Aggregate planning in manufacturing works well because of the ability to produce,

hold and sell inventory at any given time. Alternatively, aggregate planning in
services differs substantially because services cannot be inventoried. The demand
for services is much more difficult to predict and capacity is also difficult to
measure. Service capacity must be provided at the right place and the right time,
while labor is generally the most constraining service resource.

 Chase strategy
 Match output rates to demand forecast for each period
 Vary workforce levels or vary production rate
 Favored by many service organizations

Different type of service provided will have one approach to aggregate planning or other, the
following are 5 different service scenarios.

1.    RESTAURANTS

A business with highly variable demand. Aggregate scheduling focuses on smoothing

production rate and finding the optimal number of workers.

The basic model is to accumulate some inventory during peak period and less during
slack periods but using the workforce to accommodate changes in demand.

2.    HOSPITALS
Main problems are meeting the changing demand of patients by allocating money,
staff and supplies. Examples: Floating staff, cross training, planning for bed capacity,
investing in technology, R&D.

4. MISCELLANEOUS SERVICES
Examples: Financial, transportation, communication and recreation services.

Aggregate planning deals with managing demand by planning for human resource
requirements.

Plan for periods that will require more personnel and how to efficiently allocate
personnel during low demand periods.

5.  AIRLINE INDUSTRY
Unique aggregate scheduling problem. The numerous number of sites creates a more
complex method.

It consist of schedules for number of flights on all routes, number of passengers that
need to be serviced in all flights, number of all air and ground personnel required on
each plane and site and deciding how many seats to allocate to each fare.
The techniques dedicated to determine seat allocation are called yield management
(see below).

YIELD MANAGEMENT

Yield Management is about setting multiple price points according to customers’ willingness
to pay in order to maximize revenue.

Organizations that apply Yield Management usually have in common the following
characteristics:

 Service or product can be sold in advance to consumption.

 Demand Fluctuates.
 Capacity is relatively fixed.
 Demand can be segmented.
 Variable Costs are low and Fixed Costs are high.