This document discusses aggregate planning strategies and processes. It provides an overview of aggregate planning, including strategies like capacity options, demand options, and mixing options. It discusses graphical and quantitative planning methods. It also outlines the relationships between aggregate planning and other production planning processes. The objectives of aggregate planning are to minimize costs and inventory while maintaining customer service and production stability.

1. Aggregate Planning

2. Overview
 Aggregate planning in the planning
process
 Aggregate planning strategies
• Capacity options
 Chase strategy
 Level strategy
• Demand options
• Mixing options
 Graphical/charting methods
 Linear programming
 Simulation

3. Planning Relationships

4. Planning Relationships
Business
or annual
plan

5. Planning Relationships
Business
or annual
plan
Aggregate plan
– production
and staffing plan

6. Planning Relationships
MPS or
workforce
schedule
Business
or annual
plan
Aggregate plan
– production
and staffing plan

7. Planning Relationships
MPS or
workforce
schedule
Business
or annual
plan
Aggregate plan
– production
and staffing plan

8. Planning Relationships
MPS or
workforce
schedule
Business
or annual
plan
Aggregate plan
– production
and staffing plan

9. Planning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
Responsible:
Operations
managers

10. Planning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
Responsible:
Top executives

11. Planning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Responsible:
Operations
managers,
supervisors,
foremen

12. Planning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
Responsible:
Operations
managers,
supervisors,
foremen
Responsible:
Operations
managers
Responsible:
Top executives

13. Planning hierarchy
Long-range
capacity
planning
Aggregate
planning
Master
production
schedule
Production
planning
and control
systems
Pull
systems
(JIT)
Push
systems
(MRP)
Many other
systems

14. Long-range
capacity
planning
Aggregate
planning
Master
production
schedule
Production
planning
and control
systems
Pull
systems
(JIT)
Push
systems
(MRP)
Many other
systems
Planning horizon
Long range: Years
Itermediate range:
6 – 18 months
Short range: Weeks
Planning hierarchy

15. Long-range
capacity
planning
Aggregate
planning
Master
production
schedule
Production
planning
and control
systems
Pull
systems
(JIT)
Push
systems
(MRP)
Many other
systems
Planning horizon
Long range: Years
Itermediate range:
6 – 18 months
Short range: Weeks
Scope
Entire production line
i.e. Ford trucks
Product Family
i.e. Ford F series
Specific model
i.e. Ford F-150
Planning hierarchy

16. What is an aggregate plan?
Aggregate Plan

17. What is an aggregate plan?
Demand
forecast
Inventory
Machine
capacities
and costs
Labor
capacities
and costs
Outsourcing
capacities
and costs
Aggregate Plan

18. Amount to
produce
Amount of
labor and
overtime
required
Projected
Inventories
Amount to
outsource
Demand
forecast
Inventory
Machine
capacities
and costs
Labor
capacities
and costs
Outsourcing
capacities
and costs
Aggregate Plan
What is an aggregate plan?

19. Managerial Inputs

20. Managerial Inputs
Aggregate
plan

21. Managerial Inputs
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing

22. Managerial Inputs
Cost data
Financial condition
of firm
Accounting and finance
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing

23. Managerial Inputs
Labor-market conditions
Training capacity
Human resources
Cost data
Financial condition
of firm
Accounting and finance
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing

24. Managerial Inputs
New products
Product design changes
Machine standards
Engineering
Labor-market conditions
Training capacity
Human resources
Cost data
Financial condition
of firm
Accounting and finance
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing

25. Managerial Inputs
Supplier capabilities
Storage capacity
Materials availability
Materials
New products
Product design changes
Machine standards
Engineering
Labor-market conditions
Training capacity
Human resources
Cost data
Financial condition
of firm
Accounting and finance
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing

26. Managerial Inputs
Supplier capabilities
Storage capacity
Materials availability
Materials
Current machine capacities
Plans for future capacities
Workforce capacities
Current staffing level
Operations
New products
Product design changes
Machine standards
Engineering
Labor-market conditions
Training capacity
Human resources
Cost data
Financial condition
of firm
Accounting and finance
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing

27. Aggregate Planning
Objectives
 Minimize Costs/Maximize Profits
 Maximize Customer Service
 Minimize Inventory Investment
 Minimize Changes in Production Rates
 Minimize Changes in Workforce
Levels
 Maximize Utilization of Plant and
Equipment

28. Aggregate Planning Strategies
Pure Strategies
 Capacity Options — change
capacity:
•changing inventory levels
•varying work force size by
hiring or layoffs
•varying production capacity
through overtime or idle time
•subcontracting
•using part-time workers

29. Aggregate Planning Strategies
Pure Strategies
 Demand Options — change demand:
• influencing demand
• backordering during high demand
periods
• counterseasonal product mixing

30. Advantage/Disadvantages of
Aggregate Planning Options
See Table 13.1

31. Mixing the options:
The Extremes
Level
Strategy
Chase
Strategy
Production
equals
demand
Production rate
is constant

32.  Level planning strategy
• Produce same amount every month
• Keep work force level constant
 Find alternative work for employees when there
is less demand
• Vary non-work force capacity or demand
options
 Inventory levels allowed to fluctuate
• Often results in lowest production costs
• Toyota, Nissan employ this strategy
Aggregate Planning Strategies

33.  Chase planning strategy
• Output rates match demand
• Vary work force level
 Hiring/laying off
• Vary non-work force capacity or demand
options
 Overtime and outsource
 Part time employees
• Service industries often utilize this strategy
 Hospitality, construction, education
Aggregate Planning Strategies