Aggregate planning involves intermediate-range planning from 2-18 months to determine overall levels of output, employment, and inventory. It aims to balance demand and capacity over time. The key steps are to forecast aggregate demand, set output, employment, and inventory targets, and periodically update the rolling plan. Demand and capacity options like pricing, promotions, overtime/slack time, inventory, and subcontracting can be used to better match fluctuations. The optimal plan is selected by developing alternatives and choosing the lowest cost option that meets objectives.

1. Aggregate Planning
Intermediate-range planning that typically covers a time horizon
of 2~12 months – may extend to as much as 18 months.
Product and service selection
Facility size and location
Equipment decision
Facility layout
General levels of
• Output
• Employment
• Finished goods inventories
Machine loading
Job assignments
Job sequencing
Work scheduling
Long-term planning Short-term planning
Intermediate planning

2. Concept of Aggregation
Essentially a “big picture” approach to planning
• Lump all models of a product together
• Deal with them as though they are a single product
Overview of Aggregate Planning
• Begins with a forecast of aggregate demand for intermediate range
• Followed by a general plan to meet demand requirements by setting
o Output
o Employment
o FG inventory level
Updated periodically – rolling planning horizon
Aggregate Planning

3. Purpose and Scope
Balancing of Demand and Capacity
Demand and Capacity
concerns are quantity and timing of expected demand
• Available resources over the planning period must be known
• A forecast of expected demand must be available
Inputs to Aggregate Planning
Output of Aggregate Planning
Production Plan
Aggregate Planning

4. Demand options
Aggregate Planning
• Pricing – shift demand from peak periods to off-peak periods
• Promotion – sometimes are very effective in shifting demand
• Back orders – taken in one period and delivers for a later period
• New demand – creating new demand at off-peak time

5. Capacity options
• Hire and layoff workers – hiring during peak and laying off
during off-peak – may have sever effect
Aggregate Planning
• Overtime/ Slack time – can be easily & quickly implemented
– less severe
• Part time workers – for seasonal work - requiring low job skills
• Inventories – produce goods in one period & sell in another period
• Subcontracting – enables planers to acquire temporary capacity

6. Aggregate Planning
Techniques for Aggregate Planning
Determine demand for each period
Determine capacity for each period
Identify company or departmental policies
Develop alternative plans & compute cost for each
Select the one that best satisfies objectives.