VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY

OFFICE FOR INTERNATIONAL STUDY PROGRAMS

PRODUCTION AND OPERATIONS MANAGEMENT

REPORT FOR ESSAYS QUESTION

Report Chapter 6:Aggregate Planning and S&OP

Instructor: Echelmeyer Wolfgang

Class: CC01

Group: 05

Full Name Student Number

Châu Vĩnh Kỳ 2211785

Huỳnh Minh Thư 2053475

Lê Huỳnh Cát Tường 2252888

Nguyễn Đặng Việt Hằng 2153334

Nguyễn Ngọc Tâm Như 2153670

Nguyễn Thị Huỳnh Khuê 2153489

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TABLE OF CONTENTS

I. Introduction ...................................................................................................................... 2
II. Answer:............................................................................................................................ 3
1. Define sales and operations planning. ......................................................................... 3
2. Define aggregate planning. ......................................................................................... 3
3. List the strategic objectives of aggregate planning. Which one of these is most often
addressed by the quantitative techniques of aggregate planning? Which one of these is
generally the most important? ......................................................................................... 3
4. Define chase strategy. ................................................................................................. 4
5. Identify the two categories of aggregate planning strategies and explain the difference
between them.................................................................................................................. 4
6. Define mixed strategy. Why would a firm use a mixed strategy instead of a simple
pure strategy? ................................................................................................................. 4
III. Conclusion ..................................................................................................................... 5
IV. Reference: ...................................................................................................................... 5
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I. Introduction
Aggregate Planning and Sales and Operations Planning are fundamental
components of effective supply chain management. As businesses strive to optimize
their operations, these planning techniques play a pivotal role in balancing supply
with demand, managing resources efficiently, and achieving strategic objectives. This
chapter explores the principles, methodologies, and best practices associated with
aggregate planning and S&OP, offering insights into how organizations can navigate
the complexities of demand variability, capacity constraints, and market dynamics to
enhance performance and competitiveness.
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II. Answer:
1. Define sales and operations planning.
Sales and Operations Planning is a process that aligns the sales forecasts with
production plans to ensure that an organization can meet customer demand efficiently
while maximizing operational effectiveness. It involves cross-functional collaboration
between sales, marketing, finance, and operations teams to develop a consensus plan
that balances supply and demand over a specified planning horizon. S&OP aims to
synchronize activities across the entire supply chain, optimize resource utilization,
and minimize costs while meeting customer service level requirements.

2. Define aggregate planning.

Aggregate planning involves developing an overall production plan for a specified
time horizon (typically 3-18 months) to meet forecasted demand while minimizing
costs and maximizing operational efficiency. It focuses on determining the optimal
level of output, workforce levels, inventory levels, and other resources needed to
satisfy customer demand while considering factors such as capacity constraints, labor
availability, and inventory carrying costs.

3. List the strategic objectives of aggregate planning. Which one of these is most often
addressed by the quantitative techniques of aggregate planning? Which one of
these is generally the most important?
The strategic objectives of aggregate planning typically include:
a. Minimizing Costs: This involves optimizing production and resource utilization to
minimize overall costs, including labor, inventory, and overtime expenses.
b. Meeting Customer Demand: Ensuring that customer demand is met in a timely
manner while maintaining high levels of service and satisfaction.
c. Maintaining Inventory Levels: Balancing inventory levels to ensure sufficient stock
to meet demand while minimizing holding costs and obsolescence.
d. Managing Workforce Levels: Optimizing workforce utilization through hiring,
layoffs, training, and overtime to meet production requirements while minimizing
labor costs.
e. Managing Capacity: Adjusting capacity levels through subcontracting, outsourcing,
or investments in additional facilities to align with demand fluctuations.
The strategic objective most often addressed by the quantitative techniques of
aggregate planning is minimizing costs.
The strategic objective generally considered the most important depends on the
specific priorities and circumstances of the organization but often revolves around
meeting customer demand while minimizing costs.
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4. Define chase strategy.

The chase strategy is an aggregate planning approach where production and
workforce levels are adjusted to match the fluctuating demand levels. In other words,
production capacity is varied in response to changes in demand, often through hiring
and layoffs or subcontracting, to closely align output with customer orders. This
strategy aims to minimize inventory carrying costs and maximize responsiveness to
demand changes.

5. Identify the two categories of aggregate planning strategies and explain the
difference between them.
The two categories of aggregate planning strategies are level strategy and chase
strategy.
Level Strategy involves maintaining a steady workforce and production level
regardless of demand fluctuations, relying on inventory buffers and backorders to
absorb variations in demand.
Chase Strategy involves adjusting production and workforce levels to match the
fluctuating demand, minimizing inventory holding costs and maximizing
responsiveness to changes in customer orders.

6. Define mixed strategy. Why would a firm use a mixed strategy instead of a simple
pure strategy?
A mixed strategy combines elements of both level and chase strategies to balance the
advantages of each approach. For example, a firm might use a level strategy for core
products with stable demand and a chase strategy for seasonal or high-demand
products. Firms may choose a mixed strategy to achieve a balance between cost
efficiency, inventory management, and responsiveness to demand fluctuations,
optimizing overall performance.
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III. Conclusion

In summary, These strategic processes serve as the backbone for aligning

organizational objectives with operational realities, enabling businesses to respond
effectively to fluctuations in demand, capacity constraints, and market dynamics. By
adopting robust aggregate planning techniques and implementing a well-structured
S&OP framework, companies can enhance their agility, resilience, and
competitiveness in today's volatile business environment.

IV. Reference:

[1] Written summary chapter

[2] Lecturer’s notes.