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Effective Aggregate Planning Strategies for Optimal Production

Aggregate planning involves providing production quantity and timing for intermediate future, typically 3 to 18 months ahead, using capacity and demand variables to meet goals such as demand, capacity efficiency, inventory policy, and cost minimization. Strategies include capacity and demand options, chase and level strategies, mixed strategies, and methods like graphical and mathematical approaches for cost-effective production planning.

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Effective Aggregate Planning Strategies for Optimal Production

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  1. Aggregate Planning Professor Ahmadi

  2. Planning Tasks and Responsibilities

  3. Aggregate Planning • Provides the quantity and timing of production for intermediate future • Usually 3 to 18 months into future • Combines (‘aggregates’) production • Often expressed in common units • Example: Hours, dollars, equivalents (e.g., FTE students) • Involves capacity and demand variables

  4. Aggregate Planning Goals • Meet demand • Use capacity efficiently • Meet inventory policy • Minimize cost • Labor • Inventory • Plant & equipment • Subcontract

  5. Aggregate Planning StrategiesPure Strategies • Capacity Options — change capacity: • changing inventory levels • varying work force size by hiring or layoffs • varying production capacity through overtime or idle time • subcontracting • using part-time workers

  6. Aggregate Planning StrategiesPure Strategies • Demand Options — change demand: • influencing demand • backordering during high demand periods • counterseasonal product mixing

  7. The Extremes Chase Strategy Level Strategy Production equals demand Production rate is constant

  8. Aggregate Planning Strategies • Mixed strategy • Combines 2 or more aggregate scheduling options • Level scheduling strategy • Produce same amount every day • Keep work force level constant • Vary non-work force capacity or demand options • Often results in lowest production costs

  9. Aggregate Planning Methods • Graphical & charting techniques • Popular & easy-to-understand • Trial & error approach • Mathematical approaches • Transportation method • Linear decision rule • Management coefficients model • Simulation

  10. The Graphical Approach to Aggregate Planning • Forecast the demand for each period • Determine the capacity for regular time, overtime, and subcontracting, for each period • Determine the labor costs, hiring and firing costs, and inventory holding costs • Consider company policies which may apply to the workers or to stock levels • Develop alternative plans, and examine their total costs

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