The primary difference among the three strategies is the lever, that is, the parameter that is manipulated to achieve equality of supply and demand over the aggregate planning period. The first chase strategy uses capacity, in the form of machine or personnel capacity, as the lever.
What are some industries in which aggregate planning would be particularly important explain why?
Aggregate planning is useful in many types of manufacturing and services. Manufacturers include furniture, all durable goods, consumer electronics, textiles, motor vehicles, and aircraft, Service industries might be restaurants and other hospitality providers like hotels and motels.
How does aggregate planning in service differ from aggregate planning in manufacturing?
Services. Since services do not involve stockpiles or inventory, service-focused businesses do not have the luxury of building up their inventories during periods of low demand. In aggregate planning, services are considered “perishable,” where any capacity that is unused is considered to be wasted.
What are the three types of aggregate planning?
Aggregate Planning Strategies
- Level Strategy. As the name suggests, level strategy looks to maintain a steady production rate and workforce level.
- Chase Strategy. As the name suggests, chase strategy looks to dynamically match demand with production.
- Hybrid Strategy.
What are the methods of aggregate planning?
Options which can be used to increase or decrease capacity to match current demand include:
- Hire/lay off.
- Overtime.
- Part-time or casual labor.
- Inventory.
- Subcontracting.
- Cross-training.
- Other methods.
Why aggregate planning is important?
Aggregate planning helps achieve balance between operation goal, financial goal and overall strategic objective of the organization. In a scenario where demand is not matching the capacity, an organization can try to balance both by pricing, promotion, order management and new demand creation.
What is aggregate production planning what is the purpose of doing it?
Aggregate production planning is concerned with the determination of production, inventory, and work force levels to meet fluctuating demand requirements over a planning horizon that ranges from six months to one year. Typically the planning horizon incorporate the next seasonal peak in demand.
Is it possible to use aggregate planning in service?
Aggregate planning seeks to forecast mid-term (six to 18 months) demand and output capacity for a company. However, you can still develop an aggregate plan to best utilize employee hours and maintain quality service for your customers through times of rising and falling demand.
How does cost of training affect aggregate planning strategy?
If a company currently employs the chase strategy and the cost of training increases dramatically, how might this change the company’s aggregate planning strategy? As training costs increase, it becomes more expensive to vary the level of workforce, perhaps to the point of making a chase strategy cost-prohibitive.
How does high demand uncertainty affect aggregate planning?
High demand uncertainty creates difficulties for the forecasting input to aggregate planning. Based on experience any aggregate planner knows that an aggregate plan developed for an 18 month planning period will not be 100% accurate and that the last few months in the plan may have gross errors in the demand forecast.
What are the inputs needed for Aggregate planning?
The major cost categories needed as inputs for aggregate planning are production costs and inventory costs. Production costs include labor costs of regular and overtime, costs of subcontracting production, costs of changing capacity by hiring or laying off workforce and increasing or reducing machine capacity.
