1. AGGREGATE PLANNING
BY
ARATHY.P
&
SRUTHY.K.M

2. Aggregate planning is the process of
developing, analyzing, and maintaining a
preliminary, approximate schedule of the
overall operations of an organization. The
aggregate plan generally contains targeted
sales forecasts, production levels,
inventory levels, and customer backlogs.
This schedule is intended to satisfy the
demand forecast at a minimum cost.

3. Defined as …
• The process of determining output levels
of product groups over the coming 6 to 18
months on a weekly or monthly basis ; the
plan identifies the overall level of outputs
in support of the business plan.
• Aggregate planning involves translating
long-term forecasted demand into specific
production rates and the corresponding
labor requirements for the intermediate
term.
Aggragate
planning
Long term
demand
Production rates
Labour
requirements

4. objectives
• Minimize cost / maximize profits
• Maximize customer service
• Minimize inventory investment
• Minimize changes in production rates
• Minimize changes in workforce levels
• Maximize utilization of plant and
equipment

5. Aggregate planning process
- Determine demand for each period .
- Determine capacities for each period .
- Identify policies that are pertinent .
- Determine units costs for units produced .
- Develop alternative plans and compute costs
each.
- Select the best plan that satisfies objectives .

6. AGGREGATE PLANNING
STRATEGIES
• There are two pure planning strategies
available to the aggregate planner:
• level strategy
• chase strategy.
• Firms may choose to utilize one of the
pure strategies in isolation, or they may
opt for a strategy that combines the two.

7. Level strategy
• A level strategy seeks to produce an aggregate plan
that maintains a steady production rate and/or a
steady employment level. In order to satisfy changes
in customer demand, the firm must raise or lower
inventory levels in anticipation of increased or
decreased levels of forecast demand. The firm
maintains a level workforce and a steady rate of
output when demand is somewhat low. This allows
the firm to establish higher inventory levels than are
currently needed. As demand increases, the firm is
able to continue a steady production rate/steady
employment level, while allowing the inventory

8. Chase strategy
• A chase strategy implies matching demand and
capacity period by period. This could result in a
considerable amount of hiring, firing or laying off of
employees; insecure and unhappy employees;
increased inventory carrying costs; problems with
labor unions; and erratic utilization of plant and
equipment. It also implies a great deal of flexibility
on the firm's part. The major advantage of a chase
strategy is that it allows inventory to be held to the
lowest level possible, and for some firms this is a
considerable savings. Most firms embracing the just-
in-time production concept utilize a chase strategy

9. Level vs Chase
ADVANTAGES
-Stable output rates and
workforce
DISADVANTAGES
-greater inventory costs
-increased over time and idle
time
-resource utilizations vary over
time
ADVANTAGES
-Investment in
inventory is low
-Labor utilization in
high
DISADVANTAGES
-The cost of fluctuating
work force
-potential damage to
employee morale

10. Techniques
• Linear programming model
• Linear decision rule
• Simulation

11. Linear programming
• LP models are methods for obtaining optimal
solutions to
problems involving the allocation of scarce
resources in
terms of cost minimization or profit maximization.
• With AGGREGATE PLANNING, the goal is
usually to minimize the sum of costs related to
regular labor time, over time , subcontracting ,
inventory holding costs, and costs associated
with changing size of the work force. Constraints
involve the capacities of the workforce,

12. • E.H. BOWMAN - proposed formulating the
problem in terms of transportation type
programming model as a way to obtain
aggregate plans that would match capacities
with demand requirements and minimize cost.In
order to use this approach ,planners must
identify capacity (supply) of regular time, over
time, subcontracting and inventory on a period
by period basis as well as related costs of each
variable.

13. LINEAR DECISION RULE
Linear decision rule is another optimizing
technique. It seeks to minimize total
production costs (labor, overtime,
hiring/lay off, inventory carrying cost) using
a set of cost-approximating functions
(three of which are quadratic) to obtain a
single quadratic equation. Then, by using
calculus, two linear equations can be
derived from the quadratic equation, one
to be used to plan the output for each
period and the other for planning the
workforce for each period.

14. SIMULATION MODELS
• A number of simulation models can be used
for aggregate planning. By developing an
aggregate plan within the environment of a
simulation model, it can be tested under a
variety of conditions to find acceptable plans
for consideration. These models can also be
incorporated into a decision support system,
which can aid in planning and evaluating
alternative control policies. These models
can integrate the multiple conflicting
objectives inherent in manufacturing