The document discusses work study and its significance in improving production efficiency through techniques like method study and work measurement. It outlines the procedures involved in work study, emphasizes its advantages, and highlights the importance of establishing standard times for operations. Additionally, it describes how work study contributes to job simplification, industrial engineering, and overall organizational productivity.

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Work Study
Work Study forms the basis for work system design. The purpose of work design is to identify
the most effective means of achieving necessary functions. Work study aims at improving the
existing and proposed ways of doing work and establishing standard times for work
performance. Work design involves job design, work measurement and the establishment of time

2. standards and worker compensation. Work Study is encompassed by two techniques - method
study and work measurement (time study):
1. Method study is the systematic recording and critical examination of existing and
proposed ways of doing work, as a means of developing and applying easier and methods
and reducing costs.
2. Work measurement (or Time study) is the application of techniques designed to
establish the time for a qualified worker to carry out a specified job at a defined level of
performance.
There is a close link between method study and work measurement. Method study is concerned
with the reduction of the work content and establishing the one best way of doing the job
whereas work measurement is concerned with investigation and reduction of any ineffective time
associated with the job and establishing time standards for an operation carried out as per the
standard method.
Importance of Work-Study
• Work study is a means of enhancing the production efficiency (productivity) of the firm
by elimination of waste and unnecessary operations.
• It is a technique to identify non-value adding operations by investigation of all the factors
affecting the job.
• It is the only accurate and systematic procedure oriented technique to establish time
standards.
• It is going to contribute to the profit as the savings will start immediately and continue
throughout the life of the product.
Advantages of Work-Study
• It helps to achieve the smooth production flow with minimum interruptions.
• It helps to reduce the cost of the product by eliminating waste and unnecessary
operations.
• It creates better worker-management relations.
• It assists in meeting the delivery commitment.
• It helps in reducing rejections and scrap, and higher utilization of resources of the
organization.
• It helps to achieve better working conditions.

3. • It helps in designing better workplace layout.
• It helps in improving upon the existing process or methods and helps in standardization
and simplification.
• It helps in establishing the standard time for an operation or job which is used in
manpower planning and production planning.
Work-Study Procedure
Work-study is a procedure oriented and systematic study to establish the one best way (standard)
method of doing an operation by investigation and analysis of all the details regarding the job or
operation carried out as per the established standard method.
Steps Involved in Work-Study
1. SELECT Job or Process to be studied;
2. RECORD all the details concerning job using various recording techniques;
3. EXAMINE recorded facts critically by asking questions like who, what, when, why;
4. DEVELOP most economical method;
5. MEASURE the amount of work involved and set standard time to do that job;
6. DEFINE new method and standard time;
7. INSTALL the new method as a standard practice;
8. MAINTAIN new method as agreed standard.
Work Simplification and Work-Study
Any production system is characterized by the coordination of machines and materials and men.
Rapid change in technology and introduction of new technologies are making the processes and
methods more complex. Human factor has become all the more important though automation and
computer controls are catching up.
The process management is key to the success of the product and company. Method study aims
at identifying the key processes and process parameters. A detailed investigation is carried out to
get all the necessary details in order to analyze the existing process and break the process into
parts (operations) which helps to plan and control. A detailed analysis with respect to process
inputs (men, material, and money) and also the process parameters is carried out to improve the
process and to get the desired level of output both in terms of quality and quantity.
The work simplification starts with the analysis of the product and a detailed evaluation with
regards to whether it can be changed in such a way as to make it easier to produce by reducing

