The aggregate plan is crucial to the operation and sales of a business entity. The aggregate production plan is interested in the timing and quantity of production shortly which ranges between 3 to 18 months or less (Feili, 2013). The aggregate is constructed in a manner that it satisfies forecast demand by adjusting workforce size, overtime work production rates, and subcontracting work among other controllable variables such as hiring and layoffs. Indeed, the plans are meant for the operations managers who work under functional areas of the company. The plans offer an idea to the operational managers on the quantity of resources and materials that are supposed to be procured and ensure that the total cost of operations is kept minimum over a period. The physical resources and material of the company are projected to be fixed and thus oriented to the best utilization of the material and resources base on the external demand requirements (Almeder, 2014). Aggregate planning strategy is essential to the demand pattern of the company.
The main aim of aggregate planning strategy is to reduce the total cost of the firm over the planning horizon. Moreover, there is need to improve customer service, minimize inventory investment while considering the production rates and the changes in the workforce. There is a need for good planning that coordinates the demand forecasts of the functional areas of the company and its supply chain (Chada, 2015). Sometimes coordination might seem challenging since the supply chain has its constraints and limitations. The operations manager can consider changing inventories when trying to generate an aggregate plan strategy that absorbs the changes in demand over the period of planning, changing the price of the commodities, varying production rates, and varying workforce. Indeed, all these strategies involve production rates, manipulation of inventory, capacity, and workforce size among other controllable variables (Feili, 2013). The organization can create a plan by selecting the capacity options that will not change the demand but absorb the demand fluctuations. Moreover, the firm can choose the demand options to enable the company to make appropriate changes in the demand pattern during the planning period.
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There is need to change the inventory levels by maximizing the inventory over the periods of low demand to cater for the high demand that is expected in the future. Indeed, this is likely to increase the costs that are associated with insurance, capital, storage, handling among others. The firm can lay off and hire production workers to meet the varying workforce size so as to match the production rates that include costs that are related to hiring, layoff, and training (Almeder, 2014). Moreover, the firm can meet the varying production rates by keeping the workforce constant through overtime. There should be the limit for overtime since the workforce can be fatigued and thus affect the quality of production. Ultimately, subcontracting is needed to satisfy demand during the peak demand periods. However, findings have established that subcontracting can lead to loss of quality control and thus a serious issue.
On the other hand, the company can influence their demand for the various forms of advertisement, selling, promotion and sell cuts among others. The firm can exercise back ordering when there is high demand, but the exercise is risky since sales can be lost and hence the clients must be willing to wait. Moreover, the firm can create a product mix of seasonal products, but the exercise requires a lot of skills because it is difficult to find items that have opposite demand patterns (Chada, 2015). Indeed, a combination of various capacity options is employed to develop plans that arrive at the most sought-after production costs. Chase strategy is required so as to achieve output rates that match the demand forecast over a period. This can be achieved through varying production rates to varying workforce level by laying off, subcontracting and hiring. On the other hand, level strategy attempts to sustain a constant production rate or workforce during the planning horizon (Chada, 2015). Therefore, level and chase strategy can be combined to emerge with a new strategy known as the mixed strategy.
The operations managers can use some techniques that will help develop an aggregate plan. In aggregate planning, computations of the various costs that associated with production through various strategies such as level, mixed and chase strategies make the process tedious. For instance, in the dynamic manufacturing sector, there are roadblocks that are faced while analyzing aggregate planning strategies due to the complexity of the calculations method that is involved in level, chase and mixed strategies (Feili, 2013). Moreover, the process is time-consuming since there is a problem analyzing and recommending the aggregate plan that should be used. The issue becomes more complicated because there is a need to evaluate the method that is suitable for aggregate planning.
To a greater extent, aggregate planning strategy is important since it helps in understanding the significance of production planning, aggregate planning, and control. Moreover, it aids in understanding the various strategies such as level strategy, chase strategy and the techniques of aggregate production planning (Chada, 2015). The plan is important to the operations managers because it gives them a basic idea about the plans that can be used to meet the production costs that are favorable. Indeed, the operations managers will arrive at the most desirable solutions that will positively impact the production costs of the firm.
References
Almeder, C. (2014). Production Analysis. Production Management , 1-354.
Chada, C. (2015). Decision Support System in Aggregate Planning. Department of Industrial and Management Systems Engineering , 1-70.
Feili, A. J. (2013). A simulation testing and analysis of aggregate production planning strategies. Managemnt Operations , 423-448 .
