WCM/U2 Topic 13 Planning Methodology and Issues in Strategic Planning of WCM
Strategic thinking is concerned with the future development of business enterprise as a whole. It is usually described as ‘long-term’, but how long, depends on the industry in which the firm operates. Thus, in the pharmaceutical and aircraft construction industries, long-term planning means 10 years or more, but for a small software company it might mean two years. Most managers feel that three to five years is the realistic limit for their long-term planning. Most also feel that this period is getting shorter as competitive pressure and the general speed of business increase.
Another important point is that strategic thinking is about’ constructing the future’ rather than ‘predicting the future’. It is creative in the sense that the enterprise identifies where it wants the business to be and then thinks about how to get it there. Strategic thinking requires answers to the three questions shown in Figure 7.2, in the right order.
Question 1: Where are we now?
This takes stock of the current business situation, both in terms of the enterprise itse1f and the business environment in which it operates. It is often done by the familiar strengths, weaknesses, opportunities and threats (SWOT) analysis.
Question 2: Where do we want to be?
This requires a creative and imaginative response after digesting all the detail arising from the first question. It requires the ability to consider novel opportunities, perhaps based on the new use of technology in the business. The answer to this question is expressed as the vision for the enterprise, for some time in the future. Deriving directly from this may be the mission statement, which is a simple narrative statement of what the enterprise aims to be or to become, stated in the form of a series of business objectives. The vision and mission statements together describe the strategic intent of the company.
Question 3: How will we get there?
Answer to this question will produce a broad plan for getting the firm from its current position (defined in the answer to the first question) to where the firm wants to be (defined in the answer to the second question). This broad plan of development is called the (current) strategy. It is usually expressed in narrative terms, with few quantified aspects.
ISSUES IN STRATEGIC PLANNING FOR WORLD-CLASS MANUFACTURING
The manufacturing function of an organisation is primarily concerned with internal activities (the production process), whereas other functions, like marketing are involved primarily in external operations (customer contact). Furthermore, the manufacturing capabilities of an organisation determine how effectively the marketing function can satisfy the customers, consequently, manufacturing decision can often instrumental in restricting, reinforcing and determining the firm’s overall strategy. Thus an effective business strategy can only be developing by fully integration manufacturing decision it to the strategic planning process. However in order to accomplish this, a number of issued needs to be addressed. Some of these issues are:
- Involvement of line managers in strategic planning: In many organisations, where planning is identified as a separate function, it is still carried out by the planning group that in many cases does not include line operating managers. However, planning performed by a planning staff in a vacuum generally results in sufficient implementation.
It must, therefore, be realized by companies that planning is a management tool for line managers. Therefore, operating managers must become deeply involved in planning to reduce the risk of plan implementation failure.
- Lack of planning orientation in manufacturing culture: In many organisations, involving operating managers is a major problem since the traditional manufacturing culture does not encourage planning. However, one of the keys to IBM’s success is that its managers never stopped planning, and this became a major part of any manager’s job in IBM. This view must also be propagated throughout the culture of manufacturing in order to enable businesses to operate more effectively.
- Lack of IT usage as a strategic resource: Some companies manage IT merely as a technology and some others perceive IT as enabler of information management. The technological view of IT sees costs as an operating expense and, therefore, in these companies the attention of the management is primarily focused on reduced cost for efficiency sake. On the contrary, an organisation using IT for information management views information as a corporate resource sees IT as a capital investment for which maximum management attention should be on maximization of its breadth. When the IT strategy provides the framework for what is spent, then that spending can be defined as an investment. However, when there is no sense of direction, then IT spending may simply represent an ongoing expense. This shift in perception changes IT budgeting as a ‘separate’ issue to business goal with business profitable projects.
IT investment levels are frequently quoted in revenue ratios and, according to many experts; they should be in the range of 1 to 5 per cent in the case of organisations investing in IT successfully. According to a recent survey of top 50 IT spending companies in India, there was only one company spending more than 4 per cent of its revenue on IT, five companies were spending more than 3 percent, three companies were spending more than 2 per cent, eight companies were spending than. 1 percent and rest were spending less than 1 per cent (Data Quest 1996). Most of these companies perceive that IT could improve their business efficiency and productivity, and may give better access to information. Only about 15 per cent of these believed that IT could provide customer satisfaction or could give marketing and sales advantage, i.e. may have strategic impact. Thus, it is clear that most Indian companies do not perceive IT as a long term investment for gaining strategic advantage and, therefore, treat it merely as an expense item. This perhaps might explain why there are not many companies having a high extent of integration as well as high breadth of IT infrastructure. It also explains why a company’s use of IT is limited to value-oriented accounting systems and not exploiting it for long-term planning and decision support (as per Scheer’s framework, Perhaps, this might be because until recently Indian manufacturing was not exposed to global competition. But in the changed scenario, such an attitude is dangerous because it tends to make companies less competitive, thereby treating them to major business disadvantages. We believe that this is a serious issue that needs to be addressed through proper education and further research.
- Need for a formal planning methodology: Another problem facing planning is the absence of formal planning process (or methodology) to translate the strategic vision of the company into an implement able, long-term action programme in any internal function to obtain competitive advantage and move it towards World-Class performance?