4. the waste, eliminating non-value adding operations, design modification, etc. Thus work-study is
a powerful tool to make work simplification.
Influence of Method and Time Study on Production Activities
The basic objective of production management is to manufacture the right quantity and quality of
goods at the predetermined time and pre-established cost. Work-study is tool to achieve this
objective. During the product design and process design, the methods of manufacture are fixed
and process planning is done using the standard times and standard method. Methods analysis
guide with respect how the work is to be best accomplished and time standards indicate how long
it will take to complete the job.
Process analysis and standard times help to have a control on quality and quantity of
manufactured products. Based upon the standard times, standard costs are determined and this
helps to analyze the variance between actual and standard costs. Controlling of product cost
(which is a function of method and standard time) is very much essential to be in competition.
Standard time forms the basis for compensation. This helps to link wages and the work content.
Thus work-study applied in right spirit helps to accomplish the production objectives.
Work Study and Industrial Engineering
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5. Introduction
To survive in the current competitive and global environment, it is important for the organization
to continuously look at ways to improve efficiency and productivity. It needs to discover a new,
easy and cost-effective way of manufacturing or providing services.
Work study and industrial engineering play important role in job simplification, job design, job
enrichment, value analysis/engineering, method analysis, operational analysis, etc. Work study
has been utilized by companies to job productivity. Industrial engineering is the latest method
employed to improve productivity. It deals with design, enhancement and setting up of
engineering systems encompassing plants, machinery, workers, etc.
Work Study
Work study uses techniques like method study and work measurement to understand
human work potential in terms of time spend on completing a task, looking at ways to
make the task simpler and easy, as to increase productivity and efficiency. Work study is
field used to finding ways of increasing on job performance, optimum usage of plant and
machinery, standardization of work methods, etc. Therefore, objectives of work study are as
follows:
 Scientific and controlled analysis of existing available methods of executing a task.
 Measuring performance of mentally and the physically qualified workers, establishing it as
standard for performance measurement.
 Optimum utilization of workers, plant, machinery and other resources at minimum cost.
 Improved productivity and enhance worker mood.
 Increasing efficiency of organization.
For an organization, productivity can be increased over a period of time, if workers are efficient
and are focused. Therefore, advantages of work study are as follows:
 Increase in production efficiency.
 Higher levels of production and optimum utilization of resources.
 Efficient flow of material and products.
 Efficient handling of material and better layout.
 Decreased cost of production as times spend on the job is decreased.
 Increased morale of workers with an increase in safety and efficiency.
 Benchmark and standard performance level are established, thus providing targets for
organization.
 Better job satisfaction and incentive planning due to work study.

6. Method Study
It is a scientific process to better job design. It studies the existing job process and proposed job
process as to identify the appropriate job process which results in efficient and cost effective
operations. Therefore, objectives of method study are as follows:
 To study existing work process and proposed work process.
 To find out new methods of increased production and reduction of cost.
 To achieve optimum utilization of resources.
Method study ensures that there is an increase in overall productivity and profitability of
organization. Method study involves following procedures:
 Selection of work to be studied.
 Recording the present method.
 Critical examination of the facts.
 Development of most practical, economic and effective method.
 Installation of new method.
 Maintenance of new method and practices checking
Industrial Engineering
Industrial engineering is concerned with developing the most effective and efficient way to use
plant, machinery, materials, etc. The main objectives of industrial engineering are as follows:
 To increase productivity without incurring the incremental costs.
 To encourage automation as to decrease human intervention.
 To develop efficient and effective operation work cycle.
Work Measurement
Definition
Work measurement is the application of techniques designed to establish the time for a qualified
worker to carry out a specified job at a defined level of performance.
The Purpose of Work Measurement
Method study is the principal technique for reducing the work involved, primarily by eliminating
unnecessary movement on the part of material or operatives and by substituting good methods
for poor ones. Work measurement is concerned with investigating, reducing and subsequently

7. eliminating ineffective time, that is time during which no effective work is being performed,
whatever the cause.
Work measurement, as the name suggests, provides management with a means of measuring the
time taken in the performance of an operation or series of operations in such a way that
ineffective time is shown up and can be separated from effective time. In this way its existence,
nature and extent become known where previously they were concealed within the total.
The Uses of Work Measurement
Revealing existing causes of ineffective time through study, important though it is, is perhaps
less important in the long term than the setting of sound time standards, since these will continue
to apply as long as the work to which they refer continues to be done. They will also show up
any ineffective time or additional work which may occur once they have been established.
In the process of setting standards it may be necessary to use work measurement:
a. To compare the efficiency of alternative methods. Other conditions being equal,
the method which takes the least time will be the best method.
b. To balance the work of members of teams, in association with multiple activity
charts, so that, as nearly as possible, each member has a task taking an equal time
to perform.
c. To determine, in association with man and machine multiple activity charts, the
number of machines an operative can run.
The time standards, once set, may then be used:
d. To provide information on which the planning and scheduling of production can
be based, including the plant and labour requirements for carrying out the
programme of work and the utilisation of available capacity.
e. To provide information on which estimates for tenders, selling prices and delivery
promises can be based.
f. To set standards of machine utilisation and labour performance which can be used
for any of the above purposes and as a basis for incentive schemes.
g. To provide information for labour-cost control and to enable standard costs to be
fixed and maintained.
It is thus clear that work measurement provides the basic information necessary for all the
activities of organising and controlling the work of an enterprise in which the time element plays
a part. Its uses in connection with these activities will be more clearly seen when we have shown
how the standard time is obtained.
Techniques of work measurement

