Aggregate Planning

Rules
Level Strategy

1. Production to be fixed and will

remain fixed through the plan
2. Hiring is allowed once but No
layoffs are allowed
3. Overtime may be allowed
4. Inventory is to be generated
5. Backlog may be generated

Rules
Chase Strategy

1. Production will be same as

demanded
2. No overtime and No inventory
to be generated
3. No backlogs
4. Hiring and layoffs (firing) may
be done simultaneously
Production Fixed
100 workers x 1000
lb/quart = 100,000
lb/quarter
Production
1000 lb/worker/quarter x 100
worker/quarter = 100,000 lb
(fixed in every period)
At start,100 workers are employed,
But in period 1, to produce 80,000 lbs = 80
workers/ quarter x 1000 lb /worker = 80,000 ( 20
workers are not required as initially 100 workers
were employed, hence 20 are fired).

At the end of period 1, 80 workers are employed

now and may work in period 2.
However, 50,000 lbs are required in period 2,
therefore,
50 workers x 1000 lb/worker = 50,000 lb ( 30
workers are not required in period 2 and hence
from 80 workers, 30 are fired).

Now 50 left, and may work in period 3, however,

120,000 lbs are required,
120 workers x 1000 lb/worker = 120,000lb , so 120
workers are need in period but only 50 are
available, hence 70 more needd to be hired.
Example 2 – Level Strategy
Solution

Prod = demand /
periods

Prod = 1800 / 6
Prod = 300 units
( fixed)

Backlog means
negative inventory
or demand is not
met as production
is not enough.
Example 2 , Part b
Example 2
Solution Part a & b
Example
Solution - Level Strategy

Staff leveled
1.25 w = 20 worker/ period
W = 20/1.25 = 16 workers
(maximum limit to be provided in
each period, otherwise, staff will be
provided in over-time instead).
Solution- chase strategy
Example
Question
Solution