Aggregate production planning (APP) is an approach to operations management focused on satisfying demand as it relates to production, workforce, inventory and

other concepts. APP can tie in facility planning with scheduling decisions. 1. Aggregate production plans are necessary to maximize workforce opportunity and constitute a crucial part of operations management. Aggregate production plans help match supply and demand while minimizing costs. Aggregate production planning applies the upper-level forecasts to lower-level, production-floor scheduling and is most effective when applied to periods 2 to 18 months in the future. Plans generally either "chase" demand, adjusting workforce accordingly, or are "level" plans, meaning that labor is relatively constant with fluctuations in demand being met by inventories and back orders. Managerial Importance 2. Aggregate production planning helps to minimize production costs, the effect of variant demand, cost of inventory and labor costs. By doing so, aggregate production planning also maximizes plant and equipment utilization and profits. Aggregate production planning is also a useful tool in creation and evaluation of alternatives such as the adjustment of the labor force through hire/fire/layoff/overtime, the use of subcontractors, anticipatory inventory, and even the development of complementary products and pricing strategies.There are several APP techniques available to the operations manager. Chase Planning 3. The "chasing" strategy adjusts production to meet demand. Also called just-in-time management, the chase strategy maintains minimal levels of inventory, if any. While this feature is positive for many industries, such as a bakery, employment of this strategy decreases the ability to the company to meet unexpected demand increases and increases the risk of back orders. Level Planning 4. The level aggregate plan essentially smooths over fluctuations, holding inventory or placing back orders as needed. This plan supports regular scheduling and minimal overtime. The level plan approach has more holding cost that the hybrid aggregate plan, but does not require the use of as much overtime. Hybrid Aggregate Planning 5. A hybrid aggregate plan will take advantage of a combination of "chasing" and "leveling." Basically, the current workforce will be used with demand fluctuations being handled by overtime. Should the levels of demand overreach the maximum labor output, back orders will be used. In this system, there is a greater probability of layoffs and large amounts of overtime. Hybrid planning is the most popular form of aggregate production planning. Methods 6. Methods of aggregate production range from the simplistic (i.e., trial and error) to the use of quadratic calculus methods. However, aggregate production planning can have a mathematical basis while still being easy to implement and understand. Chase planning requires continual monitoring of demand and adjustment to meet that demand (i.e., overtime, temporary labor, subcontracting). Level aggregate planning involves taking the average annual demand and dividing that by the hours needed to meet that demand and scheduling thus. Hybrid planning uses a combination of the chase strategy and the level planning techniques. Hybrid planning looks at the cost of back orders compared to the cost of holding inventory and develops the optimal levels of each. While this can be accomplished through trial and error, it is also possible to use the "solver" feature in spreadsheet software to simplify the process.

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