10.1.

2
Aggregate Planning Strategies
One can a n y one or a
usc combination of the following strategies for
demand. Generally, a mixture of strategies is preferred. smoothing fluctuations in

.Building and utilizing inventory through constant work force

Varying the size of the work force

Overtime utilization

Subcontracting

If a single strategy is used to meet the demand, then it is called as a pure strategy. Each of the
ahove strategies is called as a pure strategy. Instead of this, if a combination of the above pure
strate gies is used to meet the demand, then it is called as a mixed strategy. Several mixed strategies
ean be generated by taking two at a time, three at a time or four at a time of the above pure strategies.
can
But all these mixed strategies may not be meaningful and practicable to implement. Only a
limited combinations of these strategies are used in practice. So, the objective of the aggregate
nlanning is to generate such meaningful set of pure/mixed strategies (alternatives), evaluate them and
Select the most economical alternative for implementation.

Pure strategies. The significance of each of the pure strategies is discussed below.

(a) Building and utilizing inventory through constant work force. The company can use
each
constant work force during the planning horizon, which will result into a constant output during
period in the planning horizon. Since, the demand is not a constant quantity, there may be mismatch
in a
between the production quantity and the demand of each period. The excessin production cost. period
If this
can be carried as inventory for use in future periods. But, this will result inventory
to the
pure strategy is used, the objective is to identify a desirable constant work force which leads
work force. This,
minimum total inventory cost. This pure strategy helps in having stability in the
the work force
inturn, helps in producing better quality products because of the experience gained by
and various other related benefits.

(b) Varying the size of the work force. The company can employ varying work force such
that the output matches with the demand in each period of the planning horizon. This pure strategy
can be impiemented through hiring and firing of employees. During periods of increased demand,
the company can hire employees and during periods of decreased demands, the company can fire
employees such that there is an exact match between
will
the production quantity and the demand of each
in in terms
period in the planning horizon. Hiring and firing result to
penalty
some
the company
of training cost and firing cost, respectively. But, in this strategy, the cost of inventory is zero.
In many instances new employees require training and the average productivity is temporarily
owered. A lay-off frequently results in a lower worker morale and lower productivity, and the
remaining employees may retard output to protect themselves against a similar fate.
In some instances, one can maintain a constant work force and vary the working hours. But.
m a y not yield sufficient production of units when the difference between demands of consecutive
Periods in the planning horizon is too large.
) (c) Subcontracting. This strategy can be considered as an alternative to meet the demands
roducts. In this strategy, orders can be placed with a subcontractor or a set of subcontractors
n g on the demands of various products. This is generally used during the peak demand