Aggregate Plan

The aggregate production plan is a proactive plan that effectively utilizes the organization s resources to satisfy demand as forecast. It determines not only the planned output levels but also the appropriate mix of resource inputs to be used. Inputs include inventory levels, back orders, subcontracting, and the available workforce. The outputs are a master production schedule, raw material usage. 

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Singhvi A. and Shenoy U.V. 2002. Aggregate planning in supply chains by pinch analysis, Trans. IChemE, part A, September. 

A simple definition that I have heard for aggregate planning is two- to 12-month capacity plarming. There are three components of this type of planning. The first is the business plan, which determines the strategy for capacity and production. The second is the production plan, which creates the production capacity utilization. The third is the master schedule, which establishes the production schedule for the specific products. 

One of the basic problems that exists in business today is the issue of imeven demand As a result of this, processes need to be put in place that will minimize the costs involved in leveling the demand and effectively using the available capacity. This is the goal of aggregate planning. In the area of operations management, you will find models and simulations that can be run to help optimize this process. 

Aggregate planning is a process that involves the balancing of demand and capacity. 

Production planning coordinates manufacturing/operations with the firm s business plan. It develops an aggregate plan that may be stated in dollars or aggregate units of products. For example, it may be stated in one firm in terms of cars to be sold and in another in terms of tons of fabric to be sold. This is not a detailed plan. All the products of the firm are often grouped into families. This is the planned production of the family groups that will meet the expected demand. 

In the remaining sections of this chapter, we will discuss the aggregate planning problem and quantitative methods for its solution. 

Aggregate planning problem The aggregate planning problem can be stated as follows ... 

The aggregate planning problem is basically a medium range tactical supply chain problem. There are primarily three aggregate planning strategies a company can follow. 

The LP model, illustrated in Section 2.15, can be extended to solve a more general aggregate planning problem. For the development of the general model, we use the following notations ... 

Thus, the general model, given by Equations 2.27 through 2.33, would represent most aggregate planning situations that may arise in practice. If all the cost functions are linear, then we get the LP model discussed in Section 2.15. 

Transportation problems represent a special class of LP problems that are easier to solve. In this section, we shall discuss the basics of a transportation model, how aggregate planning problems can be formulated as transportation problems, and a "greedy" algorithm to solve special cases of aggregate planning problems by inspection. 

Before we discuss the general model, we use an example to illustrate how certain aggregate planning problems can be formulated as transportation problems. 

We shall now discuss a general transportation model that allows for both inventory and shortages in aggregate planning problems. 

Shortages are allowed but all backlogs must be filled by the Tth period. The aggregate planning problem is to determine the optimal production plan that minimizes the total cost of production, inventory, and shortage. 

In order to formulate the aggregate planning problem as a transportation problem, we do the following ... 

Consider the aggregate planning problem given in Example 2.14, where no shortages are allowed and weekly demands must be satisfied at all times. Solve the transportation problem using the greedy algorithm. 

Table 2.17 gives a comparison of the two aggregate planning strategies with respect to production, workforce, inventory, and other factors. 

The managerial issues that affect the choice of the aggregate planning strategy are the following ... 

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