8. The following are the principal techniques by which work measurement is carried out:
1. Time study
2. Activity sampling
3. Predetermined motion time systems
4. Synthesis from standard data
5. Estimating
6. Analytical estimating
7. Comparative estimating
Of these techniques we shall concern ourselves primarily with time study, since it is the basic
technique of work measurement. Some of the other techniques either derive from it or are
variants of it.
1. Time Study
Time Study consists of recording times and rates of work for elements of a specified job carried
out under specified conditions to obtain the time necessary to carry out a job at a defined level of
performance.
In this technique the job to be studied is timed with a stopwatch, rated, and the Basic Time
calculated.
1.1 Requirements for Effective Time Study
The requirements for effective time study are:
a. Co-operation and goodwill
b. Defined job
c. Defined method
d. Correct normal equipment
e. Quality standard and checks
f. Experienced qualified motivated worker
g. Method of timing
h. Method of assessing relative performance
i. Elemental breakdown
j. Definition of break points
k. Recording media

9. One of the most critical requirements for time study is that of elemental breakdown. There are
some general rules concerning the way in which a job should be broken down into elements.
They include the following. Elements should be easily identifiable, with definite beginnings and
endings so that, once established, they can be repeatedly recognised. These points are known as
the break points and should be clearly described on the study sheet. Elements should be as short
as can be conveniently timed by the observer. As far as possible, elements - particularly manual
ones - should be chosen so that they represent naturally unified and distinct segments of the
operation.
1.2 Performance Rating
Time Study is based on a record of observed times for doing a job together with an assessment
by the observer of the speed and effectiveness of the worker in relation to the observer's concept
of Standard Rating.
This assessment is known as rating, the definition being given in BS 3138 (1979):
The numerical value or symbol used to denote a rate of working.
Standard rating is also defined (in this British Standard BS3138) as:
"The rating corresponding to the average rate at which qualified workers will naturally work,
provided that they adhere to the specified method and that they are motivated to apply
themselves to their work. If the standard rating is consistently maintained and the appropriate
relaxation is taken, a qualified worker will achieve standard performance over the working day
or shift."
Industrial engineers use a variety of rating scales, and one which has achieved wide use is the
British Standards Rating Scale which is a scale where 0 corresponds to no activity and 100
corresponds to standard rating. Rating should be expressed as 'X' BS.
Below is an illustration of the Standard Scale:
Rating Walking Pace
0 no activity
50 very slow
75 steady
100 brisk (standard rating)
125 very fast
150 exceptionally fast
The basic time for a task, or element, is the time for carrying out an element of work or an
operation at standard rating.
Basic Time = Observed Time x Observed Rating

