Session Overview

Once you have forecasted the future demand for a product or service, you need to
come up with a supply plan to fulfil that demand. The objective of a supply plan
is to balance supply and demand in a manner that meets the service-level
commitments and maximises the overall profit for the company. In this session,
you will learn about the concepts of supply planning and aggregate planning. 

The topics covered in this session are as follows: 

1. Supply Planning

2. Achieving Organisational Strategic Fit through Supply Planning

3. Demand Uncertainty

4. Dealing with Demand Variability

5. Aggregate Planning and Strategies

6. Sales and Operations Planning (S&OP) Process

Session Objectives:

1. Recognise the key factors and considerations involved in supply planning

2. Analyse the benefits of good supply planning by:

1. Ensuring continuous supply of raw materials at the lowest possible cost, 

2. Optimal utilisation of plant resources, 

3. Fulfilling the customers' demand for finished goods

3. Plan supply of a product / service based on external and internal factors

4. Analyse how a supply chain network is designed

 Supply Planning and
Strategic Fit
Let’s take a look again at the stepwise supply chain planning approach (also known
as sales and operations planning process), the next step is related to the supply
planning of the product. 
Let’s hear from Shyam on what supply planning is and how it fits in the entire
supply chain planning process

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In this video, you understood the position of supply planning in the big picture of
sales and operations planning process. You also understood that supply planning
is the entire planning process and it includes procurement, manufacturing
and distribution operations, in accordance with demand forecasts, considering
capacity constraints and material availability.
Supply planning broadly consists of the following three major components:

1. Procurement

2. Manufacturing
3. Distribution

In the first session of this module, you saw how an organisation achieves strategic
fit through a supply chain strategy. Taking this concept forward, while achieving
the strategic fit, the organisation faces some obstacles.
Let’s hear about these obstacles from our expert Shyam

In this video, you recognised the following obstacles that an organisation faces in
achieving the strategic fit:

1. Increasing product variety

2. Rise in customers that are more demanding

3. Conflicts arising between different stakeholders within an organisation in taking up

supply chain ownership

4. Globalisation within the organisation

5. Changing business environment

6. Difficulties faced while executing new strategies

Taking all these obstacles into consideration, an organisation needs to accelerate its
decision-making process. You will learn about this decision-making process in the
next segment.

But first, let’s attempt an assessment question to reinforce your understanding of

the topic covered in this segment

Supply Planning and Strategic Fit

According to you, for which of the following companies will it be easiest to achieve a
strategic fit through their supply chain (keeping other parameters constant across
these companies)?
  Company A, selling two variations of smartwatches every year

Company B, selling five variations of smartwatches every year

Company C, selling only a single variation of smartwatch every year

✓ Correct
Feedback:

Correct! The path of an organisation in achieving the desired strategic fit becomes
difficult as product variety increases, thus with only a single variation to be sold per
year, it will be easiest for company C to achieve strategic fit. 

Decision Making Under

Demand Uncertainty
An important facet of the business where an organisation has to decide swiftly on
its supply side of things is demand uncertainty. Let’s hear about this from our
expert Shyam
In this video, you learnt about the concept of demand uncertainty. Demand
uncertainty reflects the uncertainty of the customer’s demand for a product.
You also learnt about the concept of implied demand uncertainty, which is the
resulting uncertainty for only that portion of the demand that the supply chain
plans to satisfy based on the customer needs.

This facet of demand uncertainty can be managed through proper distribution by

the organisation. In the next video, you will learn more about the role of
distribution in a supply chain from our expert Shyam
 In this video, you learnt about distribution, which refers to the steps taken to move
and store products from the supplier stage to the customer stage in the supply
chain. Distribution happens from:

 Supplier to manufacturer: Here, raw materials are moved.

 Manufacturer to consumer: Here, finished goods are moved.

Distribution affects both the supply chain cost and customer experience. Thus, it is
imperative to design a distribution network that performs flawlessly.

You will learn more about the distribution networks within an organisation in a
separate module of this course. 

In the next segment, you will learn about demand variability, another important

facet of the business where the organisation has to decide swiftly.

However, before doing that, let’s revisit what you have learnt so far by attempting
the following assessment

Decision Making under Demand Uncertainty

Company A manufactures a highly specialised set of mattresses. This product is
meant only for tropical seasons as it absorbs all the sweat and bad odour from the
body while sleeping . Owing to the nature of the product, its demand is highly
uncertain. Which of the following steps is more suitable to mitigate this uncertainty
in demand?

