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Definition

Aggregate Production Planning is planning about how many

units of the product are to be produced on a weekly or monthly
basis for the coming six to eighteen months. This plan should
be in line with the overall business plan of the company.

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Steps in Effective Aggregate Planning Process

Demand Forecasts provided Business Plan provided

by the Marketing Department by the Top Management

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Strategies for Pure Aggregate Planning
considered by the Production Manager

Level Output Rate Plan Chase Plan Varying Utilization Rate Plan

A combination of the pure planning strategies

called the Intermediate Plan is prepared by the
Production Manager

Disaggregating of the Aggregate Production Plan

(Intermediate Plan) is done in order to arrive at a
Master Schedule

Beginning Inventory Status Master Scheduling Process Customer orders committed

Tentative Master Production

Projected on-hand Inventory Schedule (MPS) Available-to-promise Inventory

Tentative MPS is run through the Material

Requirements Planning (MRP) Processing Rough-cut capacity planning
Logic to test for feasibility

Revised Master Production Schedule is

fixed by using Time Fences
 Production Planning Strategies

• Level Output Rate Plan (we vary the inventory size

and keep workforce size and utilization of workers
constant)
• Chase Plan (we vary the workforce size according to
demand and keep the utilization of workers and
inventory size constant)
• Varying Utilization Plan (we vary the utilization of
workers and keep workforce size and inventory size
constant)

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 Vendor Relationship Management

Chakraborty and Philip (1996) identified three variables

in defining the relationship construct between vendors
and buyers.
•Task structure: As the relationship between the buyer
and the vendor grows, the tasks assigned to the vendor
for execution become less structured in nature due to
increasing confidence of the buyer on the vendor’s
capabilities.

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 Vendor Relationship Management

• Length of the contract: The length of the contract

which buyers enter with their vendors is another
important variable in determining the relationship
between them. A long-term contract (duration would
vary from industry to industry) would naturally imply
a strong relationship between the buyer and the
vendor. It would indicate the mutual trust they repose
in each other.

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 Vendor Relationship Management

• Selection of vendors: The level of trust, confidence, and

comfort between the buyer and the vendor is determined by
the selection procedure followed before awarding the contract
to a vendor. Vendor relationship with the buyer would be
deemed as strong when the buyer deploys less formal/less
structured procedures in vendor selection. There are three
types of selection methods used:

Open Tendering; Closed Tendering; & Direct Selection

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 Vendor Relationship Management
• Open tendering In this method, any possible vendor is allowed to bid for
the tender opened by the buyer. Generally, the lowest bidder is selected in
open tendering as cost is the primary criterion of vendor selection here.
• Closed tendering Only the approved vendors of the buyer organization are
allowed to bid for the tender in the closed tendering method. The vendors
are approved on the basis of past experiences of the buyer with them. The
selection criteria are usually cost and the past experience with the vendor.
• Direct selection This method of direct selection is used when the buyer is
absolutely confident that there is only one supplier that is best suited for
supplying a particular component or part.

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 Types of Distribution Strategies
Three types of outbound distribution strategies are used:
•Direct shipment : As the name of this distribution strategy suggests,
here the transportation of goods takes place directly from the
manufacturer to the retailer, thus bypassing the distributor or
wholesaler.
•Cross-docking: In this distribution strategy, trucks from different
manufacturers with different goods arrive at the cross-dock at the same
time to redistribute goods amongst each other according to the
requirements of the respective retailers they are supposed to supply to.
This redistribution of goods takes place within a short duration of time,
say within a few hours at the cross-dock.

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 Types of Distribution Strategies
• Transshipment involves transfer of goods between facilities at
the same level in the supply chain. For example, two or more
retailers may transfer goods between each other depending
upon the requirement. If one retail store is facing a stock-out
for a particular product, it may source it from another nearby
store belonging to the same retail chain. It requires real-time
visibility of inventory levels at any store, which is not difficult
to achieve in today’s times when information technology aids
in a big way.

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