Aggregate Planning
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Aggregate Planning - PowerPoint PPT Presentation

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Aggregate Planning. Production and Operations Planning. Production Process Design. Long Term Capacity Planning. Aggregate Planning. Forecast. Master Production Schedule. Demand. Material Requirements Planning. Individual Order Scheduling. The main idea behind aggregate planning.

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Production and Operations Planning

Production Process Design

Long Term Capacity Planning

Aggregate Planning


Master Production Schedule


Material Requirements Planning

Individual Order Scheduling

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The main idea behind aggregate planning

Aggregate planning

Translates business plans into rough labor schedules and production plans

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Issues to Consider for Aggregate Planning

Production rate: “aggregate units” per worker per unit time

Workforce level: available workforce in terms of hours

Actual Production: Production rate x Workforce level

Inventory: Units carried over from previous periods

Costs: production, changing workforce, inventory

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What does aggregate planning do?

Given an aggregate demand forecast, determine production levels, inventory levels, and workforce levels, in order to minimize total relevant costs over the planning horizon

Given the number of variables, there is not a single optimal solution!

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Aggregate Planning Strategies

  • Chase strategy: match production rate to production requirements by varying the workforce (no inventory buildup or shortage allowed)

  • Level strategy: keep aconstant workforce who work at maximum capacity (inventorywill vary from period to period); workforce level chosen such that the total requirement over the planning horizon can be exactly met

  • Stable workforce: keep aconstant workforce who work at maximum capacity; outsource in order to match production and requirements (no inventory buildup or shortage allowed); workforce level chosen such that they can exactly satisfy the requirements in the period with the minimum requirement level

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Example: CA&J Company…




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First step: Analyze the requirements…

Production requirement = Forecast – Beginning Inventory

Ending Inventory = Beginning Inventory + Production Requirement – Forecast

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Plan 2: Level strategy

Number of workers required

= Total hours required over planning horizon/(8*total days)

= 38,000/(8*125) = 38. This is the no. of workers for each month

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Plan 3: Stable strategy with outsourcing

Number of workers

= enough workers to cover requirements in April

= 900*5/(21*8)

= 27 workers (this is the no. of workers for each month)

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“Sensitivity Analysis”


… outsourcing costs increase or decrease?

… the holding costs are higher?

… the hiring costs are lower?

… the firing costs are higher?

We can always plug the data in and re-calculate the costs