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OBJECTIVES
Objectives of aggregate planning:
Meet forecasted demand Minimizing cost over planning period
WHAT IS NEEDED IN AP
A logical overall unit for measuring sales and output. A method for determining relevant cost. A forecast of demand for a reasonable intermediate planning period in these aggregate terms. A model that combines forecasts and costs so that scheduling decisions can be made for the planning period.
AGGREGATE PLANNING
Means combining appropriate resources into general terms. It is a part of larger production planning system. Disaggregation is breaking the aggregate plan into greater detail. The result of disaggregation is master production schedule which is a timetable specifies what to be made and when.
PLANNING PROCESS
Varying workforce.
Meet demands by hiring or laying off workers.
Subcontracting
Subcontracting work during peak demand.
DEMAND OPTION
Influencing demands
Use advertising, promotions, personal selling and price cuts to increase demands.
Level strategy
Maintaining a constant output rate, production rate, or workforce level over planning horizon.
Option
Advantage
Disadvantage
Some Comments
Applies mainly to production, not service, operations
Option
Varying production rates or idle time Subcontracting
Advantage
Disadvantage
Some
Comments
Matches seasonal Overtime fluctuations hiring/training costs Permits flexibility and smoothing of the firm's output Loss of quality control; reduced profits; loss of future business Applies mainly in production settings premiums, tired workers, may not meet demand Allows flexibility within the aggregate plan
Option
Using part-time workers
Advantage
Less costly and more flexible than full-time workers
Disadvantage
High turnover/training costs; quality suffers; scheduling difficult Uncertainty in demand. Hard to match demand to supply exactly.
Some Comments
Good for unskilled jobs in areas with large temporary labor pools
Influencing demand
Option
Back ordering during highdemand periods
Advantage
Disadvantage
Some Comments
Many companies backorder.
May avoid Customer must overtime. Keeps be willing to capacity constant wait, but goodwill is lost.
Counterseasonal Fully utilizes May require products and resources; allows skills or service mixing stable workforce. equipment outside a firm's areas of expertise.