The company should sell its product only during the tropical season and
stop the production in non-tropical seasons. The unsold inventory from the
production in the tropical season could be sold in the subsequent non-
tropical seasons.
 The company should sell its product online through e-commerce
retailers and let them handle the excess inventory.

The company should keep its production running throughout the year
at an optimal production rate with the least possible labour.

✓ Correct
Feedback:

Different states have different temperature and weather profiles throughout the year.
There are states that have a sweaty atmosphere even in winters. Maintaining
production throughout the year would ensure that the company is not losing on
sales from such states

Decision Making Under

Demand Variability
Another important facet of the business where an organisation has to decide swiftly
on its supply side of things is demand variability. 
The demand for a product or a service does not remain constant throughout
the year and fluctuates due to a number of factors, both internal and external. It is
one such challenge that haunts supply chain managers and is, thus, very important
to be incorporated while planning the supply of an organisation.
Let’s hear more about the demand variability from our expert Shyam

In this video, you learnt about the following four major causes of demand
variability:

1. Volatility

2. Uncertainty

3. Complexity

4. Ambiguity
 When the market signals a sharp increase in demand, especially in times of global
crisis, supply chain leaders’ profitability depends on being informed and agile
enough to forecast and fulfil inventory in the right places, at the right speed and at
the right time.

Now that you have understood what causes demand variability and why it needs to
be addressed, the next question is

 How to address demand variability?

Let’s find the answer to this question in the coming video

In this video, you learnt about five major actions that can be taken to plan for
demand variability. They are as follows:

1. Maintain transparent, proactive relations with suppliers

2. Activate alternative sources of supply

3. Reduce lead time

4. Update inventory policy and planning

5. Align supply and demand management

Festive seasons bring with themselves a huge spike in demand for e-commerce
players such as Amazon and Flipkart, thereby creating demand variability between
festive and non-festive seasons. Let’s now look at an example of how an e-
commerce company manages its capacity during the festive season sale

Now that you have understood the details of supply and demand planning, it is
time to get into the production side of things through the concept of aggregate
planning.
 

However, before doing that, let’s revisit what you have learnt so far by attempting
the following assessments

Estimate the facility size based on area availability and cost

Flipkart conducts a nation-wide Big Billion Day sale in the month of October, in which
the total demand reaches about 4–5 times the demand during the BAU (business as
usual) period. To satisfy this demand, Flipkart also needs to stock up large amounts
of inventory and, therefore, needs larger warehouse space. However, this space is
required only during peak times in October and is not required in the BAU period.
Which of the following is the best option for Flipkart to plan for warehouse space
while minimising costs?

Build large warehouses that can meet the peak demand 

 

Build regular warehouses to meet the BAU demand and rent extra space
during the peak season 

Build large warehouses to meet the peak demand and rent out extra
space during the off-peak season 

A combination of (B) or (C) depending on the ease and costs of

obtaining extra space during peak season and industry demand for extra
space during the off-peak season

✓ Correct
Feedback:

Correct! Firstly, Flipkart has to find the demand for extra temporary space from other
companies during its BAU days. Once it has the estimated the demand number, it
can plan accordingly. If the amount of temporary space required by Flipkart during
Big Billion day sale is much higher than the estimated demand from other companies
in BAU days, then it is not feasible to build large warehouses to meet the seasonal
demand. In such a case, Flipkart can build only that much storage space which can
easily be rented out during the off-peak season. The remaining temporary space
requirement for Flipkart should be fulfilled through renting.  However, if the amount
of seasonal space required by Flipkart in Big Billion day sales is similar to the
estimated demand from other companies during BAU days, then it can build its own
storage space and rent it out during the off-peak season.
Decision Making under Demand Variability
Customer demand for any company or any product can vary from one time period to
another. However, in certain situations, the variability in demand is predictable,
especially when the variability occurs because of the internal factors in the company.
In such cases, a company can plan for the variability in advance and deploy its supply
capabilities accordingly (some of the supply levers used by companies to meet the
predictable variability in demand are a flexible workforce, a flexible production
facility, distribution of the production of complementary product portfolio uniformly
across the year, etc.). 

However, if the variability in demand occurs because of external factors, it becomes

difficult for the company to predict this and take suitable measures.

According to you, which of the following scenarios describes a predictable variability

in demand for a company?
 
