This document provides an overview of aggregate planning. It discusses that aggregate planning is a big picture approach that looks at overall demand and supply over a 2 to 12 month time horizon rather than individual products. It considers options for matching uneven demand and supply such as pricing, promotion, workforce levels, overtime, inventory etc. The general procedure for aggregate planning involves forecasting demand, determining capacities, identifying costs, developing alternative plans and selecting the optimal plan. Trial and error techniques can be used. The document also discusses how aggregate planning applies to services which have different characteristics than manufacturing.

1. AGGREGATE
PLANNING

2. AGGREGATE PLANNNING
◦ Aggregate planning is a big picture approach to planning
◦ It is not concerned with individual products, but with a single aggregate
product representing all products
◦ All models are lump together and represent a single product; hence the term
aggregate planning.
◦ Time frame of 2 to 12 months
◦ “Sales and Operations Planning”

3. OVERVIEW OF AGGREGATE PLANNING
◦ Aggregate planning start with forecast of
aggregate demand for the intermediate range.
◦ Aggregate plans are should be updated
periodically.
◦ Demand and Supply. Aggregate planners are
concerned with quantity and timing of expected demand.
◦ Inputs to Aggregate Planning. Effective aggregate
planning requires good information.
◦ Aggregate Planning and Supply Chain. It is
essential to take supply chain capabilities into account.

4. DEMAND AND SUPPLY OPTIONS
◦Demand Options
1. Pricing. Pricing differentials are commonly used to shift demand from
peak periods to off peak periods.
2. Promotion. Displays and direct marketing can be very effective in
shifting demand.
3. Back Orders. Can shift demand fulfillment to other periods by
allowing back orders.
4. New Demand. Problem of having to provide products or services for
peak demand in situations where demand is uneven.

5. DEMAND AND SUPPLY OPTIONS
◦ Supply Options
1. Hire and Lay-off workers. The impact that changes in the workforce level will have on
capacity.
2. Overtime/Slack time. Use of overtime or slack time is a less severe method for changing
capacity.
3. Part time workers. Part time workers is a viable option-depend on the nature of work,
training and skills needed.
4. Inventories. Finished goods inventories allows firms to produce goods in one period and sell
or ship them in another period.
5. Subcontracting. Enables planners to acquire temporary capacity.

6. BASIC STRATEGIES FOR MEETING
UNEVEN DEMAND
◦ Maintain a level workforce(level capacity)
◦ Maintain a steady output rate(level capacity)
◦ ‘Match demand period by period(chase demand)
◦ Use a combination of decision variables.

9. GENERAL PROCEDURE FOR AGGREGATE PLANNING
1. Determine demand for each period.
2. Determine capacities (regular time, overtime,
subcontracting) for each period.
3. Identify company or departmental policies that are
pertinent.
4. Determine unit costs for regular time, overtime,
subcontracting, holding inventories, back orders, layoffs
and other relevant costs.
5. Develop alternative plans and compute the cost for each.
6. If satisfactory plans emerge, select the one that satisfies
objectives. Otherwise, return to step 5.

10. TECHNIQUES FOR AGGREGATE PLANNING:
TRIAL-AND-ERROR TECHNIQUES

11. TRIAL-AND-ERROR TECHNIQUES

12. TRIAL-AND-ERROR TECHNIQUES

13. AGGREGATE PLANNING IN SERVICES
◦ Examples of service organization that uses aggregate planning
1. Hospitals. Use aggregate planning to allocate funds, staff, and supplies to meet the demands of
patients for their medical services.
2. Airlines. Fairly complex due to need to take account a wide range of factors.
3. Restaurants. Directed toward smoothing the service rate, determining the size of the workforce,
and managing demand.
4. Other services. Financial, hospitality, transportation, and recreation services provides high-
volume, intangible output.

14. ◦ Some differences on aggregate planning in Manufacturing and Services.
1. Demand for service can be difficult to predict. The volume of demand for services is often
quite variable.
2. Capacity availability can be difficult to predict. Processing requirements for services can
sometimes be quite variable, similarly to the variability of work in a job shop setting.
3. Labor flexibility can be an advantage in services. Labor often comprises a significant
portion of service compared to manufacturing.
4. Services occur when they are rendered. Unlike manufacturing output, most services can’t be
inventoried.
AGGREGATE PLANNING IN SERVICES

15. MATERIALS
REQUIREMENT
PLANNING(MRP)

16. MATERIALS REQUIREMENT PLANNING(MRP)
◦ Methodology used for
planning the production of
assembled products.
◦ It is designed to answer 3
questions: What is needed?
How much is needed?
When it is needed?

17. MRP INPUTS: THE MASTER SCHEDULE
◦ One of the primary inputs of MRP and also called Master schedule production.
◦ Has no set time that it must cover but most managers like to plan far enough to
the future.
◦ It must cover the stacked or the cumulative lead time necessary to produce the
end items.

18. MRP INPUTS: THE BILL OF MATERIALS
◦ One of the three primary inputs of MRP that contains all listing of assemblies,
subassemblies, parts, parts cost, and raw materials needed one unit of a finished
product.
◦ Product structure tree provide a visual depiction of the subassemblies and
components needed to assemble a product.

20. MRP INPUTS: THE INVENTORY RECORDS
◦ Stored information on the status of each item by time period.
◦ Like bill of materials, inventory records must be accurate.

21. MRP PROCESSING
◦ MRP processing takes the end item
requirements specified by the
master schedule and explodes them
into time phased requirements for
assemble, parts and raw materials
using the bill of materials offset by
the lead times

22. The term in the
spreadsheet are defined as
follows.
1. Gross requirements
2. Scheduled receipts.
3. Projected on hand
4. Net requirements
5. Planned order receipts
6. Planned order releases
MRP PROCESSING

24. MRP OUTPUTS
◦ MRP system has the ability to provide management with a fairly broad range of output
which are often classified as primary reports, which are the main reports and secondary
reports, which are optional output.
◦ Primary Reports
1. Planned orders. Schedule indicating the amount and timing of future orders.
2. Order releases. Authorizing the execution of planned orders.
3. Changes. Revision of due dates, order quantities, cancellations of orders.
◦ Secondary Reports
1. Performance –control reports. Evaluate system operation.
2. Planning reports. Useful in forecasting inventory requirements
3. Exception reports. Call attention to major discrepancies.

25. BENEFITS AND REQUIREMENTS OF MRP
◦ Low levels of in-process inventories, due
to an exact matching of supply to
demands.
◦ The ability to keep track of material
requirements.
◦ The ability to evaluate capacity
requirements generated by a give master
schedule.
◦ A means of allocating production time.
◦ The ability to easily determine inventory
usage by back flushing.
◦ A computer and necessary software
programs to handle computations and
maintain records.
◦ Accurate and up-to-date
1. Master Schedules
2. Bill of Materials
3. Inventory records
◦ Integrity of file data

26. THANK YOU AND KEEP
SAFE ALWAYS!