AGGREGATE

PLANNING
A g g re g a te p la n n in g in vo lve s p la n n in g th e
b e st q u a n tity to p ro d u ce d u rin g tim e
p e rio d s in th e in te rm e d ia te ra n g e h o rizo n
{ often from 3 months to 18months } and
p la n n in g th e lo w e st co st m e th o d o f
p ro vid in g th e a d ju sta b le ca p a city to
a cco m m o d a te th e p ro d u ctio n
re q u ire m e n ts.

Fo r m a n u fa ctu rin g o p e ra tio n s a g g re g a te

p la n n in g in vo lve s p la n n in g w o rkfo rce
size , p ro d u ctio n ra te a n d in ve n to ry
Characteristics of aggregate
planning

• Considers a "planning horizon" from about 3 to

18 months, with periodic updating
• Looks at aggregate product demand
• Looks at aggregate resource quantities
• Possible to influence both supply and demand by
adjusting production rates, workforce levels,
inventory levels, etc., but facilities cannot be
expanded
OJECTIVES OF AGGREGATE PLANNING

1) m a xim ize cu sto m e r se rvice

2) m in im ize in ve n to ry in ve stm e n t
3) m in im ize ch a n g e s in w o rkfo rce le ve ls
4) m in im ize ch a n g e s in p ro d u ctio n ra te s
5) m a xim ize u tiliza tio n o f p la n t a n d e q u ip m e n t
6)
Basic Strategies

 Level capacity strategy:

 Maintaining a steady rate of regular-
time output while meeting
variations in demand by a
combination of options. Here the
capacities are kept constant
according to the planning horizon
 Chase demand strategy:
 Matching capacity to demand; the
planned output for a period is set
at the expected demand for that
period. Here the capacities are
adjusted to match the demand
requirements over the planning
horizon
Chase Approach
 Advantages
 Investment in inventory is low
 Labor utilization in high

 Disadvantages
 The cost of adjusting output rates
and/or workforce levels
Level Approach
 Advantages
 Stable output rates and workforce
 Disadvantages
 Greater inventory costs
 Increased overtime and idle time

 Resource utilizations vary over time

Mathematical Techniques

•Linear programming: Methods for

obtaining optimal solutions to
problems involving allocation of
scarce resources in terms of cost
minimization.
•Linear decision rule: Optimizing

technique that seeks to minimize

combined costs, using a set of
cost-approximating functions to
obtain a single quadratic equation.
SEARCH DECISION RULE

The search decision rule methodology

overcomes some of the limitations of the
linear cost assumptions of linear
programming. The search decision rule allows
the user to state cost data inputs in very
general terms
SIMULATION
A number of simulation models can be
used for aggregate planning. By
developing an aggregate plan within
the environment of a simulation
model, it can be tested under a variety
of conditions to find acceptable plans
for consideration
AGGREGATE PLANNING IN
SERVICES
• For manufacturing firms the luxury of
building up inventories during periods of
slack demand allows coverage of an
anticipated time when demand will exceed
capacity. Services cannot be stockpiled or
inventoried so they do not have this option.
Also, since services are considered
"perishable," any capacity that goes
unused is essentially wasted.
• For eg:- An empty hotel room or an empty
seat on a flight cannot be held and sold
later, as can a manufactured item held in
inventory