Aggregate Planning

Intermediate-range planning that typically covers a time horizon of

2~12 months – may extend to as much as 18 months.

Long-term planning Short-term planning

Product and service selection Machine loading
Facility size and location Job assignments
Equipment decision Job sequencing
Facility layout Work scheduling

Intermediate planning
General levels of
• Output
• Employment
• Finished goods inventories
 Aggregate Planning
Concept of Aggregation
• Lump all models of a product together
• Deal with them as though they are a single product
Essentially a “big picture” approach to planning
Overview of Aggregate Planning
• Begins with a forecast of aggregate demand for intermediate range
• Followed by a general plan to meet demand requirements by setting
o Output
o Employment
o FG inventory level

Updated periodically – rolling planning horizon

 Aggregate Planning
Purpose and Scope
Balancing of Demand and Capacity
Demand and Capacity
concerns are quantity and timing of expected demand

Inputs to Aggregate Planning

• Available resources over the planning period must be known

• A forecast of expected demand must be available

Output of Aggregate Planning

Production Plan
 Aggregate Planning

Demand options

• Pricing – shift demand from peak periods to off-peak periods

• Promotion – sometimes are very effective in shifting demand

• Back orders – taken in one period and delivers for a later period

• New demand – creating new demand at off-peak time

 Aggregate Planning

Capacity options
• Hire and layoff workers – hiring during peak and laying off
during off-peak – may have sever effect

• Overtime/ Slack time – can be easily & quickly implemented

– less severe

• Part time workers – for seasonal work - requiring low job skills

• Inventories – produce goods in one period & sell in another period

• Subcontracting – enables planers to acquire temporary capacity

 Aggregate Planning
Techniques for Aggregate Planning

Determine demand for each period

Determine capacity for each period

Identify company or departmental policies

Develop alternative plans & compute cost for each

Select the one that best satisfies objectives.