Course Code and Title: CBME 1 - Operations Management with Total

Quality Management
Lesson Number: 15
Topic: Aggregate Planning

Learning Objectives
At the end of this lesson, you should be able to:
1. Describe aggregate planning
2. Identify optional strategies for developing an aggregate plan
3. Prepare a graphical aggregate plan
4. Solve an aggregate plan via the transportation method of linear programming
5. Solve a yield management problem

Pre-Assessment
Select the letter of the best answer:
1. Aggregate planning is concerned with determining the quantity and timing of
production in the:
Intermediate term
Short term
Long term
All of the choices
2. Aggregate planning deals with a number of constraints such as:
Subcontracting, employment levels, inventory levels, and capacity.
Job assignments, job ordering, dispatching, and overtime help.
Part-time help, weekly scheduling, and SKU production scheduling.
 Capital investment, expansion or contracting capacity, and R&D.
3. Which of the following is not one of the graphical method steps?
Construct the transportation table.
Determine the demand in each period.
Determine capacity for regular rime, overtime, and subcontracting each period.
Develop alternative plans and examine their total cost.
4. When might a dummy column be added to a transportation table?
When supply does not equal demand.
When overtime is greater than regular time.
When subcontracting is greater than regular time.
When production needs to spill over into a new period.
5. Yield management requires management to deal with:
All of the choices
Multiple pricing structures
Changes in demand
Forecasts of use

Lesson Development

Aggregate planning (or aggregate scheduling)

- is an approach to determine the quantity and timing of production for the

intermediate future (usually 3 to 18 months ahead)
- The objective is to meet forecasted demand while minimizing cost over the
planning period.
- Requirements for aggregate planning:
 As we have learned in our previous lessons demand forecasting can address
short-, medium-, and long-range problems.

Long-range forecasts help managers deal with capacity and strategic issues and are
the responsibility of the operations managers (see Figure above). Top executives
formulate policy-related questions, such as facility location and expansion, new
product development, research funding, and investment over a period of several
years.

Operations managers, on the other hand, is in charge of medium-range planning,

which begins once long-term capacity decisions are made. This is accomplished by
building an aggregate production plan. An aggregate plan means combining
appropriate resources into general, or overall, terms.

Short-term planning may extend up to a year but is usually less than 3 months. This
plan is the responsibility of operations personnel, who work with supervisors and
foremen to “disaggregate” the intermediate plan into weekly, daily, and hourly
schedules. In a manufacturing environment, the process of breaking the aggregate
plan down into greater detail is called disaggregation. Disaggregation results in a
master production schedule, which provides input to material requirements planning
systems.
Strategies for Developing an Aggregate Plan:

A. Capacity Options
B. Demand Options
C. Mixing Options
A mixed strategy is a planning strategy that uses two or more controllable
variables to set a feasible production plan. It maybe the best way to achieve
minimum costs. The following are some of the many possible mixed methods:
Methods for Aggregate Planning

Steps in the graphical method:

Example 1:
Example 4:
Evaluation:

Answer the evaluation using the link below:

https://forms.gle/TVEm6qGqQd4MNmYQ6

Application:

Answer the application using the link below:

https://forms.gle/ASJdFjatWPhp5u9v8