1

Aggregate Sales and Operations Planning

 2

Exhibit
Exhibit14.1
14.1 Process planning
Long
range Strategic capacity planning

Intermediate Forecasting
& demand Sales and operations (aggregate) planning
range management
Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range Daily workforce and customer scheduling
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Sales and Operations Planning

Activities
 Long-range planning
– Greater than one year planning horizon
– Usually performed in annual increments

 Medium-range planning
– Six to eighteen months
– Usually with weekly, monthly or quarterly
increments

 Short-range planning
– One day to less than six months
– Usually with weekly or daily increments
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The Aggregate Operations Plan

 Main purpose: Specify the optimal
combination of
– production rate (units completed per unit
of time)
– workforce level (number of workers)
– inventory on hand (inventory carried from
previous period)
 This planning is done over an intermediate-
range planning period of 3 to18 months
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Balancing Aggregate Demand

and Aggregate Production Capacity
10000
Suppose
Supposethe thefigure
figureto
to
10000
8000
the
theright
rightrepresents
represents 8000 7000
6000
forecast
forecastdemand
demandin in 6000 5500
4500
units
units 4000

Now
Nowsuppose
supposethis
this 2000
lower
lowerfigure
figurerepresents
represents 0
the
theaggregate
aggregatecapacity
capacity Jan Feb Mar Apr May Jun
of
ofthe
thecompany
companyto to
9000
meet
meetdemand
demand 10000
8000
8000
What
Whatwewewant
wanttotodo
doisis 6000
6000
4500 4000
balance
balanceout
outthe
the 4000
4000
production
productionrate,
rate,
workforce
workforcelevels,
levels,and
and
2000

inventory
inventorytotomake
make 0
these
these figuresmatch
figures matchupup
Jan Feb Mar Apr May Jun
 6

Required Inputs to the Production

Planning System
Competitors’ Raw material Market
behavior availability demand
External
to firm
External Economic
capacity Planning
conditions
for
production

Current Current Inventory Activities Internal

physical workforce levels required to firm
capacity for
production
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Key Strategies for Meeting Demand

 Chase

 Level

 Some combination of the two

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Aggregate Planning Applied

to Services
 Aggregate Planning majorly deals with
the hiring full time / part time employee.

 Managing working hours in a way that

leads to managing off-peak & high peak
demand.
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Level Scheduling
 It holds production process constant over a
period of time.
 It is combination of different strategies like

Chase Strategy & Level Strategy.

 It is mainly effective wherein production is

constant & repetitive in nature.

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Yield Management
 It is a process of allocating the right type
of capacity to the right type of customer
at the right price & time to maximize
firm’s revenue.