What is Aggregate Planning?

A firm can make its business Plans and doing demand forecast. Once planning done then firm working on backward  for arrange raw material. Firm doing planning annually and quarterly for arrangement of labor, raw material, and working capital etc. mostly aggregate planning doing for period of 6 months to 18 months.  

Aggregate Planning as an Production Tool

Aggregate planning helps adjust balance between operation goal, financial goal and overall strategic objective of the firm. It serves as a platform to manage capacity and demand planning.

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.

In scenario where capacity is not matching demand, an organization can try to balance the both by various alternatives such as 

• Laying off/hiring excess/inadequate excess/inadequate excess/inadequate workforce until demand decrease/increase.
• Including overtime as part of scheduling there by creating additional capacity.
• Hiring a temporary workforce for a fix period or outsourcing activity to a sub-contract

Total arranging is very confused with variable request and additionally supply. The request example can be changed to some degree through estimating, advancement, overabundance and reservations, creating elective items, and dismissing clients. On the supply side, the significant factors related with total arranging incorporate stock level, work drive estimate (contracting and cutback), additional move, extra time or under-time, item blend, transitory/low maintenance representatives, and subcontracting. In total arranging, an association endeavors to fulfill request by control of the size and blend of the factors in charge. Most associations don't configuration total designs that take after nearly the high points and low points of real requests since it is normally too exorbitant to change yield levels altogether starting with one period then onto the next period.    

Aggregate Planning Procedure

       1.  Develop firm policies regarding the use of aggregate planning                                .

        2.  Establish the forecasting time period and the horizon of the aggregate plan.

        3.  Arrange  the demand forecasting system.

        4.  Select an appropriate unit of aggregate capacity.

        5.  Determine the relevant cost structures.

        6. Develop an aggregate planning model.                                                                                                              

By Azhar Ali Abbasi