Aggregate Planning
Overview


Aggregate planning in the planning
process
Aggregate planning strategies
• Capacity options

Chase strategy

Level strategy
• Demand options
• Mixing options

Graphical/charting methods

Linear programming

Simulation
Planning Relationships
Planning Relationships
Business
or annual
plan
Planning Relationships
Business
or annual
plan
Aggregate plan
– production
and staffing plan
Planning Relationships
Business
or annual
plan
Aggregate plan
– production
and staffing plan
MPS or
workforce
schedule
Planning Relationships
Business
or annual
plan
Aggregate plan
– production
and staffing plan
MPS or
workforce
schedule
Planning Relationships
Business
or annual
plan
Aggregate plan
– production
and staffing plan
MPS or
workforce
schedule
Planning Horizons
Responsible:
Operations
managers
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
Today
3 Months
1 year
Planning Horizon
5 years
Planning Horizons
Responsible:
Top executives
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
Today
3 Months
1 year
Planning Horizon
5 years
Planning Horizons
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Responsible:
Operations
managers,
supervisors,
foremen
Today
3 Months
1 year
Planning Horizon
5 years
Planning Horizons
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Responsible:
Operations
managers,
supervisors,
foremen
Today
Responsible:
Operations
managers
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
3 Months
1 year
Planning Horizon
Responsible:
Top executives
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
5 years
Planning hierarchy
Long-range
capacity
planning
Aggregate
planning
Master
production
schedule
Production
planning
and control
systems
Pull
systems
(JIT)
Push
systems
(MRP)
Many other
systems
Planning
hierarchy
Planning horizon
Long range: Years
Long-range
capacity
planning
Itermediate range:
Aggregate
planning
6 – 18 months
Short range: Weeks
Master
production
schedule
Production
planning
and control
systems
Pull
systems
(JIT)
Push
systems
(MRP)
Many other
systems
Planning
hierarchy
Planning horizon
Long range: Years
Long-range
capacity
planning
Scope
Entire production line
i.e. Ford trucks
Itermediate range:
Aggregate
planning
6 – 18 months
Product Family
i.e. Ford F series
Short range: Weeks
Master
production
schedule
Specific model
i.e. Ford F-150
Production
planning
and control
systems
Pull
systems
(JIT)
Push
systems
(MRP)
Many other
systems
What is an aggregate plan?
Aggregate Plan
What is an aggregate plan?
Demand
forecast
Inventory
Aggregate Plan
Machine
capacities
and costs
Labor
capacities
and costs
Outsourcing
capacities
and costs
What is an aggregate plan?
Amount to
produce
Demand
forecast
Amount to
outsource
Inventory
Aggregate Plan
Machine
capacities
and costs
Labor
capacities
and costs
Outsourcing
capacities
and costs
Amount of
labor and
overtime
required
Projected
Inventories
Managerial Inputs
Managerial Inputs
Aggregate
plan
Managerial Inputs
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Aggregate
plan
Managerial Inputs
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Aggregate
plan
Accounting and finance
Cost data
Financial condition
of firm
Managerial Inputs
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Aggregate
plan
Accounting and finance
Cost data
Financial condition
of firm
Human resources
Labor-market conditions
Training capacity
Managerial Inputs
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Aggregate
plan
Engineering
New products
Product design changes
Machine standards
Accounting and finance
Cost data
Financial condition
of firm
Human resources
Labor-market conditions
Training capacity
Managerial Inputs
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Materials
Supplier capabilities
Storage capacity
Materials availability
Aggregate
plan
Engineering
New products
Product design changes
Machine standards
Accounting and finance
Cost data
Financial condition
of firm
Human resources
Labor-market conditions
Training capacity
Managerial Inputs
Operations
Current machine capacities
Plans for future capacities
Workforce capacities
Current staffing level
Materials
Supplier capabilities
Storage capacity
Materials availability
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Aggregate
plan
Engineering
New products
Product design changes
Machine standards
Accounting and finance
Cost data
Financial condition
of firm
Human resources
Labor-market conditions
Training capacity
Aggregate Planning
Objectives
 Minimize Costs/Maximize Profits
 Maximize Customer Service
 Minimize Inventory Investment
 Minimize Changes in Production Rates
 Minimize Changes in Workforce

Levels
Maximize Utilization of Plant and
Equipment
Aggregate Planning Strategies
Pure Strategies

Capacity Options — change
capacity:
• changing inventory levels
• varying work force size by
hiring or layoffs
• varying production capacity
through overtime or idle time
• subcontracting
• using part-time workers
Aggregate Planning Strategies
Pure Strategies

Demand Options — change demand:
• influencing demand
• backordering during high demand
periods
• counterseasonal product mixing
Advantage/Disadvantages of
Aggregate Planning Options
See Table 13.1
Mixing the options:
The Extremes
Level
Strategy
Chase
Strategy
Production rate
is constant
Production
equals
demand
Aggregate Planning Strategies

Level planning strategy
• Produce same amount every month
• Keep work force level constant

Find alternative work for employees when there
is less demand
• Vary non-work force capacity or demand
options

Inventory levels allowed to fluctuate
• Often results in lowest production costs
• Toyota, Nissan employ this strategy
Aggregate Planning Strategies

Chase planning strategy
• Output rates match demand
• Vary work force level

Hiring/laying off
• Vary non-work force capacity or demand
options


Overtime and outsource
Part time employees
• Service industries often utilize this strategy

Hospitality, construction, education