Aggregate planning is a marketing activity that does an aggregate plan for the

production Production may refer to: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (goods and services) * Production as a stati ...

process, in advance of 6 to 18 months, to give an idea to

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activities ...

as to what quantity of materials and other

resources Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their ...

are to be procured and when, so that the total

cost of operation The cost of operation is the business strategy implemented in many companies to gain a huge market. The cost of operation is the cost acquired in completing one operation. It may be a conversion of inputs into the outputs or labor costs etc. I ...

s of the organization is kept to the minimum over that period. The quantity of outsourcing,

subcontracting A subcontractor is an individual or (in many cases) a business that signs a contract to perform part or all of the obligations of another's contract. Put simply the role of a subcontractor is to execute the job they are hired by the contractor ...

of items,

overtime Overtime is the amount of time someone works beyond normal working hours. The term is also used for the pay received for this time. Normal hours may be determined in several ways: *by custom (what is considered healthy or reasonable by society) ...

of labour, numbers to be hired and fired in each period and the amount of

inventory Inventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying the sh ...

to be held in stock and to be backlogged for each period are decided. All of these activities are done within the framework of the company

ethics Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and wrong behavior".''Internet Encyclopedia of Philosophy'' The field of ethics, along with aesthetics, concerns ...

, policies, and long term commitment to the society, community and the country of operation. Aggregate planning has certain pre-required inputs which are inevitable. They include: *Information about the resources and the facilities available. *

Demand In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...

forecast for the period for which the planning has to be done. *Cost of various alternatives and resources. This includes cost of holding inventory, ordering cost, cost of production through various production alternatives like subcontracting, backordering and overtime. *Organizational policies regarding the usage of above alternatives. "Aggregate Planning is concerned with matching supply and demand of output over the medium time range, up to approximately 12 months into the future. The term aggregate implies that the planning is done for a single overall measure of output or, at the most, a few aggregated product categories. The aim of aggregate planning is to set overall output levels in the near to medium future in the face of fluctuating or uncertain demands. Aggregate planning might seek to influence demand as well as supply.

Aggregate Plan Strategies

Level plans

*Use a constant workforce & produce similar quantities each time period *Use inventories and back-orders to absorb demand peaks & valleys *Use inventories in better way to absorb the peak of demand and valleys

Chase plans

*Minimize finished good inventories by trying to keep pace with demand fluctuations *Matches demand varying either work force level or output rate

Hybrid Strategies

*Build-up inventory ahead of rising demand and use back-orders to level extreme peaks *

Layoff A layoff or downsizing is the temporary suspension or permanent termination of employment of an employee or, more commonly, a group of employees (collective layoff) for business reasons, such as personnel management or downsizing (reducing the ...

furlough A furlough (; from nl, verlof, " leave of absence") is a temporary leave of employees due to special needs of a company or employer, which may be due to economic conditions of a specific employer or in society as a whole. These furloughs may be ...

workers during lulls *Subcontract production or hire temporary workers to cover short-term peaks *Reassign workers to

preventive maintenance The technical meaning of maintenance involves functional checks, servicing, repairing or replacing of necessary devices, equipment, machinery, building infrastructure, and supporting utilities in industrial, business, and residential installa ...

during lulls

Problems related to Aggregate Planning

Smoothing *Smoothing refers to costs that result from changing production and workforce levels from one period to the next. Bottleneck Problems *It is the inability of the system to respond to sudden changes in demand as a result of capacity restrictions. Planning Horizon *The number of periods for which the demand is to be forecasted, and hence the number of periods for which workforce and inventory levels are to be determined, must be specified in advance. Treatment of Demand Aggregate planning methodology requires the assumption that demand is known with certainty. This is simultaneously a weakness and a strength of the approach.

Aggregate Plan Strategies

Level plans

Chase plans

Hybrid Strategies

Problems related to Aggregate Planning

Further reading