A new product launched by the competitor 

Changes in compliance and taxation rules by the government

Increase in the demand for ACs and refrigerators during summers

✓ Correct
Feedback:

 Correct answer! The fact that there will be an increase in demand for ACs and
refrigerators during summers is predictable, and companies can start planning their
supply in advance

Aggregate Planning
Once demand is forecasted and supply is planned, the next step in line is to plan for
the production to cater to the supply. The planning done for this production process
falls under the purview of aggregate planning.
 Let’s hear about this from our expert Shyam

In the video, you learnt that an organisation finalises its business plans on the basis
of the demand forecast. This business plan is broken down to individual material
requirements for a defined finite period. The process of working out these
requirements for a medium-range (between 2–3 months and 12–15 months) is
called aggregate planning.

You also learnt about the advantages of conducting aggregate planning for an
organisation. Some of these advantages are as follows:

1. Aggregate planning helps organisations in dealing with the production

facilities in a lean manner.
2. It helps to develop effective strategic plans as well as relationships with
distributors and suppliers.
3. It helps in the optimisation of inventory.
4. It serves as a useful tool for making viable forecasts.
5. It helps organisations to identify the best options so that they can meet the
demand easily.
6. It assists in knowing about the inefficiencies that exist within the
organisation.
7. It also helps to determine resources within the organisation that are required
in the manufacturing process.

Organisations have to plan for their production to meet the supply requirements of
products. There are three types of aggregate planning strategies that organisations
follow to plan for their production. Let’s hear about them from our expert Shyam

This video talked about the following types of aggregate planning strategies: 
1. Level strategy

 A level strategy maintains a steady production rate as well as the level of

the workforce by continuing consistent human resources and production
in the organisation.

1. Chase strategy

 A chase strategy keeps pace with demand fluctuations by varying either

the actual level of output or the workforce number.

1. Hybrid strategy

 A hybrid strategy maintains a sufficient balance between the stock level,

recruiting, termination and production rate

Supply Planning Case

Study
You have learned how enterprises can plan for demand and supply. Our expert,
Shyam, will now discuss a case study about a cement manufacturer who initiated a
project to meet demand better, but after careful investigation changed their supply
strategy

As you learnt from this video, the case study deals with understanding the
implications of different ways of fulfilling demand. 
 

Any manner of demand fulfillment has implications for the following:

 Customer satisfaction, as the demand has to be met on-time and in-full

 Overall costs, that includes tangible and intangible costs

 Tangible costs include the total logistics cost. It is also known as the total

landed cost or total delivered cost and includes the following costs:

 Total manufacturing cost: This is the total cost of production.

 Non-manufacturing expenses: These are the administrative and

developmental costs associated with the purchase of materials, engineering design, etc.

 Finished product logistics costs: These are the logistics costs incurred

for transporting the finished goods to the next entity in the supply chain, be it a distributor, a

depot or a customer.

 Intangible or hidden costs include the following costs:

 Demurrage and wharfage charges: These charges are faced by an

organisation that uses Indian Railways to fulfil its demand. These charges are penalty charges

that an organisation has to bear for using wharves for extended periods of time and for

temporary storage.

 Inventory holding costs: As each railway rake can transport only

2600 tons, there are huge stockpiles of excess inventory. The inability to sell the excess stock

to customers results in product obsolescence (the fine grains in the cement would become

lumpy).

The objective of the project was twofold:

 To ensure that all customer demands are met on time and in full.

 To ensure that the overall costs are always under control.

Let’s now watch the next video where our expert, Shyam, will discuss the current
situation of demand fulfilment in the organisation

As you learnt from Shyam in this video, the organisation had two centres in Tamil
Nadu that produced cement, which had to be transported to all 14 districts of
Kerala. As some of these districts and subdistricts had access to railheads and some
 did not, the mode of demand fulfilment was a combination of rail and road.
 
The table given below summarises and compares the available means of demand
fulfilment.

Mode of
Road Transport Rail Transport
Transport

Partners 12 transporters Only one: Indian Railways

Dispatched directly to depots in sub- Dispatched to goods sheds in districts. Further

Destination
districts, based on demand handling and transportation as per demand

Capacity (tons) 24 tons per truck 2,600 tons per rake

Lead time
2 days 4 days
(days)

Supply Planning Case Study

Select the correct statement from the following statements that compare road
transport and rail transport.

Road transport led to waiting time at factories, as there were 12

transporters

Containerisation impacted the lead time of rail transport.

