Types of planning

Plans as an expression of the results of planning should form a pyramidal structure in the aggregate, have a concentrated, differentiated by levels of management informativeness, be divided by development time (short-term, medium-term and long-term).

The planning model from the point of view of its subject consists of separate planning complexes or sections of the general plan:

1. Planning of general goals;

2. Strategic planning;

3. Tactical planning;

4. Ongoing planning.

General target planning includes the development of the concept of the enterprise. This includes planning the most important material goals: areas of activity, the most important results that they want to achieve; planning the most important cost goals: financial results and liquidity, planning the most important social goals: a certain image of the enterprise, social position, a certain model of behavior in relation to personnel, investors, market partners, the state.

The general objectives of the enterprise are formed in the form of directives of a general nature. Such directives are the global goal of the enterprise – profitability and the achievement of guaranteed liquidity. For an enterprise in a social market economy, this means that the desire for the maximum result, expressed ultimately in maximizing the value of the enterprise’s capital, is formulated as the highest monetary goal, which can be achieved only when the goals of production and marketing of competitive products and services are achieved by periods, taking into account social goals.

Value goals in terms of content, scale and time horizons find their expression in the indicators of planning results and financial planning, as well as other economic indicators derived from them, forming a multi-stage branched set of higher goals in the system of monetary goals of the enterprise.

Strategic planning is carried out in the long term and implies the formulation of goals, objectives, scale and scope of the enterprise at the qualitative level or in the form of very general, quantitative guidelines.

Strategic planning is, first of all, planning the achievement of goals. Within strategic planning, targets can be organized in a variety of ways, but there are at least four types of objectives:

market (what segment of the market of goods and services is planned to be covered, what are the priorities in the main production and commercial activities of the company); production (what production structure and technology will ensure the production of products of the required volume and quality); financial and economic (what are the main sources of financing and the projected financial results of the chosen strategy); social (to what extent the company’s activities will ensure the satisfaction of certain social needs of society as a whole or its individual strata).

Strategic planning includes program and capacity planning (planning of the number and structure of personnel, types, volumes and structure of means of production, organizational and territorial structure of the enterprise). Strategic planning is also called planning of strategies of business fields, strategies of functional areas of activity and regional strategies.

The subject of strategic planning is the planning of the size of the enterprise expressed by the potential, the definition of a goal-oriented potential structure, since the size of the enterprise is limited by the possibilities of external financing, the planning of the capital structure (the ratio of own and borrowed capital) is also referred to as strategic planning.

Strategic planning is concerned with enterprise development planning and innovation planning. It is of a long-term nature and is characterized by the following signs:

fundamental decisions should be made taking into account the philosophy and policies of the enterprise; they are of particular importance for the development of the material base and (or) financial indicators of the enterprise; are valid in the long term and are adopted relatively rarely; require when taking special responsibility for the enterprise as a whole and taking into account all interrelations.

A strategic plan may have the following structure:

Section 1. Content and target settings of the company’s activities.

The purpose and strategic goal of the company’ activities, the scale and scope of activities, tactical goals and objectives are outlined.

Section 2. Forecasts and benchmarks. The forecast of the economic situation in the capital, product and labor markets, the outlined promising benchmarks for the main indicators are given. Section 3. Specialized plans and forecasts: Production; Marketing; Finance (financial plan); Personnel policy; Innovation policy (research and development); New products and markets.

The lack of a strategic approach to the management of the enterprise is often the main reason for the defeat in the market struggle.

Tactical planning is carried out for the medium term (1-5 years). In the structural units of the enterprise, within the framework of tactical planning, they plan not only goals and activities, but also individual projects for the implementation of strategic goals. Tactical planning is carried out in the form of business plans, which are a program for effective management of the enterprise and projects. The relationship between strategic and tactical planning is presented in Fig. 6.2.

Current planning is carried out by detailed development (usually for one year) of short-term and operational plans for the enterprise as a whole and its individual divisions. An operational plan is a plan of action aimed at solving the problems facing the enterprise.

The annual (current) plan of the enterprise consists of planning functional areas of activity:

sales plan; production plan; plan of scientific and technological development, improvement of production and management; plan of material and technical supply; personnel plan; financial plan; social development of the team;

environmental protection and rational use of natural resources.

The main distinguishing features of strategic and current planning are presented in Table 6.1.

Table 6.1.

Distinctive features of the strategic and
current planning

Operational-production planning is a detailed continuation of the current production planning, forming production programs and tasks for sites and brigades, taking into account the possibility and implementation at each workplace. It is designed to ensure the effective functioning of the production process, to contribute to the achievement of high final results.

Operational and production planning is carried out in two interrelated areas – scheduling and dispatching. The first includes: calculations of equipment load by workshops and by its types; determination of calendar standards for the movement of the production process; development of calendar schedules for the launch and release of products; preparation of operational plans for brigades, shifts, workshops and operational preparation of production (provision of blanks, tools, technical documentation, components).

Dispatching is a continuous accounting, control and regulation of the course of production in accordance with the calendar schedules of production. Dispatching tasks: operational accounting of the implementation of the established production schedule and shift-daily tasks, identification, analysis and elimination of the causes of deviations from the established schedules, taking prompt measures to prevent and eliminate deviations; coordination of current activities of interrelated links, supply of workplaces with blanks, equipment, tools.

