Aggregate Planning

Business Planning

 A business plan lays out a written plan from a

marketing, financial and operational

viewpoint.
 Planning Levels

• Short-range plans (Detailed plans)

• Intermediate plans (General levels)
• Long-range plans
 Planning Levels
• Short-range plans (Detailed plans)

 Machine loading

 Job assignments

 Job sequencing

 Order quantities

 Work Schedule
 Planning Levels
Intermediate plans (General levels)

General levels of:

 Employment

 Output

 Finished-goods inventories

 Subcontracting

 Backorders
 Planning Levels

Long-range plans

 Long term capacity

 Location / layout

 Product Design
 Demand and Capacity Options

Demand Options
Options for situations in which
demand needs to be increased in
order to match capacity includes:
 Demand Categories
Pricing – Differential pricing is often used to reduce peak
demand or to build up demand in off-peak periods.
Advertising and Promotion – Advertising, direct marketing,
and other forms of promotion are used to shift demand.
Backlog and Reservations – In some cases, demand is
influenced by asking customers to wait for their orders
(backlog) or by reserving capacity in advance
(reservations).
Development of complementary products – Firms with
highly seasonal demands may try to develop products that
have counter cyclic seasonal trends.:
 Demand and Capacity Options

Capacity Options
Options which can be used to increase
or decrease capacity to match current
demand includes:
 Capacity Options
• Hiring and Layoff of employees
• Using overtime and under time

• Using part-time or temporary labor – In some

cases, it is possible to hire part-time or
temporary employees to meet peak or
seasonal demand.
 Capacity Options

• Carrying inventory –inventory can be used

as a buffer between supply and demand.
• Subcontracting – This option, which involves
the use of other firms, is sometimes an
effective way to increase or decrease supply.
• Making Cooperative Arrangements – These
arrangements are very similar to
subcontracting in that other sources of
supply are used.
Quantitative Technique for Aggregate Planning