PRODUCTION AND

OPERATIONS
MANAGEMENT
INSTRUCTOR: ECHELMEYER WOLFGANG
 GROUP 5

CHAPTER
6
AGGREGATE
PLANNING
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 SALES AND
with production plans —> ensure
OPERATIONS
PLANNING
Cross-functional collab
between sales, marketing,
finance, operations teams —>
develop consensus plan
balances supply + demand over
specified planning horizon.
Process aligning sales forecasts
to meet customer demand
efficiently while maximizing
operational effectiveness.
Aims to synchronize activities
across entire supply chain,
optimize resource utilization,
minimize costs while meeting
customer service level
requirements.
 AGGREGATE PLANNING

Develop overall production plan for specified time

horizon to meet forecasted demand while minimizing
costs and maximizing operational efficiency.

Focus on determining the optimal level of output,

workforce, inventory, and other resources needed to
satisfy customer demand while considering capacity
constraints, labor availability, and inventory carrying
costs.
 STRATEGIC OBJECTIVES OF
AGGREGATE PLANNING
Minimizing Meeting Maintaining
Costs Customer Inventory

ensure sufficient
optimizing maintaining high stock to meet
production and levels of service demand while
resource utilization and satisfaction. minimizing holding
costs and
obsolescence.
 STRATEGIC OBJECTIVES OF
AGGREGATE PLANNING
Managing Managing
Workforce Capacity
Levels

optimizing workforce adjusting capacity

utilization to meet levels or investments
production in additional facilities
requirements while to align with demand
minimizing labor costs. fluctuations.
 STRATEGIC OBJECTIVES OF
AGGREGATE PLANNING

Strategic objective generally

considered the most important
Minimizing costs —> most
depends on specific priorities
often addressed by the
and circumstances of
quantitative techniques of
organization but often revolves
aggregate planning. around meeting customer
demand while minimizing costs.
chase Aggregate planning approach where
production and workforce levels adjusted

strategy to match fluctuating demand levels.

Production capacity is varied in response

to changes in demand, through hiring,
layoffs or subcontracting —> closely align
output with customer orders.

Aim to minimize inventory carrying costs

and maximize responsiveness to
demand changes.
TWO CATEGORIES OF AGGREGATE PLANNING
STRATEGIE
Level Strategy Chase Strategy
Maintaining steady workforce Adjusting production and
and production level regardless workforce levels to match the
of demand fluctuations, relying fluctuating demand, minimizing
on inventory buffers and inventory holding costs and
backorders to absorb variations maximizing responsiveness to
in demand. changes in customer orders.
mixed strategy
Combines elements of both level and
chase strategies to balance advantages of
each approach.
Firm might use level strategy for core
products, stable demand and chase
strategy for seasonal/ high-demand
products.

Firms may choose mixed strategy to

achieve balance between cost
efficiency, inventory management,
responsiveness to demand fluctuations,
optimizing overall performance.
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