✓ Correct
Feedback:

Containerisation is required to ensure that only full rakes of 2,600 tons are loaded
onto rails. Hence, it resulted in waiting time until 2,600 tons of material were
produced by manufacturing units.

After rail rakes transported the material to goods sheds, there was no
additional external dependence for transporting material to the required
destination.

None of the above.

 As you learnt in this video, the situation was analysed from both the supplier’s
point of view and the receiver’s point of view.

1. The manufacturer was indifferent to the mode of dispatch; they only wanted a quicker

mode of evacuating their factories in order to achieve higher capacities of manufacturing and

storage.

2. Prima facie, the receiver faced a higher landed cost when the material was transported

by rail. Also using rail as a means of transport resulted in excess supplies, due to which the

supply spiked suddenly and depleted after a long period of time.

But in using rail transport, the receiver was also burdened with the hidden costs of
demurrage, wharfage, inventory holding, redistribution and transportation.

To check if the entire demand could be fulfilled via road, the organisation
compared both modes of transport across all locations in Kerala. When all the costs
were accounted for, the results were evident. Although the landed costs were
higher for road transport, it accounted for a lower overall cost across all locations
in Kerala.

By shifting their demand fulfilment mode to road transport, the organisation:

1. Reduced their lead time

2. Reduced their delivered cost

3. Improved customer satisfaction

4. Facilitated easier material handling

Supply Planning Case Study
Regarding the usage of road transport for fulfilling cement demand, select the correct
statement from the options given below.

Road transport does not depend on any external labour for handling material.

✓ Correct
Feedback:

As there are no intermediate destinations, there is no dependency on any external labour.

Lead times are reduced due to the elimination of excess material and wasteful
expenditure.

Delivered costs are reduced, as there are zero damages to the material.

In conclusion, although the landed cost of logistics is an important factor to be

considered, it does not always allow you to compare different modes of
transportation. The final impact can be better estimated by also considering other
processes impacted by each mode, including customer satisfaction, stock life,
hidden costs and lead times.

Now that you are familiar with all the steps under the Sales and Operations
Planning (S&OP) process, let’s bind together all the planning activities you have
learnt so far under the umbrella of S&OP in the next segments.

Sales and Operations

Planning (S&OP) and Its
Need
 Let’s again take a look at the stepwise supply chain planning approach (also known
as sales and operations planning process). The next two steps in line are related to
the sales and operations planning (S&OP) activity. 
Let’s hear from Shyam as he explains what sales and operations planning (S&OP)
is.

In the video above, you understood that the sales and operations planning
(S&OP) is an aspect of supply chain planning whose goal is to create a unified,
consensus-based business plan. This consensus is achieved through the cross-
functional collaboration between the following departments:

 Sales

 Marketing

 Manufacturing

 Distribution

 Finance

 Human resources

In the next video, you will understand the need for sales and operations planning
(S&OP)

As you learnt in the video above, there are certain limitations to statistical
forecasting, as it relies heavily on models and historical data to produce estimates.
However, other data, such as revenue, profit projections and marketing events are
often not a part of statistical forecasting.

This major drawback leads to the development of the sales and operation planning
(S&OP) process.
The aim of sales and operations planning (S&OP) is to gain a holistic view of the
planning process by extending the forecasting process to other functions and
departments.

In the next segment, you will learn how sales and operations planning (S&OP)
process functions within an organisation. 

But first, let’s attempt an assessment question to reinforce your understanding of

the topic covered in this segment

Sales and Operations Planning (S&OP) and Its Need

According to you, what is the purpose of a marketing team in the sales and
operations planning process?

Suggested Answer
The marketing team runs several campaigns across a business year. These campaigns
have an impact on the demand for the respective products. Thus, it is vital for other
teams, especially the manufacturing, sales and distribution teams, to know
beforehand when these campaigns are supposed to run so that they can plan their
side of things accordingly.

Incorporation of S&OP in
an Organisation
Sales and operations planning (S&OP) is a complex and time-consuming process.
To incorporate the S&OP process, an organisation has to invest a lot in terms of
 time and other resources. Let’s understand the workings of sales and operations
planning (S&OP) in an organisation in the next video

The important points from the video above can be summarised as follows:

 Sales and operations planning (S&OP) is an extremely important step in the entire

supply chain planning process, and hence, it is typically led by senior management and

executed on a monthly basis.

 In this iterative process, the results from one planning cycle are compared with those

of the next planning cycle to provide the management with information on trends from across

the business.

