Aggregate planning

Meaning

• Aggregate planning is the process of

determining output level of product groups
over the next 6 to 18 months period on a
weekly or monthly basis. The plan indicates
the overall level of outputs supporting the
business plan.
• Aggregate Planning is concerned with matching
supply and demand of output over the medium time
range, up to approximately 12 months into the
future.
• The aim of aggregate planning is to set overall output
levels in the near to medium future in the face of
fluctuating or uncertain demands. Aggregate
planning might seek to influence demand as well as
supply.
 Objectives of the Aggregate
planning
To minimize the investments in the various inventories.
To minimize the total cost over the planning horizon.
To maximize the customer service.
To minimize the changes in the workforce levels
To minimize the changes in the production rates.
To maximize the utilization of the plant and the various
equipments.
 Pre required inputs for Aggregate
Planning
• Information about the resources and the
facilities available.
• Demand forecast for the period for which the
planning has to be done.
• Cost of various resources. This includes cost of
holding inventory, ordering cost, cost of
production .
• Organizational policies
 Outputs from Aggregate Planning
• Total cost of a plan
• Projected level of inventory, output,
employment, subcontracting
 Need Of Aggregate Planning
• Minimise cost and maximise profits
• Keep Production cost low
• Maximise the customer services
• Minimise inventory investment
• Minimise change in production rates
 Steps in Aggregate Planning
• Prepare the sales forecast
• Sum up the individual product forecast into one
aggregate demand for the factory
• Transform the demand for each time period into
labor , materials, machines and other elements of
production capacity required to satisfy the
aggregate demand
• Determine the unit costs for regular time, overtime,
subcontracting, holding inventories etc.
 Steps in Aggregate Planning
• Develop alternative resource scheme for
supplying the necessary production capacity
to support the cumulative aggregate demand
and calculate the cost of each alternative plan.
• Select the best capacity plan from
alternatives.
Approaches to Aggregate Planning
• Top down approach:
• Bottom up approach:
 Costs associated with Aggregate
Planning
• Cost of over time , second shifts.
• Costs of hiring of workers
• Costs of excess inventory
• Cost of production rate changes
THANK YOU