10. The result is expressed in basic minutes - BM's.
The work content of a job or operation is defined as: basic time + relaxation allowance + any
allowance for additional work - e.g. that part of contingency allowance which represents work.
1.3 Standard Time
Standard time is the total time in which a job should be completed at standard performance i.e.
work content, contingency allowance for delay, unoccupied time and interference allowance,
where applicable.
Allowance for unoccupied time and for interference may be important for the measurement of
machine-controlled operations, but they do not always appear in every computation of standard
time. Relaxation allowance, on the other hand, has to be taken into account in every
computation, whether the job is a simple manual one or a very complex operation requiring the
simultaneous control of several machines. A contingency allowance will probably figure quite
frequently in the compilation of standard times; it is therefore convenient to consider the
contingency allowance and relaxation allowance, so that the sequence of calculation which
started with the completion of observations at the workplace may be taken right through to the
compilation of standard time.
Contingency allowance
A contingency allowance is a small allowance of time which may be included in a standard time
to meet legitimate and expected items of work or delays, the precise measurement of which is
uneconomical because of their infrequent or irregular occurrence.
Relaxation allowance
A relaxation allowance is an addition to the basic time to provide the worker with the
opportunity to recover from physiological and psychological effects of carrying out specified
work under specified conditions and to allow attention to personal needs. The amount of the
allowance will depend on the nature of the job. Examples are:
Personal 5-7%
Energy output 0-10%
Noisy 0-5%
Conditions 0-100%
e.g. Electronics 5%
Other allowances
Other allowances include process allowance which is to cover when an operator is prevented
from continuing with their work, although ready and waiting, by the process or machine
requiring further time to complete its part of the job. A final allowance is that of Interference
which is included whenever an operator has charge of more than one machine and the machines

11. are subject to random stoppage. In normal circumstances the operator can only attend to one
machine, and the others must wait for attention. This machine is then subject to interference
which increased the machine cycle time.
It is now possible to obtain a complete picture of the standard time for a straightforward manual
operation.
2. Activity Sampling
Activity sampling is a technique in which a large number of instantaneous observations are made
over a period of time of a group of machines, processes or workers. Each observation records
what is happening at that instant and the percentage of observations recorded for a particular
activity or delay is a measure of the percentage of time during which the activity or delay occurs.
The advantages of this method are that
1. It is capable of measuring many activities that are impractical or too costly to be
measured by time study.
2. One observer can collect data concerning the simultaneous activities of a group.
3. Activity sampling can be interrupted at any time without effect.
The disadvantages are that
1. It is quicker and cheaper to use time study on jobs of short duration.
2. It does not provide elemental detail.
The type of information provided by an activity sampling study is:
a. The proportion of the working day during which workers or machines are producing.
b. The proportion of the working day used up by delays. The reason for each delay must be
recorded.
c. The relative activity of different workers and machines.
To determine the number of observations in a full study the following equation is used:
Where:

12. 3. Predetermined Motion Time Systems
A predetermined motion time system is a work measurement technique whereby times
established for basic human motions (classified according to the nature of the motion and the
conditions under which it is made) are used to build up the time for a job at a defined level of
performance.
The systems are based on the assumption that all manual tasks can be analysed into basic
motions of the body or body members. They were compiled as a result of a very large number of
studies of each movement, generally by a frame-by-frame analysis of films of a wide range of
subjects, men and women, performing a wide variety of tasks.
The first generation of PMT systems, MTM1, were very finely detailed, involving much analysis
and producing extremely accurate results. This attention to detail was both a strength and a
weakness, and for many potential applications the quantity of detailed analysis was not
necessary, and prohibitively time -consuming. In these cases "second generation" techniques,
such as Simplified PMTS, Master Standard Data, Primary Standard Data and MTM2, could be
used with advantage, and no great loss of accuracy. For even speedier application, where some
detail could be sacrificed then a "third generation" technique such as Basic Work Data or MTM3
could be used.
4. Synthesis
Synthesis is a work measurement technique for building up the time for a job at a defined level
of performance by totaling element times obtained previously from time studies on other jobs
containing the elements concerned, or from synthetic data.
Synthetic data is the name given to tables and formulae derived from the analysis of accumulated
work measurement data, arranged in a form suitable for building up standard times, machine
process times, etc by synthesis.
Synthetic times are increasingly being used as a substitute for individual time studies in the case
of jobs made up of elements which have recurred a sufficient number of times in jobs previously
studied to make it possible to compile accurate representative times for them.
5. Estimating
The technique of estimating is the least refined of all those available to the work measurement
practitioner. It consists of an estimate of total job duration (or in common practice, the job price
or cost). This estimate is made by a craftsman or person familiar with the craft. It normally
embraces the total components of the job, including work content, preparation and disposal time,
any contingencies etc, all estimated in one gross amount.
6. Analytical estimating

