Engineering Management Chapter 3: Planning and Decision Making

Intended Learning Outcomes

1. Describe the role of useful information to decision-making

2. Engage in discussions about ethics and how it affects our decisions
3. Explain the importance of planning in the company

Activity

1. Answer Assessment 13 page 527, Management 11th ed by Schermerhorn

2. Prepare a deck of cards. Your professor will give your group a pattern to arrange the cards. At the
first try, there will be no time for you to talk among your groupmates. After the first game, you will
be given time to plan on how to execute the task. Discuss the outcome of both times.
3. Read the story below
Some 40 climbers are winding their ways to the top of Mt. Everest. About 1,000 feet below the
summit sits a British mountain climber, in trouble, collapsed in a shallow snow cave. Most of those
on the way up look while continuing their climbs; none stop to assist, abandoning their quest.
Sherpas from one passing team pause to give him oxygen before moving on. Within hours, David
sharp, 34, is dead, on the mountain, of oxygen deficiency.

Processing

Why Plan?
 Improves Focus and Flexibility
 Action Orientation
 Coordination
 Time Management

Ethics in Decision-Making
Justification from a climber who passed by:
“At 28, 000 feet it’s hard to stay alive yourself…he was in very poor condition…it was a very hard
decision….he wasn’t a member of our team.”
Comment of a past successful climber
“If you’re going to go to Everest…I think you have to accept responsibility that you may end up
ding something that’s not ethically nice…you have to realize that you’re in a different world.”
Reaction from Sir Edmund Hillary who reached the top in 1953
“Human life is far more important than just getting to the top of the mountain.”
Reflection
In our personal affairs, daily lives, careers we are all, in our own ways, climbing Mt. Everest.
What are the ethics of our climb?
How often do we notice others in trouble, struggling along the way, and, like the mountain
climbers heading to the summit, pass them by to continue our own journeys?

Abstraction

The Planning Process

 Define objectives
 Determine where you stand vis-à-vis objectives
 Develop premises regarding future conditions
 Analyze and make a decision
 Implement the plan and evaluate results

Types of Plans
 Short-range and Long-Term Plans

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Engineering Management Chapter 3: Planning and Decision Making

 Strategic and Operational Plans

 Budget

Strategy and Strategic Management

 Strategy- A comprehensive action plan that identifies the long-term direction for an organization
and guides resource utilization to achieve sustainable competitive advantage

Porter’s Competitive Strategies

 Differentiation
 Cost leadership
 Focused differentiation
 Focused cost leadership

Strategy Formulation
 Vision
 Mission
 Core Values
 Objectives

Analysis of Organizational Capability

 SWOT
 Strengths
 Weaknesses
 Opportunities
 Threats

Each company has strengths and weaknesses in comparison to its competitors (Mcguire 2014).
Because of the company’s strengths or core competencies, there may be opportunities offered in the
marketplace that the company ought to exploit aggressively. On the other hand, because of the strengths
of its competitors and the conditions in the marketplace, the company may be subjected to certain future
threats. Such potential threats could be the result of technology advancement, business alliances,
marketing partnerships, and other such step changes accomplished by the competition. New
governmental regulations and policies may also affect the company’s business in the future. A systematic
monitoring of publications—patents, technical articles, news releases, and financial reports—represents
an initial step in conducting a competitive analysis.

A well-performed SWOT analysis will bring to the fore an assessment of the company’s current
position. As such, the SWOT analysis procreates a road map by which a company can make informed
decisions about improving its core competencies to meet its current and future business and operational
needs.

The analysis answers questions such as:

(a) What does the company have in place today?
(b) In which direction is the company headed in the next three to five years, and
(c) What is the company’s process of managing changes?

Strategic Planning:
1. sets the goals, purpose, and direction of a company.
2. focuses on identifying worthwhile future activities.
3. ensures that the company applies its resources—core competencies, corporate know-how,
proprietary technologies, skilled manpower resources, business relationships, and so on—
effectively to achieve the short- and long-term goals of the company
4. It deals with questions such as:
a. What are the company’s mission, vision, and value system?
b. What business should the company be in?

