Aggregate production planning (APP) is an operational activity that creates a production plan for a 6 to 18 month period, focusing on matching supply and demand while minimizing operational costs. The process involves managing various inputs such as demand forecasts, capacity, and organizational policies to develop outputs like sales and production plans. Different planning strategies are utilized to handle fluctuations in demand and supply, including chase and level strategies, as well as the use of transportation models for efficient distribution.

1. By: Arushi Gupta
AGGREGATE PRODUCTION
PLANNING

2. AGGREGATE PRODUCTION
PLANNING: MEANING, NATURE,
SCOPE, NEED FOR APP
AND APP PROCESS

3. AGGREGATE PRODUCTION
PLANNING
Aggregate planning is an operational activity that does an aggregate
plan for the production process, in advance of 6 to 18 months, to
give an idea to management as to what quantity of materials and
other resources are to be procured and when, so that the total cost of
operations of the organization is kept to the minimum over that
period.
The quantity of outsourcing, subcontracting of items, overtime of
labour, numbers to be hired and fired in each period and the amount
of inventory to be held in stock and to be backlogged for each period
are decided. All of these activities are done within the framework of
the company ethics, policies, and long term commitment to the
society, community and the country of operation.

4. NATURE
Aggregate Planning is concerned with matching supply and demand
of output over the medium time range, up to approximately 12
months into the future. The term aggregate implies that the planning
is done for a single overall measure of output or, at the most, a few
aggregated product categories. The aim of aggregate planning is to
set overall output levels in the near to medium future in the face of
fluctuating or uncertain demands. Aggregate planning might seek to
influence demand as well as supply.

5. NEED FOR APP
1) Demand fluctuation
2) Capacity fluctuation
3) Difficulty level in altering operation rate
4) Benefits of multi-period plans

6. Long-range plans
(over one year)
Research and Development
New product plans
Capital investments
Facility location/expansion
Intermediate-range plans
(3 to 18 months)
Sales planning
Production planning and budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
Short-range plans
(up to 3 months)
Job assignments
Ordering
Job scheduling
Dispatching
Overtime
Part-time help
Top
executives
Operations
managers
Operations
managers,
supervisors,
foremen
Responsibility Planning tasks and horizon
ThePlanning
Process

8. AGGREGATE PLANNING
ENVIRONMENT, INPUT AND
OUTPUT OF APP AND
BALANCE BETWEEN DEMAND

9. AGGREGATE
PLANNING
ENVIRONMENT
Aggregate planning has certain pre-
required inputs which are inevitable. They
include:
Information about the resources and the
facilities available.
Demand forecast for the period for which
the planning has to be done.
Cost of various alternatives and resources.
This includes cost of holding inventory,
ordering cost, cost of production through
various production alternatives like
subcontracting, backordering and
overtime.
Organizational policies regarding the
usage of above alternatives.

10. INPUTS AND OUTPUTS OF
AGGREGATE PLANNING

11. INPUT RESPONSIBILITY
•Demand Forecast - Marketing
•Market intelligence - Marketing
•Actual sales - Sales
•Capacity information - Manufacturing
•Management targets - Management
•Financial requirements - Finance
•New product information - R&D
•New process information Process - engineering
•Workforce availability - Human resources

12. OUTPUT RESPONSIBILITY
• Sales plan - Marketing and sales
• Production plan - Manufacturing
• Inventory plan (MTS) - Management
• Backlog plan (MTO) - Management
• Purchasing plan - Purchasing
• Financial plan - Finance
• Engineering plan - Engineering
• Workforce plan - Human resources

14. CRITERIA GENERALLY USED
INCLUDE:
• Minimizing cost
• Maximizing customer service level
• Minimizing inventory
• Maintaining a stable work force level
• Combination of the above

15. Options for managing demand –influencing
demand from customers –delivering orders as
promised
Options for managing supply –delivering what is
promised –managing capacity & other resources
PLANNING OPTIONS

16. HOW TO BALANCE
Options for Influencing
(Managing) Demand
• Pricing
• Advertising and promotion
• Backlog or reservations
(shifting demand)
• Development of
complementary products
Options for Influencing
(managing) Supply
• Hiring and layoff of employees
• Using overtime and under-time
• Using part-time or temporary
labour
• Carrying inventory
• Outsourcing or Subcontracting
• Making cooperative
arrangements

17. DEMAND AND SUPPLY SIDE
PRODUCTION PLANNING

18. INTRODUCTION
Production planning is a futuristic concept
Based on Forecasts made by the firm.
Follows certain assumptions.
In order to avoid extra material costs, firms use demand side
techniques to optimise their production planning.

19. TECHNIQUES
1. Chase Strategy
2. Level Strategy
3. Varying Work Hours
4. Mixed Strategy
*Subcontracting is another strategy, generally, used as to chase demand, however
sentimentally different.

20. LEVEL STRATEGY
Here, in level
strategy, we
maintain a constant
production rate and
with demand
fluctuations, we try
to maintain
inventory or handle
backlogs(stock-
outs).

21. CHASE STRATEGY
Here, in Chase
Strategy, we try to
chase the actual
demand, through
measures like
hiring, laying off,
varying hours and
subcontracting.

22. TRANSPORTATION
MODEL

23. A transportation model is used to determine
how to distribute supplies to various
destinations while minimizing total shipping
cost. In this case, a shipping plan is produced
and is not changed unless factors such as
supply, demand, or unit shipping costs change.

24. ASSUMPTIONS
1. Items are homogeneous.
2. Shipping cost is same.
3.Only one route is used from one place to another.

25. NORTH WEST CORNER METHOD