Aggregate planning involves marketing activities to plan production over 6-18 months in advance. It aims to minimize costs and inventory investment while maximizing customer service and profits. There are three main types of aggregate plans: level plans maintain constant workforce and capacity to meet average demand but can build inventory; chase plans produce only what is needed each period to minimize inventory but involve constantly changing capacity; and hybrid plans combine options like a level workforce with overtime to balance these tradeoffs.

1. Aggregate Planning

2. Meaning:
 Marketing activity that does an
aggregate plan for the
production process
 In advance of 6 to 18 months
 Gives an idea to management
as to what quantity of materials
and other resources are to be
procured

3. Role of Aggregate Planning
Minimize
cost/maximize
profits
Maximize
customer service
Minimize
inventory
investment
Minimize
changes in
production rates

5. Types of
Aggregate
Planning
Level
Aggregate
Plans
Chase
Aggregate
Plan
Hybrid
Aggregate
Plan
5

6. Level Aggregate Plan
 Maintain the constant workforce
 Sets capacity to accommodate average demand
 Often used for make-to-stock product
 Disadvantage – builds inventory and/or uses back orders

7. Example:

8. Chase Aggregate Plan
 Produces exactly what is needed in each period
 Sets labour/equipment what is needed in each period
 Disadvantage – constantly changing short term capacity
 Minimize finished good inventories by trying to keep pace with demand
fluctuations
 Matches demand varying either work force level or output rate

9. Example:

11. Hybrid Aggregate Plan
 Uses combination of options
 Option should be limited to facilitate execution
 May use a level workforce with overtime
 May use short term sourcing

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