 Participants of the sales and operations planning (S&OP) meeting evaluate the

projections for supply and demand to ensure that the tactical plans for all business

functions, across geographies, are aligned and support the organisation’s broader strategy.

Let’s now understand the sequencing of activities that are performed within an
organisation under the umbrella of sales and operations planning (S&OP)

Now that you have understood what a sales and operations planning process is,
how it works, why it is required, in the next segment, you will learn about the
different time horizons in a sales and operations planning process.

But first, let’s attempt an assessment question to reinforce your understanding of

the topic covered in this segment

Incorporation of S&OP in an Organisation

According to you, which of the following is not a benefit of incorporating S&OP in
an organisation?
Due to proper interaction and flow of information across cross-departmental teams:

The amount of unsold inventory at any point in time is very less.

 The amount of time from the manufacturing stage of a product to its
placement on retail shelves has been reduced.

The profitability at the end of a business cycle has decreased.

✓ Correct
Feedback:

With the incorporation of S&OP, the manufacturing, logistics and other supply chain
costs decrease, thereby increasing the overall profitability. Profitability also
increases due to the information flow across cross-departmental teams.

Customer service levels have increased 

S&OP Horizons
Generally, planning is done for the future. This future can either refer to the next
couple of weeks, months or years. Therefore, it is imperative that this horizon for
the future should be decided beforehand.

The time horizon for S&OP varies from long-term horizon (3-5 years) to short-
term (1-2 months or even less). So, how does a company decide the time horizon
for this activity? Let’s watch the next video to learn more about this

As you learnt in the video above, a sales and operations planning process is defined
in terms of objectives over short-, medium- and long-term periods.

The different time horizons in sales and operations planning (S&OP) are as
follows:
1. Strategic horizon (long-term): 

Strategic horizon involves making decisions for the next three to five years. This horizon

includes planning for the following types of decisions:

1. Expansion of plant

2. Making changes in offtake policy or offtake agreement: It is an agreement

between a producer and a buyer to purchase or sell a specified quantity of the producer’s

future production. Such an agreement is usually negotiated prior to the construction of a

production facility.

3. Launching of new innovative products

2. Tactical horizon (mid-term): The tactical horizon spans from six to eighteen

months. This horizon includes planning for the following types of decisions:

1. Modification of the supply chain process

2. Making changes in recruitment and operations policy

3. Operational horizon (short-term): Operational horizon involves making decisions

for the next four months. This horizon includes planning for the following types of decision:

1. Plans for anticipated and prepared flexibility 

2. Deciding on the number of teams

3. Hiring temporary workforce

4. Shift operations

Let’s have a look at the below chart and understand which time horizon is suitable
for which type of supply chain planning activity:
 

Process Horizons

  Strategic Tactical Operational

Long term planning 

Forecasting   

S&OP  
Production planning 

Inventory Management  

Distribution: Transportation and Warehousing 

S&OP Horizons
In the table provided below, on the left-hand side, you can see some key decisions
that are taken by the management while planning for sales and operations. On the
right-hand side, the planning horizon (strategic, tactical or operational) is given.
Match each decision with the correct planning horizon.

Sl.   Planning
Decisions
No. Horizon
Operating a beverage manufacturing plant in two shifts
1 P Strategic
instead of three due to reduced demand during winter 
Relocating the engine manufacturing plant from Gujarat to
2 Q Tactical
Maharashtra
Offering voluntary retirement to 10% of the office staff within
3 R Operational
one year
1-Q, 2-P, 3-R

1-P, 2-Q, 3-R

1-R, 2-Q, 3-P

1-R, 2-P, 3-Q

✓ Correct
Feedback:

Relocating an engine manufacturing plant is a capital-intensive decision and is

generally made if an organisation sees its benefits in the long run. Such decisions lie
in the strategic planning horizon.

Voluntary retirement cannot be offered to employees with a very short notice period.

Hence, this decision lies in the tactical planning horizon.

Changing operations from three shifts to two shifts in order to deal with the demand
variability is a decision taken in the operational planning horizon.
S&OP Horizons
Match the following:

Sl.   Planning
Decisions
No. Horizon
Increasing the headcount of factory workers from 100 to 150 to
1 P Strategic
meet the continuously increasing demand  
Setting up manufacturing operations in neighbouring countries
2 Q Tactical
to cater to the rising demand from those areas
Increasing the work hours of factory labourers from the current
3 9 hours to 12 hours for the next couple of weeks to meet the R Operational
sudden spike in demand due to change of season 
1-Q, 2-P, 3-R

✓ Correct
Feedback:

Increasing the headcount of factory workers involves hiring new permanent

employees and needs changes in the hiring process. Thus, it falls in the tactical
horizon.

