Chaper-2 Aggregate Production Planning

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What is Aggregate Production Planning?

The intermediate-range of production planning is called Aggregate production planning.

It is thus called because of the demand for facilities and available capacities are specified in aggregate quantities. 

For example, aggregate quantities of no. of mobile vehicles, the aggregate number of soaps, etc.

Types of Aggregate Production Planning

While dealing with the production dilemma, the planning process is normally divided into three class

  1. Long term planning which deals with a strategic decision such as the purchase of facilities, Introduction of new products, process, etc. 
  2. Short term Planning which deals with day to day work, scheduling and some time inventory problems.
  3. Intermediate or aggregate planning, which is in the long term and short term planning. Which is concerned in generally acceptable planning taking the load on hand and facilities available into consideration.

How does aggregate planning look like?

To help the Production Manager the aggregate planning must have the following characteristic

  • Both output and sales should be expressed in the logical overall unit of measurement. For example, let’s say BMW manufacturing total of 2000 per year, without giving the number of each variety of vehicle. 
  • Acceptable forecast for some reasonable planning period, say a half year.

How to do aggregate planning?

The decisions are normally followed by the development of a few decision rules to plan aggregate output for both manufacturing and service industries.

Modification of demand

The demand for a product or service may be increased or decreased by adopting various strategies like

  • Differential pricing 
  • Advertising and sales promotion
  • Development of complementary products

Modification of supply

Some of the methods by which we can modify the supply to match the demand are

  • Hiring and lay-off of employees
  • Overtime and undertime
  • Use of part-time or temporary labor


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