Aggregate Planning

Once demand is forecasted and supply is planned, the next step in line is to plan for the production to cater to the supply. The planning done for this production process falls under the purview of aggregate planning.

Let’s hear about this from our expert Shyam.

In the video, you learnt that an organisation finalises its business plans on the basis of the demand forecast. This business plan is broken down to individual material requirements for a defined finite period. The process of working out these requirements for a medium-range (between 2–3 months and 12–15 months) is called aggregate planning.

You also learnt about the advantages of conducting aggregate planning for an organisation. Some of these advantages are as follows:

1. Aggregate planning helps organisations in dealing with the production facilities in a lean manner.

2. It helps to develop effective strategic plans as well as relationships with distributors and suppliers.

3. It helps in the optimisation of inventory.

4. It serves as a useful tool for making viable forecasts.

5. It helps organisations to identify the best options so that they can meet the demand easily.

6. It assists in knowing about the inefficiencies that exist within the organisation.

7. It also helps to determine resources within the organisation that are required in the manufacturing process.

Organisations have to plan for their production to meet the supply requirements of products. There are three types of aggregate planning strategies that organisations follow to plan for their production. Let’s hear about them from our expert Shyam.

This video talked about the following types of aggregate planning strategies: 

1. Level strategy

   • A level strategy maintains a steady production rate as well as the level of the workforce by continuing consistent human resources and production in the organisation.

2. Chase strategy

   • A chase strategy keeps pace with demand fluctuations by varying either the actual level of output or the workforce number.

3. Hybrid strategy

   • A hybrid strategy maintains a sufficient balance between the stock level, recruiting, termination and production rate.