that affect the overall project.