Republic of the Philippines

BATANGAS STATE UNIVERSITY JPLPC-Malvar

Malvar, Batangas
Tel. Nos.: (043) 778-2170/ (043) 406-0830 loc.116
Website Address: http://www.batstate-u.edu.ph

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS

AND INTERNATIONAL HOSPITALITY MANAGEMENT
Graduate School

MALIJAN, LEYLA B.
MBAN - 1216

WRITTEN REPORT
AGGREGATE SCHEDULING

For better understanding of what aggregate scheduling/planning is, I will explain

first the activities in sales and operations planning. In order to create an aggregate plan,
there should be proper coordination of Sales Manager and Operations Manager from the
product design, supply of materials, production and selling of goods/products. There
should be planning in all aspects, mitigating problems to be encountered and an intelligent
forecast on demand, supply, production and costs shall be made. Decisions must be tied to
strategic planning and integrated with all areas of the firm over all planning horizons.
Feasible plans should be implemented. After these activities were done, then an aggregate
plan is created.
Aggregate planning is the process of developing, analyzing, and maintaining a
preliminary, approximate schedule of the overall operations of an organization. Its
objective is to meet forecast demand while minimizing cost over the planning period. It
combines appropriate resources into general terms. It is part of a larger production planning
system. It gives an idea to management as to what quantity of materials and other resources
are to be procured and when, so that the total cost of operations of the organization is kept
to the minimum. An aggregate plan is an output of Sales and Operations Planning which
contains targeted sales forecasts, production levels, inventory levels and customer
backlogs.
 Republic of the Philippines
BATANGAS STATE UNIVERSITY JPLPC-Malvar
Malvar, Batangas
Tel. Nos.: (043) 778-2170/ (043) 406-0830 loc.116
Website Address: http://www.batstate-u.edu.ph

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS

AND INTERNATIONAL HOSPITALITY MANAGEMENT
Graduate School

The optional strategies for developing aggregate plan are categorized into two:
Capacity options and Demand options. Under capacity options, there are five options which
are: (1) Changing inventory levels; (2) Varying workforce size by hiring or layoffs; (3)
Varying production rates through overtime or idle time; (4) Subcontracting and (5) Using
part-time workers. While under demand options, there are 3 options which are: (1)
Influencing demand; (2) Backordering (process of allowing customers to place an order
even if there is no sufficient stock on hand) during high-demand periods and (3)
Counterseasonal product and service mixing. To summarize the advantages and
disadvantages of these optional strategies for developing aggregate plan, see
Table 1 and 2 below:

TABLE 1. AGGREGATE PLANNING CAPACITY OPTIONS

OPTION ADVANTAGES DISADVANTAGES REMARKS
Changing Changes in human Inventory holding Applies mainly to
inventory levels resources are cost may increase. production, not
gradual or none; no Shortages may result service operations.
abrupt production in lost sales.
changes.
Varying workforce Avoids the costs of Hiring, layoff, and Used where size of
size by hiring or other alternatives. training costs may be labor pool is large.
layoffs significant.
Varying production Matches seasonal Overtime premiums; Allows flexibility
rates through fluctuations without tired workers; may within the
overtime or idle hiring/ training not meet demand. aggregate plan.
time costs.
 Republic of the Philippines
BATANGAS STATE UNIVERSITY JPLPC-Malvar
Malvar, Batangas
Tel. Nos.: (043) 778-2170/ (043) 406-0830 loc.116
Website Address: http://www.batstate-u.edu.ph

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS

AND INTERNATIONAL HOSPITALITY MANAGEMENT
Graduate School

Sub-contracting Permits flexibility Loss of quality Applies mainly in

and smoothing of control; reduced production settings.
the firm’s output. profits; loss of future
business.
Using part-time Is less costly and High turnover/ Good for unskilled
workers more flexible than training costs; quality jobs in areas with
full-time workers. suffers; scheduling large temporary
difficult. labor pools.

TABLE 2. AGGREGATE PLANNING DEMAND OPTIONS

OPTION ADVANTAGES DISADVANTAGES REMARKS
Influencing Tries to use excess Uncertainty in Creates marketing
demand capacity. Discounts demand. Hard to ideas. Overbooking
draw new match demand to used in some
customers. supply exactly. businesses.
Backordering May avoid Customer must be Many companies
during high- overtime. Keeps willing to wait, but back order.
demand periods capacity constant. goodwill is lost.
Counter-seasonal Fully utilizes May require skills or Risky finding
product and service resources; allows equipment outside products or
mixing stable workforce. the firm’s areas of services with
expertise. opposite demand
patterns.
 Republic of the Philippines
BATANGAS STATE UNIVERSITY JPLPC-Malvar
Malvar, Batangas
Tel. Nos.: (043) 778-2170/ (043) 406-0830 loc.116
Website Address: http://www.batstate-u.edu.ph

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS

AND INTERNATIONAL HOSPITALITY MANAGEMENT
Graduate School

Mixing options to develop an aggregate plan may be the best way to achieve
minimum costs in the operations. There are many possible mixed strategies and finding the
optimal plan is not always possible. One among the mixing options is Chase strategy.
Using this strategy, output rates are matched to demand forecast for each period and vary
workforce levels or production rate. This is best to use in service organizations. Second is
Level strategy in which the level of production per day is uniform. In this strategy, there is
stable production which may lead to better quality and productivity. Idle time and inventory
are used only as buffer. Another mixed strategy is combination of capacity options from
changing inventory levels, varying workforce size, varying production rates,
subcontracting and using part time workers.
The methods for aggregate planning graphical methods and popular techniques.
There are several steps to be used in graphical method. First, you have to determine the
demand for each period. Then, determine the capacity for regular time, overtime and
subcontracting period. Next, find hiring cost, hiring and layoff costs and inventory holding
costs. Then company policy on workers and stock levels are considered. Lastly, develop
alternative plans and examine their total cost.
There are mathematical approaches which are useful for generating strategies in
developing an aggregate plan. One is transportation method of linear programming. It
works well for inventories, overtime and subcontracting and it produces an optimal plan.
Using this method, supply must equal the demand and production should be allocated to
the lowest cost cell available without exceeding unused capacity in the row or demand
column.
Aggregate planning in services usually used mixed strategies and controlling the
cost of labor is critical because of customer demands and satisfaction with the services
provided.
 Republic of the Philippines
BATANGAS STATE UNIVERSITY JPLPC-Malvar
Malvar, Batangas
Tel. Nos.: (043) 778-2170/ (043) 406-0830 loc.116
Website Address: http://www.batstate-u.edu.ph

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS

AND INTERNATIONAL HOSPITALITY MANAGEMENT
Graduate School

Revenue management is a concept that not only maximizes in high period demand,
it helps in stimulating demand in low periods while avoiding pricing cannibalism. In order
to make revenue management work, multiple pricing structures must be feasible and appear
logical to the customers. There should be forecasts of the duration of the products and the
changes of its demand. Through strategic distribution and pricing tactics, products may be
sold at the right time to the right customers, boosting the company’s revenue growth.