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Engineering Management Chapter 3: Planning and Decision Making

c. Does the company need to change its product portfolio, market coverage,
production system, or service capabilities?
d. What specific goals (such as profitability, market share, sales revenue, technology
leadership position, global penetration, etc.) should the company accomplish, by
when, with what investment, and by which core competencies?
e. What business networks should the company establish via supplier alliances, co-
marketing partnerships, production joint ventures, and other forms of
collaboration?
f. Which new products should the company offer?
g. What core technologies should the company maintain, develop, acquire, or utilize?
h. Which performance metrics are to be used for monitoring the company’s progress?
i. How should the company tackle the daunting challenge of making innovation
central to the company’s products, processes, or relationships?

Operational Planning

Managers at both middle level (managers and directors) and lower level (supervisors and group
leaders) perform operational planning:
1. to define the specific tactics and action steps needed to accomplish the goals specified by top
management
2. to break down the company goals into short-term objectives. Supervisors and group leaders
specify events and tasks that can be implemented with the least amount of resources within
the shortest period of time.
3. To ensure that the company applies its resources efficiently to achieve its stated goals.

Questions considered in operational planning include the following:

1. What is the most efficient way of accomplishing a project with known objectives?
2. What is the best way to link up with three top suppliers in the marketplace for needed parts?
3. What are the operational guidelines for performing specific work?

Operational planning involves a process of analysis by which a corporate goal or a set of corporate
intentions is to be accomplished by performing a group of action steps. These steps are then formalized
for easy implementation. Furthermore, the consequences for the business are articulated at each step.
Operational planning focuses on the preservation and rearrangement of established categories (e.g.,
major strategies defined by upper management, existing products, and organizational structures).
Operational planning is essentially a programming task that is aimed at making the attainment of various
strategic goals possible.
Operational planning is also called platform-based planning because it extrapolates future results
from a well-understood, predictable platform of past experience. The results of such planning are
predictable because they are based on solid knowledge rather than assumptions. Compared with strategic
planning, operational planning is easier for engineers to accomplish because past experience and
examples are usually available as references

Planning Tools and Techniques

 Forecasting
 Contingency Planning
 Scenario Planning
 Benchmarking
 Staff Planners
 Participatory Planning
 Management by Objectives (MBO)

(Management by Objectives) MBO Criteria

 Specific
 Measurable

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Engineering Management Chapter 3: Planning and Decision Making

 Attainable
 Realistic
 Time-bound

Planning Roles of Engineering Managers

Engineering managers at the middle and low levels will predominantly devise operational plans
to achieve the short-term goals of the unit or department. As engineering managers move up the
corporate ladder, they are expected to participate increasingly in strategic planning, with emphasis placed
on technology, product, and production planning. They may find it useful to follow the planning guidelines
listed next, in order to add value to the company. It is important that engineering managers spend time
and effort to actively assist their direct superiors in planning.

These tasks may include

(1) analyzing hard data (industry, competition, and marketing);
(2) offering alternative interpretations of the data available;
(3) raising insightful questions to challenge conventional assumptions; and
(4) communicating the resulting outputs of planning—programs, schedules, and budgets—to
help effectuate buy-in from others.

Time Management

All managers need to plan and prioritize their personal daily tasks (such as problem solving, staff
meetings, task specification, progress monitoring, and performance evaluation), according to the value
each task may add, so that high-value tasks are completed before others. This is to maximize the value
contributed by their daily activities (Feddox 2014).
Also to be included in the daily to-do list are tasks such as networking, continuing education, and
scanning emerging technologies, which are deemed important for advancing one’s own career.