In the conditions of serial production, the main objects of dispatching are: the level of warehouse reserves, the state of equipment for individual products, the timing of the launch and release of parts, assemblies, products, providing workplaces with blanks and tools.

In a single production, the object of dispatch control is the timing of  work on individual orders, the provision of workplaces with blanks, tools. It is carried out for compliance with the timing of the launch and release of parts, units in the shops, the progress of production preparation.

Operational and production planning, depending on the scale of the units for which it is carried out, is divided into inter-workshop and intra-workshop. Inter-shop planning ensures the development and delivery of operational tasks to the workshops, controls, regulates and coordinates their work. Intra-shop planning solves the same issues inside the workshop (for shifts, sites, workplaces).

Depending on the type of production, several operational and production planning systems are used at industrial enterprises. The following systems are most widely used in mechanical engineering: machine-complete, complete-node, complete-group, detailed (according to the rhythm of release), warehouse, according to the level of security (“R-G”, i.e. “Category minus group”), standard plan, etc. All of them differ in the planning and accounting unit, as which can be used: products, a unit, a set of parts, a part and a technological operation.

The choice of the OPP system is determined by the following main factors: the type of production, the volume and repeatability of the products, its complexity, the degree of unification of parts and assemblies, the production structure of the enterprise and workshops, the form of intra-plant specialization, the availability of computers and specialists in its maintenance. The criteria for assessing the effectiveness of AKI are:

rhythmic work of the team and uniform output; the level of use of the means of production and labour; minimum duration of the production cycle; minimum stocks of work in progress.

Financial planning is carried out within the framework of general target, strategic, tactical and current planning.

The main element of financial planning is budgeting. The budget is a quantitative implementation of the plan, characterizing the income and expenses for a certain period, and the capital that must be attracted to achieve the set goals. Budget data plan future financial transactions, which allows it to be used to monitor and evaluate the effectiveness of the enterprise.

Budgets have many types and forms: individual budgets that characterize intermediate operations (purchase of raw materials, materials, production budget, etc.) can carry information only about income (sales budget) or only about expenses, and enlarged budgets (profit and loss statement, cash budget) show the budget of the enterprise as a whole, the so-called master budget, which is a system of interrelated operating and financial budgets.

Block 1. Sales budget. The purpose of this block is to calculate the forecast of sales as a whole. Based on the company’s development strategy, its production facilities and, most importantly, forecasts regarding the capacity of the sales market, the number of potentially sold products (in physical units) is determined. Forecast selling prices are used to estimate sales in value terms. Calculations are carried out in the context of the main types of products.

Block 2. Production budget. The purpose of this block is to calculate the forecast of production volume based on the results of the calculation of the previous block and the target balance of produced, but not sold products (product stocks).

Block 3. Budget of direct costs of raw materials and materials. Based on data on production volumes (previous block), raw material consumption standards per unit of production, target stocks of raw materials at the beginning and end of the period and prices for raw materials and materials, requirements for raw materials and materials, procurement volumes and the total amount of acquisition costs are determined. Data are formed both in physical units and in monetary terms.

Block 4. Budget of direct labor costs. The purpose of this block is to calculate the total costs of attracting labor resources engaged directly in production (in value terms). The initial data of the block are the results of calculating the production volumes in block 2. The calculation algorithm depends on many factors, including the systems of labor rationing and payment of employees. In particular, if standards are established in hours for the production of a particular product or its component, as well as the tariff rate per hour of work, it is possible to calculate direct labor costs.

Block 5. Variable overhead budget. The calculation algorithm is carried out according to the items of overhead costs (depreciation, electricity, insurance, other general plant expenses, etc.), depending on the basic indicator adopted by the company (production volume, direct labor costs in hours, etc.).

Block 6. Budget of stocks of raw materials, finished products. The initial data for the calculation are: target balances of stocks of finished products in physical units, raw materials and materials (blocks 2 and 3), data on prices per unit of raw materials and materials, as well as data on the cost of finished products.

Block 7. Budget of management and commercial expenses. Here, a forecast estimate of general plant (fixed) overhead costs is calculated. The itemized composition of expenses is determined by various factors, including the specifics of the company’s activities.

Block 8. Budget of the cost of sales. The calculation is carried out on the basis of the data of the previous blocks using algorithms determined by the company’s method of calculating the cost.

The quantitative estimates formed within each block are used not only for their intended purpose as planning and control benchmarks, but also as initial data for building a financial budget.

These four planning complexes are developed as part of the so-called rolling planning periodically (usually annually). Within the framework of rolling periodic planning, non-periodic project planning can in turn be carried out in each planning complex.

The main substantive connections and temporal interweaving of these four planned complexes in the enterprise are presented in Figure 6.3.

In the literature and entrepreneurial practice, the formation of individual planning complexes and their names are very diverse.

With a simplified approach, only strategic (including goal planning) and current planning are distinguished.

Investment planning and project planning are considered as a special planning complex, occupying an intermediate place between strategic and current planning.