Aggregate production planning determines production levels over the next 6-18 months. It aims to balance objectives like customer service, workforce stability, costs and profits. Inputs include demand forecasts and the business plan. Outputs include a master schedule. Common strategies are level output, chase, and varying utilization plans. Level output keeps workforce stable but inventory costs may rise. Chase varies the workforce but hiring/laying off costs are incurred. Varying utilization keeps workforce stable but idle time or overtime costs occur. Ideally a combination of strategies is used.

1. Aggregate Planning

2. Aggregate production planning
Aggregate Production Planning is planning about how
many units of the product are to be produced on a
weekly or monthly basis for the coming six to
eighteen months. This plan should be in line with the
overall business plan of the company.
• Objectives of Aggregate Planning
i. The overall objective is to balance conflicting
objectives involving customer service, work force
stability, cost and profit.
ii. To establish company-wide strategic plan for
allocating resources.
iii.To develop an economic strategy to meet
customer demand.

3. Inputs to and Outputs from Aggregate
Production Planning

4. Steps in Effective Aggregate Planning
Steps in Effective Aggregate Planning
Process
Process
Demand Forecasts Business Plan
provided by the Marketing provided by the Top
Department Management
Strategies for Pure Aggregate Planning
considered by the Production Manager
Production
planning Level Output Rate Plan Chase Plan Varying Utilization Rate Plan
strategies
A combination of the pure planning strategies
called the Intermediate Plan is prepared by
the Production Manager
Disaggregating of the Aggregate Production
Plan (Intermediate Plan) is done in order to
arrive at a Master Schedule
Beginning Inventory Status Master Scheduling Customer orders
Process committed
Tentative Master
Projected on-hand Production Schedule Available-to-promise
Inventory (MPS) Inventory
Tentative MPS is run through the
Material Requirements Planning (MRP)
Rough-cut capacity planning
Processing Logic to test for feasibility
Revised Master Production Schedule is 4
fixed by using Time Fences

5. Level out put rate plan:
• The inventory size is varied keeping the workforce size and
utilization of workers constant.
• The number of workers is kept constant throughout the time
period under consideration.
• During months of low demand , the excess units produced
over demand are accumulated as inventory.
• The advantage of this plan is that the cost of hiring and
training new workers is zero.
• Also the cost of laying off workers is zero, as the workforce
size is constant.
• The employee moral is high due to sense of job security.
• The disadvantage is , in low demand period, the inventory
cost will be high due to its large size.

6. Chase plan
• The work force size is varied accordingly demand,
keeping utilization of workers and inventory size
constant.
• During months of low demand, the workforce size is
decreased and extra workers are laid off, and vis a vis.
• The hiring and laying off costs are substantial in this
plan.
• The workers moral is low due to sense of un security.
• The inventory is almost negligible as the production of
items is in tune with demand.
• During the month of heavy demand, overtime may be
required on the part of workers, for which the
company incurs overtime cost.

7. Varying utilization plan
• The utilization of workers is varied keeping the
workforce size and inventory size constant.
• The number of workers is kept constant in this plan.
• During the months of low demand, the workers
produces less so as to match the demand and they
have a lot of ideal time.
• On other hand, during the months of high demand, the
excess units required over regular production are
produced by overtime on the part of workers.
• The ideal time on the part of workers during the
months of low demand is a loss to the company and
same way again company incur loss in time of high
demand due to overtime.
• Still company incur negligible cost as far as inventory,
as there is no inventory accumulation.
Ideally, company should chose all these plan as a combination, as all individual
Ideally, company should chose all these plan as a combination, as all individual
strategies have their own draw backs. .
strategies have their own draw backs