Make your own free website on

Aggregate Planning

Aggregate Planning


Chapter 12

Aggregate planning = intermediate-range capacity planning, usually covering 2 to 12 months

 Overview of planning levels (Table 14-1, p. 604)

   Short-range plans = detailed plans about machine loading, job assignments, job sequencing, production lot size, order quantities, and work schedules

   Intermediate plans = general levels of employment, output, finished goods inventories, subcontracting, and backorders

   Long-range plans = long-term capacity, location, layout, product design, work system design

 The Concept of Aggregation

   Aggregate planning is essentially a “big” picture approach to planing.  Planners look at broad issues not individual items

 Purpose of Aggregate Planning

   -- To plan for dealing with the quantity and timing of demand

   -- Inputs to aggregate planning

1.  available resource over the planning period

2.  forecast of expected demand

3.  policies regarding changes in employment levels (use of overtime, layoffs, subcontracting, etc.)

 Demand and Capacity Options

Demand Options

1.  Pricing

2.  Promotion

3.  Back orders

4.  New demand

Capacity options

1.  Hire and lay off workers

2.  Use overtime/slack time

3.  Part-time workers

4.  Inventories

5.  Subcontracting


Basic Strategies for Meeting Uneven Demand

1.  Maintain a level work force

2.  Maintain a steady output rate

3.  Match demand period by period

4.  Use a combination of decision variables

   -- level capacity strategy = maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options

   -- chase demand strategy = matching capacity to demand; the planned output for a period is set at the expected demand for that period

 Techniques for Aggregate Planning

General procedure

1.  Determine demand for each period

2.  Determine capacities (regular time, overtime, subcontracting) for each period

3.  Identify company or departmental policies that are pertinent (maintain a safety stock, maintain a reasonably stable workforce)

4.  Determine unit costs for regular time, overtime, subcontracting, holding inventories, back orders, layoffs, and other relevant costs

5.  Develop alternative plans and compute the cost for each

6.  If satisfactory plans emerge, select the one that best satisfies objectives

Aggregate Planning in Services

   Differences between manufacturing and services which impact aggregate planning

1.  services occur when they are rendered

2.  demand for service can be difficult to predict

3.  capacity availability can be difficult predict

4.  labor flexibility can be an advantage in services

 Disaggregating the Aggregate Plan

   Breaking down the aggregate plan into specific (individual) product requirements

   Master schedule = the result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon

   Rough-cut capacity planning = approximate balancing of capacity and demand to test the feasibility of a master schedule

   Master production schedule = this schedule indicates the quantity and timing of planned production

   Available-to-promise inventory = uncommitted inventory


Enter supporting content here