Projects and Programs

Engineering managers need to plan projects and programs assigned to them by upper
management. In doing so, they need to fully understand the applicable project objectives, the relevant
performance metrics used to measure outcome, and the significance of this outcome to the company.
They should carefully select staff members with the relevant skills, expertise, and personality to
participate in the project and seek their inputs regarding tasks, resource requirements, preferred
methodologies, and task duration. They should then integrate all inputs to draft a project plan and
distribute the plan among all participants to iteratively finalize the relevant details. These details include
budgets, deliverables, and dates of completion. Managers must also secure authorization from upper
management before initiating work related to the projects and programs.

Corporate Know-How

The preservation of corporate know-how is of critical importance to the company for maintaining
and enhancing its competitiveness in the marketplace. Corporate knowhow comes in many types and
forms. Certain documentable knowledge, such as patents, published memoranda, operational manuals,
and troubleshooting guides, is easy to save. Others, such as insights related to procedures or perfected
ways of designing the specific products and services of the company, may require extra efforts to preserve.
Managers should plan to systematically capture, retain, and widely disseminate such know-how to
maximize its use within the company. Certain other cognitive knowledge is typically retained mentally by
the experts. Managers need to find effective ways to induce such experts to willingly externalize this tacit
knowledge for use by others in the company. Problem-solving expertise is yet another type of corporate
know-how worth preserving. Typically, engineering managers are busy resolving conflicts that may arise
from disagreements in task priorities, personality conflicts, customer complaints, interpretation of data,
and other conflicts. Managers need to solve these problems promptly. They should be mentally prepared

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Engineering Management Chapter 3: Planning and Decision Making

to jump from one task to another to handle such time-sensitive issues. What should be planned under
these circumstances is the preservation of the learning experience garnered from each incident so that
the company will become more efficient in solving similar problems in the future.

Proactive Tasks

Engineering managers should plan to devote their efforts to proactively pursue certain other
tasks. These tasks include:
• Utilizing new technologies to simplify and enhance the products and services of the company.
• Creating business networks and searching for partners to form mutually beneficial alliances.
• Offering new or enhanced services to customers (e.g., self-service, an information on-demand
system, and an Internet-based inquiry center).
• Initiating new programs to promote healthy customer relationships.
• Developing novel products/services with distinguishable attributes (e.g., product customization
to serve customers better, cheaper, and faster).
• Reengineering and simplifying specific operational processes to increase efficiency.
• Outsourcing specific tasks to augment cost-effectiveness and to reduce time to market.

Performance Benchmarks

Performance benchmarks are those that have been successfully applied by successful firms in the
same or a related industry. When undertaking planning activities, it is important to define these
benchmarks for the purpose of measuring corporate progress.
Hubbard (2014) offers an excellent set of broad-based benchmarks, which include:
1. Customer-related measures: Product defects, just-in-time delivery, life-cycle product cost,
customer satisfaction score, order processing efficiency, percentage sales from new customers, service
quality, time taken between orders and product delivery, and so on
2. Process-related measures: Time to market (i.e., the lapse of time from the initiation of product
design and development to product delivery to the marketplace), quality standards, unit product cost,
core competence development, labor hours per product, and so on
3. Financial measures: Gross margin, net income-to-sales ratio, current ratio, sales per employees,
return on equity, sales growth rate, market share percentage, inventory turn ratio, and so on
4. Employee-related measures: Turnover ratio, employee satisfaction score, skill building and
development expenses per employee, and so on
5. Competition-related measures: Market share, cost of innovation, acquisition cost per new
customer, number of new products commercialized per year, and so on

Technology Forecasting

Technology forecasting is of critical importance to those companies whose products are

composed of high-technology components. Companies must constantly examine, monitor, and apply
emerging technologies to enhance business performance. (Porter et al. 2011). Engineering managers need
to understand the value that any of these emerging technologies (e.g., big data, cloud computing, the
Internet of Things, mobile communications, and social media practices), may have on the products and
services offered by their employers and plan accordingly. Another technological example is the speed of
computing. It is almost a certainty that the computing speed will continue to increase over time. The
question for engineering managers is as follows: How can business benefit from such advancements?
Computing speed may be used advantageously in computationally intensive problems, whose solutions
of finer granularity provide value to the business