Setting up new manufacturing plants is a capital-intensive decision and is generally

made if an organisation sees its benefits in the long run. Such decisions lie in the
strategic planning horizon.

Increasing the daily working hours for the next couple of weeks is done to meet the
immediate future demand and, thus, falls in the operational horizon of planning

1-P, 2-Q, 3-R

1-R, 2-P, 3-Q

1-P, 2-R, 3-Q

S&OP in Real Life

Now that you have learnt about the activities involved in sales and operations
planning, let’s take a look at how planning is done in a real-life scenario. In the
next video, Shyam will take you through an example of a ready-to-eat food
manufacturer to explain how key decisions taken in different planning horizons can
help solve a real-life problem of a demand and supply mismatch

In the video above, you learnt about a ready-to-eat food manufacturer that operates
on a B2B model. The food manufacturer exports 60% of the goods produced and
sells the remaining 40% in the domestic market. Its manufacturing plants run at
90% utilisation. Now, the manufacturer is facing a supply shortage in both
domestic and export markets. 

The image given below summarises the key decisions that the manufacturer needs
to make within the strategic, tactical and operational horizons. 

Types of Horizons

In the next segment, you will find the summarised learnings from this session

Answer the following questions to test your learnings from this session. Note that
these questions will not be graded

Supply Planning and Strategic Fit

At Flipkart, a packer can pack about 80 items per hour. Each packer works for one
shift, which is eight hours long. Assuming that the packer remains productive for 80%
of the shift time, what is the manpower (number of packers) required on a normal
day to supply the requirement of packing 84,000 items per day?

156 packers per day 

160 packers per day

165 packers per day

✓ Correct
Feedback:

Each packer packs (80 * 8 * 80%) = 512 items per day. 

Therefore, to pack 84,000 items per day, the number of packers that will be required
= (84000/512=164.06)
168 packers per day 

Aggregate Planning
If the demand is higher, a company hires additional manpower to increase the
output and meet the demand. If the demand is as usual, the company is able to meet
the demand with the regular number of workers. However, if the demand is low, the
company lays off a certain number of workers to achieve the lower output. 

Which of the following issues can arise for this company because of the
aforementioned aggregate planning strategy? 

High storage costs 

Labour union strikes 

✓ Correct
Feedback:

Correct answer! In the aforementioned planning strategy, the company is constantly

chasing the demand, hiring additional manpower in the peak season and laying off
manpower during the low-demand period. Therefore, it is more likely to face
manpower planning and labour union-related issues, such as strikes by the labour
union because of constant hiring and firing of workers and no job security.

Lost sales/business 

Underutilisation of manpower
Graded questions
The following questions will be graded
Decision Making under Demand Uncertainty
Which of the following products do you think has the highest demand uncertainty?

Engine oils for vehicles

Intra City bus tickets

Anti pollution face wash

✕ Incorrect
Feedback:

Face wash is one such product category that is being used by almost everyone
nowadays. It does not have high demand uncertainty.

Fifth generation defense aircrafts

✓ Correct
Feedback:

Fifth generation defense aircrafts have cutting edge technology and require huge
capital investment for their manufacturing. They are made only in small quantities
and require careful inspection right from their manufacturing and even after their
induction. Thus, they have the highest demand uncertainty within the options
provided.

Aggregate Planning
Company A plans its production according to the forecast demand. It hires additional
manpower when the demand is high and lays off manpower during the period of
lean demand. Which of the following aggregate planning strategies does it deploy?

Level strategy

Chase strategy
✓ Correct
Feedback:

Correct answer! A chase strategy is employed when the company's production is

constantly chasing the demand. Here, capacity is the lever for the company and the
workforce keeps changing to meet the demand.

Aggregate Planning
Company B is in the small water turbine manufacturing business. The manufacturing
process is a complex one and requires heavy training of the workforce. Thus, the
company does not lay off its workforce frequently. The demand for small water
turbines is constant throughout the year. 
Which of the following aggregate planning strategies does it deploy?
Level strategy

✓ Correct
Feedback:

Correct! A level strategy allows a company to maintain a steady production rate as

well as a steady workforce in the organisation. The advantage of using a level
strategy is a well-trained workforce. Thus, it is best suited for company B.

Chase strategy

Hybrid strategy