Presented by Vrijendra Pal, Unnati Joglekar, Balamurugan , Pankaj Kale

Definition of Aggregate Planning

Aggregate planning is intermediate-range capacity planning that typically covers a time horizon of 2 to 12 months.
It deals with translating annual business and marketing plans into

a production plan for all products.

It is particularly useful for organizations that experience seasonal

or other fluctuations in demand or capacity.

Goal of Aggregate Planning

To develop a realistic production plan on an aggregate level that will satisfy organizational goals and customer demand needs at the lowest total cost.

The concept of Aggregation

Aggregate planning is essentially a big picture approach to

planning Convenient to think of capacity in terms of labour hours/ machine hours /output rates

Assumptions in aggregate planning

The regular output capacity is the same in all periods. Cost is a linear function composed of unit cost and number of units. Plans are feasible; that is sufficient inventory capacity exists to

accommodate a plan, subcontractors with appropriate quality and capacity are standing by, and changes in output can be made as needed. All costs associated with a decision option can be represented by a lump sum or by unit cost that are independent of the quantity involved. Cost figures can be reasonably estimated and are constant for the planning horizon. Inventories are built up and drawn down at a uniform rate and output occurs at a uniform rate throughout each period

Advantages and Disadvantages

Overview of Planning Levels

Long-Range Planning
Begins with a statement of organization objectives and goals to be achieved over the next two to ten years.
Corporate Strategic Planning -- Articulates how these

objectives and goals are to be achieved in light of the companys capabilities and its economic and political environment. Product and Market Planning -- Translates these into individual market and product line objectives. Financial Planning -- Analyzes the financial feasibility of these objectives relative to capital requirements and return on investment goals. Resource planning -- Identifies the equipment, facilities, and personnel needs to accomplish long-range production plan
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Medium-Range Planning
Aggregate Production Planning -- Specifies output

requirements by major product groups either in labor hours required or in units of production for monthly periods up to 18 months in the future. Item Forecasting -- Provides an estimate of specific products, which when integrated with aggregate production plan, become the output requirement for the master production schedule. Master Production Scheduling -- (MPS), Generates the amounts and need dates for the manufacture of specific end products. Rough-cut Capacity Planning -- Reviews the MPS to make sure that there are no obvious capacity constraints that would require the schedule to be changed.

Short-range Planning
Materials Planning -- (MRP), Takes the end product requirements from

MPS and breaks it into component parts or subassemblies. Capacity Requirements Planning -- (CRP), Provides detailed schedule of when each operation is to be run on each work center. Final Assembly Scheduling -- Provides operations required to put the product in its final form. Input / Output Planning and Control -- Refers to a variety of reports and procedures focusing on schedule demands and capacity constraints deriving from the materials plan. Production Activity Control -- (PAC), Describes scheduling and shop floor control activities. Purchase Planning and Control -- Deals with the acquisition and control of purchased items specified by the materials plan.

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Organizations need Aggregate Planning?

Planning - It takes time to implement plans. Aggregation - It is not possible to predict with any degree of

accuracy, the timing and volume of demand for individual items.

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Departmental Aggregate planning

Operations

Materials

Distributions and Marketing

Aggregate Planning

Engineering

Accounting

Human Resources 12

Business Plan and Objective

The Business Plan establishes guidelines for the organization, taking into account the organizations strategies and policies; forecasts of demand for the organizations products or services, and economic, competitive and political conditions. Objective To coordinate the intermediate plans of various organizational functions, such as marketing, operations, and finance.

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Planning sequence
Corporate strategies and policies Economic, competitive, and political conditions Aggregate demand forecasts

Business Plan

Establishes production and capacity strategies

Production plan

Establishes production capacity

Master schedule

Establishes schedules for specific products

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Inputs to Production Planning System

Competitor's behavior Raw material availability

Market demand
External Firm

External Capacity

Planning for Production

External conditions

Current physical capacity

Current workforce

Inventory levels

Activities required for production

Internal to firm
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Purpose & scope of aggregate planning

Demand and Capacity If capacity and demand are nearly equal emphasis should be placed on meeting demand as efficiently as possible. If capacity is greater than demand the firm might chose promotion and advertising in order to increase demand. If capacity is less than demand the firm might consider subcontracting a portion of the work load.

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Level of production & capacity planning

Items
Product lines or families Production Planning Aggregate production Planning Master production schedule Capacity Planning Resource requirement plan Rough-cut capacity plan Resource Level Plan

Individual Products

Critical work centers

Components

Material requirement plan

Capacity requirement Plan Input /Output control

All work centers

Manufacturin g operations

Shop floor schedule

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Individual

Inputs to Aggregate Planning

Determine demand for each period. Determine capacities for each period. Determine unit cost based on all relevant sources. Develop alternative plans and calculate the cost for each. Chose the best overall plan based on company objectives and

cost.

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Thank you

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