AGGREGATE

PRODUCTION PLANNING
 Learning Objectives
• Understand the production planning system
• Appreciate different production planning
strategies
• Study aggregate planning techniques – trial and
error methods, linear programming approach,
transportation model approach, dynamic
programming approach.
• Aggregate planning for services – yield
management.
Production Planning and Scheduling
System
BUSINESS PLAN (6 TO 18 MONTHS)

OPERATIONS PLAN

OUTPUT PLANNING CAPACITY PLANNING

AGGREGATE PRODUCTION AGGREGATE CAPACITY

MPS ROUGH CUT CAPACITY

MRP DETAILED CAPACITY

LOADING
SHORT TERM
SCHEDULING
CAPACITY CONTROL
SEQUENCING
EXPEDITING
 Aggregate Planning Process
• Concept of aggregation
• Goals
– Provide levels of output, inventory and backlogs as
dictated by the business plan
– Use capacity consistent with org strategy
– Should be consistent with org goals and policies
regarding its employees
• Forecasts of aggregate demand
– Developed for 6 to 18 months
 Inputs – Production Planning
System
INTERNAL
EXTERNAL FACTORS
FACTORS
Economic Current
Market Conditions Capacity
Demand
Current
Planning
Competitor’s Workforce
for
Behaviour production Inventory Levels

Raw Materials Policy on

External
Availability Back orders &
Capacity
Sub contracts
 Production Planning Strategies
• Chase Strategy. Production rate is adjusted to
meet forecast demand by increasing or
decreasing the level of the work force through
hiring and firing.
• Level Production Strategy. A stable work force
is maintained and production rate is kept
constant. The work force is based on the total
demand for the planning period and shortfalls
are carried forward as backorders while
surpluses are carried forward as inventories.
Production Planning Strategies
• Stable Workforce – Variable Work
Hours. Have stable work force but adjust
the production rate by varying the work
hours. Shortfalls can be made up through
working overtime and during slack periods
the work force can be under utilised.
• Sub-contracting
• Part time workers
 Production Planning Strategies
• Strategy aims at minimising costs
• Costs
– Basic production cost
– Hiring and firing costs
– Inventory carrying costs
– Back-order costs
– Subcontracting costs
Aggregate Planning Techniques
• Trial and Error
• Linear Programming
• Transportation Model
• Other Methods
– Dynamic Programming
– Simulation
– Linear Decision Rules
 Aggregate Planning - Services
• Services cannot be stored
• Difficult to predict demand and measure
capacity
• Difficult to predict staffing requirements
• Marginal Analysis or Yield Management