13. This technique introduces work measurement concepts into estimating. In analytical estimating
the estimator is trained in elemental breakdown, and in the concept of standard performance. The
estimate is prepared by first breaking the work content of the job into elements, and then utilising
the experience of the estimator (normally a craftsman) the time for each element of work is
estimated - at standard performance. These estimated basic minutes are totalled to give a total job
time, in basic minutes. An allowance for relaxation and any necessary contingency is then made,
as in conventional time study, to give the standard time.
7. Comparative estimating
This technique has been developed to permit speedy and reliable assessment of the duration of
variable and infrequent jobs, by estimating them within chosen time bands. Limits are set within
which the job under consideration will fall, rather than in terms of precise capital standard or
capital allowed minute values. It is applied by comparing the job to be estimated with jobs of
similar work content, and using these similar jobs as "bench marks" to locate the new job in its
relevant time band - known as Work Group.
Facility Location - Factors Influencing the Location
Facility Location is the right location for the manufacturing facility, it will have sufficient access
to the customers, workers, transportation, etc. For commercial success, and competitive
advantage following are the critical factors:
Overall objective of an organization is to satisfy and delight customers with its product and
services. Therefore, for an organization it becomes important to have strategy formulated around
its manufacturing unit. A manufacturing unit is the place where all inputs such as raw material,
equipment, skilled labors, etc. come together and manufacture products for customers. One of
the most critical factors determining the success of the manufacturing unit is the location.
Facility location determination is a business critical strategic decision. There are several factors,
which determine the location of facility among them competition, cost and corresponding
associated effects. Facility location is a scientific process utilizing various techniques
.
Location Selection Factors
For a company which operates in a global environment; cost, available infrastructure, labor skill,
government policies and environment are very important factors. A right location provides

14. adequate access to customers, skilled labors, transportation, etc. A right location ensures success
of the organization in current global competitive environment.
Industrialization
A geographic area becomes a focal point for various facility locations based on many factors,
parameters and issues. These factors are can be divided into primary factors and secondary
factors. A primary factor which leads to industrialization of a particular area for particular
manufacturing of products is material, labor and presence of similar manufacturing facilities.
Secondary factors are available of credit finance, communication infrastructure and insurance.
Errors in Location Selection
Facility location is critical for business continuity and success of the organization. So it is
important to avoid mistakes while making selection for a location. Errors in selection can be
divided into two broad categories behavioral and non-behavioral. Behavioral errors are decision
made by executives of the company where personal factors are considered before success of
location, for example, movement of personal establishment from hometown to new location
facility. Non-behavioral errors include lack of proper investigative practice and analysis,
ignoring critical factors and characteristics of the industry.
Location Strategy
The goal of an organization is customer delight for that it needs access to the customers at
minimum possible cost. This is achieved by developing location strategy. Location strategy helps
the company in determining product offering, market, demand forecast in different markets, best
location to access customers and best manufacturing and service location.
Factors Influencing Facility Location
If the organization can configure the right location for the manufacturing facility, it will have
sufficient access to the customers, workers, transportation, etc. For commercial success, and
competitive advantage following are the critical factors:
Customer Proximity: Facility locations are selected closer to the customer as to reduce
transportation cost and decrease time in reaching the customer.
Business Area: Presence of other similar manufacturing units around makes business area
conducive for facility establishment.
Availability of Skill Labor: Education, experience and skill of available labor are another
important, which determines facility location.

15. Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing
facility by providing incentives in custom duties and levies. On another hand free trade
agreement is among countries providing an incentive to establish business, in particular, country.
Suppliers: Continuous and quality supply of the raw materials is another critical factor in
determining the location of manufacturing facility.
Environmental Policy: In current globalized world pollution, control is very important,
therefore understanding of environmental policy for the facility location is another critical factor.
Facility Layout - Objectives, Design and Factors Affecting the Layout
Introduction
For an organization to have an effective and efficient manufacturing unit, it is important that
special attention is given to facility layout. Facility layout is an arrangement of different aspects
of manufacturing in an appropriate manner as to achieve desired production results. Facility
layout considers available space, final product, safety of users and facility and convenience of
operations.
An effective facility layout ensures that there is a smooth and steady flow of production material,
equipment and manpower at minimum cost. Facility layout looks at physical
allocation of space for economic activity in the plant. Therefore, main objective of the
facility layout planning is to design effective workflow as to make equipment and
workers more productiveFacility Layout Objective
A model facility layout should be able to provide an ideal relationship between raw material,
equipment, manpower and final product at minimal cost under safe and comfortable
environment. An efficient and effective facility layout can cover following objectives:
 To provide optimum space to organize equipment and facilitate movement of goods and
to create safe and comfortable work environment.
 To promote order in production towards a single objective
 To reduce movement of workers, raw material and equipment
 To promote safety of plant as well as its workers
 To facilitate extension or change in the layout to accommodate new product line or
technology upgradation
 To increase production capacity of the organization
An organization can achieve the above-mentioned objective by ensuring the following:

16.  Better training of the workers and supervisors.
 Creating awareness about of health hazard and safety standards
 Optimum utilization of workforce and equipment
 Encouraging empowerment and reducing administrative and other indirect work
Factors affecting Facility Layout
Facility layout designing and implementation is influenced by various factors. These factors vary
from industry to industry but influence facility layout. These factors are as follows:
 The design of the facility layout should consider overall objectives set by the
organization.
 Optimum space needs to be allocated for process and technology.
 A proper safety measure as to avoid mishaps.
 Overall management policies and future direction of the organization
Design of Facility Layout
Principles which drive design of the facility layout need to take into the consideration objective
of facility layout, factors influencing facility layout and constraints of facility layout. These
principles are as follows:
 Flexibility: Facility layout should provide flexibility for expansion or modification.
 Space Utilization: Optimum space utilization reduces the time in material and people
movement and promotes safety.
 Capital: Capital investment should be minimal when finalizing different models of
facility layout.
Design Layout Techniques
There are three techniques of design layout, and they are as follows:
1. Two or Three Dimensional Templates: This technique utilizes development of a
scaled-down model based on approved drawings.
2. Sequence Analysis: This technique utilizes computer technology in designing the facility
layout by sequencing out all activities and then arranging them in circular or in a straight
line.
3. Line Balancing: This kind of technique is used for assembly line.
Types of Facility Layout
There are six types of facility layout, and they are as follows:

17.  Line Layout
 Functional Layout
 Fixed Position Layout
 Cellular Technology Layout
 Combined Layout, and
 Computerized Relative Allocation of Facility Technique
Capacity Planning
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The production system design planning considers input requirements, conversion process and
output. After considering the forecast and long-term planning organization should undertake
capacity planning.
Capacity is defined as the ability to achieve, store or produce. For an organization, capacity
would be the ability of a given system to produce output within the specific time period. In
operations, management capacity is referred as an amount of the input resources available to
produce relative output over period of time.
In general, terms capacity is referred as maximum production capacity, which can be attained
within a normal working schedule.
Capacity planning is essential to be determining optimum utilization of resource and plays an
important role decision-making process, for example, extension of existing operations,
modification to product lines, starting new products, etc.
Strategic Capacity Planning
A technique used to identify and measure overall capacity of production is referred to as strategic
capacity planning. Strategic capacity planning is utilized for capital intensive resource like plant,
machinery, labor, etc.
Strategic capacity planning is essential as it helps the organization in meeting the future
requirements of the organization. Planning ensures that operating cost are maintained at a
minimum possible level without affecting the quality. It ensures the organization remain
competitive and can achieve the long-term growth plan.