Product Life-Cycle Analysis

Every product has a life cycle that moves typically through the stages of initiation, growth, market
saturation, and decline (Kloepffer and Grahl 2014). Engineering managers need to examine the life cycles

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of all products marketed by their enterprises. Doing so will guide them in introducing new products or
product enhancements in a timely manner in order to sustain company profitability. Tools for operational
planning include the following: Microsoft Project 2013, Enterprise Project Management Timeline, critical
path method (CPM), program evaluation review technique (PERT), and others

DECISION MAKING
Decision - a choice among possible alternatives course of action

Criteria of Information
Timely
High-quality
Complete
Relevant
Understandable

Decision Environments
Certain
Risk
Uncertain

Problem-Solving Styles

Systematic vs Intuitive

Systematic = rational, step by step, analytical fashion

Intuitive = flexible, creative, spontaneous, quick, considers hunches, deals with many problems at
once

The Decision-Making Process

1. Identify and define the problem
2. Generate and Evaluate Alternative Courses of Action
3. Decide on a Preferred Course of Action
4. Implement the Decision
5. Evaluate the Results

Decision-Making Errors and Traps

Heuristics – rule of the thumb
◦ Availability
◦ Representativeness
◦ Anchoring and adjustment
◦ Framing error

Root Cause Analysis is a method that is used to address a problem or non-conformance, in order to get to
the “root cause” of the problem. It is used so we can correct or eliminate the cause, and prevent the
problem from recurring.

Traditional applications of Root Cause Analysis

– Resolution of customer complaints and returns.
– Disposition of non-conforming material (Scrap and Repair) via
the Material Review process.
– Corrective action plans resulting from internal and customer
audits.

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Root Cause is the fundamental breakdown or failure of a process which, when resolved, prevents a
recurrence of the problem.

Or, in other words for a particular product problem, Root Cause is the factor that, when you fix it, the
problem goes away and doesn’t come back.

Philosophy of Root Cause Analysis

Each problem is an opportunity (“golden nugget”) because it can tell a story about
why and how it occurred.

• It is critical that everyone take a personal and active role in

improving quality.
• The “true” problem must be understood
before action is taken.
– Problems are often masked for a variety
of reasons

To do this well, we must be

– Both focused and open-minded

– Both patient and quick
– Above all, we must be relentless

We Perform Root Cause Analysis to Prevent Turnbacks and Customer Escapes from Recurring

Symptom Approach vs. Root Cause

If we do a poor job of identifying the root causes of our problems, we will waste time and
resources putting bandaids on the symptoms of the problem.

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How do we do Root Cause Analysis?

Fishbone Diagram - A Useful Tool

Example: The Washing Machine

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Assessment Tasks

Essay. Answer by citing examples.

1. How do ethical dilemmas complicate the workplace?
2. How do managers use information to make decisions? Is it ok to decide with incomplete criteria
of information?
3. Research on companies who have used the different planning techniques.

References:

Bullinger, H. (2013), Challenges for the Future – Engineering Management, Faculty of Technical Sciences
(Novi Sad, Serbia), Fraunhofer IAO (Stuttgart, Germany) and DAAAM International (Vienna, Austria)

Chang, C.M. (2016), Enginering Management: Meeting the Global Challenges – 2nd ed., CRC Press, Florida

Daft, R. (2010), Management – 9th ed., Sout-Western Cengage Learning, USA.

Eisner, H. (2002), Essentials of Project and Systmes Engineering Management – 2nd ed, John Wiley and
Sons, Inc, New York.

Schermerhorn, John R. (2013), Management — 12th ed. , John Wiley and Sons, Inc, USA.

ten Haaf, W. et al. (2002), Fundamentals of Business Engineering and Management: A systems approach
to people and organizations, VSSD, Netherlands.

Engineering Management Principles and Economics: Custom Edition for Corcordia University (2013),
Pearson Learning Solutions, Massachusetts

Zairi, M. (1991), Total Quality Management for Engineers Woodland Publishing Ltd., England

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