What is the Meaning of Corporate Planning?

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By: Site Engineer, Staff

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Corporate planning can be defined as the establishment of objectives and the formulation, evaluation, and selection of the policies, strategies, tactics, and actions required for achieving these objectives.

This involves the identification of specific work to be done the allocation of human and material resources to such activities, implementing the set-out strategy to attain objectives and the evaluation of performance.

A corporate plan or strategic plan refers to the systematic grafting of a set of activities to be done to attain objectives.

The purpose of any corporate plan is to systematically set up the corporate objectives and make strategic decisions for achieving the set objectives.

Such questions as

  • What
  • How
  • When
  • Who

They must be addressed and resolved for an effective corporate plan.

Planning comprises of long-term/strategic planning, and short-term operational planning. The latter usually refers to a period of one year.

Such questions that need to be addressed are:

  • What operations should be performed with existing facilities to meet the specified output requirements in the next operational period?
  • What types of resources are needed to implement the actions?
  • Who is to implement the formulated action?

Therefore, it will be seen that the overall process of planning covers both the long and short term. Short-term tactical planning or budgeting works within a framework set by the long-term plans and it deals with a futuristic period.

Planning and Control Strategies

Planning is a conscious intellectual process characterized by:

  • Establishing premises
  • Forecasting conditions
  • Structuring alternative chains of actions
  • Establishing objectives
  • The ranking or selecting total plans
  • Establishing standards and means for measuring adherence to the plan of action.
  • Identifying a need
  • Accumulating information
  • Relating bits of information and belief

There are three planning horizons:

  • Long-term
  • Medium-term
  • Short-term,

And for each of the three-time horizons, the planning activity is concentrated on the production system which encompasses inputs or resources processes or transformations and output or product subsystems. Depending on the nature of the production and size of the organization, a long-term 1 day can span from 5 to 15 years; Medium-term, 1 to 6 years; and Short-term, 1 day to 360 days. Each plan must establish a control mechanism to avoid waste and failure of the plan.

The following questions have to be answered if an effective control system needs to be built.

  • When should it be controlled?
  • Who should control it?
  • Where?
  • How?
  • What is to be controlled?
  • Why should it be controlled?

Secondly, a control system must undergo five basic stages:

  • Determine correction action
  • Implement correction action
  • Measure (i.e the initial measurement or inspection)
  • Compare with plan
  • Establish variance

The production control function is set out to accomplish the following:

  • Making up the schedules for the performance of the operation and use of machines
  • Deciding and assigning jobs to the right men and machines
  • Directing the transportation of materials in the process
  • Receiving reports of work done and comparing them with the schedule
  • Helping to remove causes of delay
  • Operating the finished parts and products stockroom and controlling parts
  • Answering inquiries concerning the progress of orders in process
  • Helping to make cost estimates or prospective new order
  • Always making sure that there are the right man and machine for the right operations at the right time from the right sources.
  • Helping to make up the master production schedules
  • Making plans and arranging for men needed to meet schedules
  • Receiving orders for the manufacture of products
  • Analyzing the orders
  • Determination of raw materials stockroom and maintaining the stock
  • Initiating routing
  • Making up the production orders by directing the performance of the operations that make both parts and the products

The management accountant is one of the major providers of information for planning purposes and to do this effectively it is essential that he understands the nature of planning, how plans are established, the distinction between long-term and short-term planning the place of budgeting in the planning process, how to derive individual budgets and the overall master budget, and how planning relates to control.

Statistical and Operational Research Techniques can provide invaluable assistance in planning. Examples include the statistical aids in forecasting cost behavior and such operational research techniques as Linear Programming.

 

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