Chap013 - Chapter 13 - Aggregate Planning CHAPTER 13:...

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Chapter 13 - Aggregate Planning CHAPTER 13: AGGREGATE PLANNING Teaching Notes In the earlier chapters, we have looked at certain problems that involve long range planning such as facility location, layout and major equipment purchase decisions. Aggregate planning involves medium range planning. The planning horizon for medium range plans varies from a couple of months to 18 months. A major component of aggregate planning is to plan aggregate production and inventory levels to achieve a desired level of customer service. In preparing the aggregate plan, a major consideration is to check the desired production plan against the estimated capacity. On the other hand, in determining the estimated capacity, we must take into account the expected demand and the resulting medium range production plan. We use the term aggregate plan in lieu of medium range production plan for two reasons: 1. It generally involves the production plan for a group or a family of products (aggregation of products). 2. It aggregates daily or weekly (short-range) demand and the resulting production plan (aggregation of time periods). Even though the aggregate plan is a function of many different factors, the key factor is the forecasted demand over the length of the medium-range planning horizon. After developing an aggregate plan consistent with the forecasted demand and capacity, it is disaggregated into shorter time periods. The process of disaggregation is the beginning of short range planning using master scheduling and operations scheduling. Both master scheduling and operations scheduling are designed to implement the medium range plan on the shop floor. In determining the aggregate plan, integration and communication between various functions of the firm are vital. Expected changes in the work force levels need to be communicated to the human resources department, while any major equipment purchases, layout changes and capacity additions must involve the approval of the finance department. On the other hand, changes in anticipated inventory levels and especially, expected stockouts must be discussed with the marketing department. Answers to Discussion and Review Questions 1. Three levels of planning that involve operations managers are: a. Business plan: It establishes production and capacity strategies. b. Production plan: It establishes production capacity and intermediate term aggregate production schedule. c. Master schedule: It establishes schedules for specific products (disaggregation of production plan). 2. The three phases are forecasting demand, aggregate planning, and disaggregating the overall plan. 3. Aggregate planning involves developing a general plan for employment, output, and inventory levels. The goal is to develop a plan which makes efficient use of the resources of an organization. Planners attempt to determine the best way to meet forecasting demand requirements within the constraints imposed by long-term decisions.
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This note was uploaded on 04/20/2011 for the course TOM 301 taught by Professor Williamcosgrove during the Spring '08 term at Cal Poly Pomona.

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Chap013 - Chapter 13 - Aggregate Planning CHAPTER 13:...

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