Aggregate planning, a fundamental decision model in supply chain management, refers to the determination of production, inventory, capacity and labor usage levels in the medium term.
What is meant by aggregate planning?
Aggregate planning is a method for analyzing, developing and maintaining a manufacturing plan with an emphasis on uninterrupted, consistent production. Aggregate planning is most often focused on targeted sales forecasts, inventory management and production levels in the mid-term (3-to-18-month) future.
What is aggregate planning example?
Aggregate planning is typically done 12 months into the future. Some examples of aggregate planning are hiring temporary workers, laying off employees for a specific period or cross-training. This works as an effective benchmark to measure resource utilization and implementation.
What are 3 types of aggregate plan?
We categorize aggregate plans as level, chase, or hybrid plans. A level aggregate plan maintains a constant workforce and produces the same amount of product in each time period of the plan. Example 13.1 shows how to calculate the number of employees needed to produce a specified output.
What are the 5 aggregate planning strategies?
6 types of aggregate planning strategies
- Type 1: Pricing differentials and promotions. Managers use pricing differentials and promotions to boost demand to match available capacity. …
- Type 2: Back ordering. …
- Type 3: Generating new demand. …
- Type 4: Seasonal hiring. …
- Type 5: Subcontracting. …
- Type 6: Building up inventory.
Why is aggregate planning important?
Aggregate planning is important because it helps an organization optimize its costs and production in order to fulfill its long-term goals. Some of the specific ways it can help include: It can help the company use its production capabilities with maximum efficiency.
What are the two primary objectives of aggregate planning?
The purpose of aggregate planning is planning ahead because it takes time to implement plans. The second reason is strategic of the company and third aggregate planning help synchronize flow throughout the supply chain; it affects costs, equipment utilization, employment levels and customer satisfaction.
What are the factors affecting aggregate planning?
Factors considered in the aggregate planning activity include:
- Sales forecasts.
- Inventory investment.
- Capital equipment utilization.
- Work force capacity.
- Skills training requirements.
- Corporate policies concerning customer service levels, overtime, and subcontracting.
What is aggregate planning problem?
The Aggregate Planning Problem. The standard aggregate planning problem aims to determine the production levels, inventory kept in the supply chain, hiring and firing employees, overtime production, backorders and demand satisfaction levels with the objective of having the minimum cost or maximum profit.
How aggregate planning process works in production?
Aggregate planning in manufacturing involves allocating the correct amount of resources for every manufacturing process so that the time and costs are minimized during idle mode. Manufacturing businesses use either the Chase Strategy or the Level Strategy.
What are the disadvantages of aggregate planning?
Labor and Uncertainty
Labor remains one of the most serious problems of aggregate production planning. For example, a company plans to increase overtime hours and hire part-time workers for peak demand seasons. It will then cut hours and give unpaid furloughs during poor demand seasons.
What is capacity planning and aggregate planning?
Chapter 8: Aggregate Planning in a Supply Chain – Part 1
What is some examples in aggregate planning in services industry?
Examples: Financial, transportation, communication and recreation services. Aggregate planning deals with managing demand by planning for human resource requirements. Plan for periods that will require more personnel and how to efficiently allocate personnel during low demand periods.
How do you do aggregate planning?
TECHNIQUES FOR AGGREGATE PLANNING
- Determine demand for each period.
- Determine capacity for each period. …
- Identify company, departmental, or union policies that are pertinent. …
- Determine unit costs for units produced. …
- Develop alternative plans and compute the cost for each.
What is an example of Chase strategy?
When you go to a restaurant for food and place an order the staff will normally pull supplies from a “stable inventory” level and make the order, or in other words “chase the demand.”
What is aggregate planning problem?
The Aggregate Planning Problem. The standard aggregate planning problem aims to determine the production levels, inventory kept in the supply chain, hiring and firing employees, overtime production, backorders and demand satisfaction levels with the objective of having the minimum cost or maximum profit.
What are the factors affecting aggregate planning?
Factors considered in the aggregate planning activity include:
- Sales forecasts.
- Inventory investment.
- Capital equipment utilization.
- Work force capacity.
- Skills training requirements.
- Corporate policies concerning customer service levels, overtime, and subcontracting.
What are the disadvantages of aggregate planning?
Labor and Uncertainty
Labor remains one of the most serious problems of aggregate production planning. For example, a company plans to increase overtime hours and hire part-time workers for peak demand seasons. It will then cut hours and give unpaid furloughs during poor demand seasons.