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INVENTORY MANAGEMENT PROJECT

AGGREGATE PLANNING

Content

Introduction to Aggregate Planning
What is Aggregate Planning
Objectives of Aggregate Planning
Inputs and Outputs
Considerations
Aggregate Planning Strategies
References

Aggregate planning is concerned to match the supply of and demand for a product or service by determining the appropriate quantities and timing of inputs, transformation, and outputs. It is used in a manufacturing environment and the time period of aggregate planning is usually 3 to 18 months. The objectives of aggregate planning is to maintain a level workforce by minimising changes in workforce levels, maintain a steady output rate by minimising changes in production rates, minimising costs or maximising profits. The inputs of aggregate planning include targeted sales forecasts, production levels, inventory levels, staffing levels, customer backlog, cost of resources such as the cost of holding inventory, ordering cost, cost of production through various production alternatives like subcontracting, backordering and overtime. The outputs of aggregate planning includes production plan, total cost of the plan. Before starting an aggregate plan, demand and current capacity have to be determined as there are situations in which demand needs to be increased in order to match capacity or to either increase or decrease capacity to meet current demand.

Demand options include pricing such as changing price during high and low demand season, promotion such as advertising or marketing to increase demand, backorders during high demand periods, counterseasonal product mixing through developing a product mix of counterseasonal items .

Capacity options include, varying workforce size by hiring and laying off workers, varying production capacity through overtime or slack time, hiring part-time workers, inventories by changing the levels, subcontracting to other parties.

The aggregate planning strategies...