18. Capacity Planning Classification
Capacity planning based on the timeline is classified into three main categories long range,
medium range and short range.
Long Term Capacity: Long range capacity of an organization is dependent on various other
capacities like design capacity, production capacity, sustainable capacity and effective capacity.
Design capacity is the maximum output possible as indicated by equipment manufacturer under
ideal working condition.
Production capacity is the maximum output possible from equipment under normal working
condition or day.
Sustainable capacity is the maximum production level achievable in realistic work condition and
considering normal machine breakdown, maintenance, etc.
Effective capacity is the optimum production level under pre-defined job and work-schedules,
normal machine breakdown, maintenance, etc.
Medium Term Capacity: The strategic capacity planning undertaken by organization for 2 to 3
years of a time frame is referred to as medium term capacity planning.
Short Term Capacity: The strategic planning undertaken by organization for a daily weekly or
quarterly time frame is referred to as short term capacity planning.
Goal of Capacity Planning
The ultimate goal of capacity planning is to meet the current and future level of the requirement
at a minimal wastage. The three types of capacity planning based on goal are lead capacity
planning, lag strategy planning and match strategy planning.
Factors Affecting Capacity Planning
Effective capacity planning is dependent upon factors like production facility (layout, design,
and location), product line or matrix, production technology, human capital (job design,
compensation), operational structure (scheduling, quality assurance) and external structure
( policy, safety regulations)
Forecasting v/s Capacity Planning
There would be a scenario where capacity planning done on a basis of forecasting may not
exactly match. For example, there could be a scenario where demand is more than production
capacity; in this situation, a company needs to fulfill its requirement by buying from outside. If
demand is equal to production capacity; company is in a position to use its production capacity to
the fullest. If the demand is less than the production capacity, company can choose to reduce the
production or share it output with other manufacturers.

19. What is Aggregate Planning ? - Importance
and its Strategies
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Introduction
An organization can finalize its business plans on the recommendation of demand forecast. Once
business plans are ready, an organization can do backward working from the final sales unit to
raw materials required. Thus annual and quarterly plans are broken down into labor, raw
material, working capital, etc. requirements over a medium-range period (6 months to 18
months). This process of working out production requirements for a medium range is called
aggregate planning.
Factors Affecting Aggregate Planning
Aggregate planning is an operational activity critical to the organization as it looks to
balance long-term strategic planning with short term production success. Following factors
are critical before an aggregate planning process can actually start;
 A complete information is required about available production facility and raw materials.
 A solid demand forecast covering the medium-range period
 Financial planning surrounding the production cost which includes raw material, labor,
inventory planning, etc.
 Organization policy around labor management, quality management, etc.
For aggregate planning to be a success, following inputs are required;
 An aggregate demand forecast for the relevant period
 Evaluation of all the available means to manage capacity planning like sub-contracting,
outsourcing, etc.
 Existing operational status of workforce (number, skill set, etc.), inventory level and production
efficiency
Aggregate planning will ensure that organization can plan for workforce level, inventory level
and production rate in line with its strategic goal and objective.

20. Aggregate planning as an Operational Tool
Aggregate planning helps achieve balance between operation goal, financial goal and overall
strategic objective of the organization. It serves as a platform to manage capacity and demand
planning.
In a scenario where demand is not matching the capacity, an organization can try to balance both
by pricing, promotion, order management and new demand creation.
In scenario where capacity is not matching demand, an organization can try to balance the both
by various alternatives such as.
 Laying off/hiring excess/inadequate excess/inadequate excess/inadequate workforce until
demand decrease/increase.
 Including overtime as part of scheduling there by creating additional capacity.
 Hiring a temporary workforce for a fix period or outsourcing activity to a sub-contrator.
Importance of Aggregate Planning
Aggregate planning plays an important part in achieving long-term objectives of the
organization. Aggregate planning helps in:
 Achieving financial goals by reducing overall variable cost and improving the bottom line
 Maximum utilization of the available production facility
 Provide customer delight by matching demand and reducing wait time for customers
 Reduce investment in inventory stocking
 Able to meet scheduling goals there by creating a happy and satisfied work force
Aggregate Planning Strategies
There are three types of aggregate planning strategies available for organization to choose from.
They are as follows.
1. Level Strategy
As the name suggests, level strategy looks to maintain a steady production rate and
workforce level. In this strategy, organization requires a robust forecast demand as to
increase or decrease production in anticipation of lower or higher customer demand.
Advantage of level strategy is steady workforce. Disadvantage of level strategy is high
inventory and increase back logs.
2. Chase Strategy

21. As the name suggests, chase strategy looks to dynamically match demand with
production. Advantage of chase strategy is lower inventory levels and back logs.
Disadvantage is lower productivity, quality and depressed work force.
3. Hybrid Strategy
As the name suggests, hybrid strategy looks to balance between level strategy and chase
strategy.