AGGREGATE PLANNING IN A SUPPLY CHAIN

After reading this chapter, you will be able to 

Understand the importance of aggregate planning as a snpply chain activity. 

Describe the information needed to produce an aggregate plan and the outputs obtained. 

Explain the basic trade-offs to consider when creating an aggregate plan. 

Formulate and solve basic aggregate planning problems using Microsoft Excel. 

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

As stated at the beginning of the chapter, the success of a manufacturing supply chain depends on its ability to accurately forecast customer demands and plan the production process to meet those demands in time. So far in this chapter, we discussed the forecasting principles and several qualitative and quantitative methods for demand forecasting. Based on the demand forecasts, aggregate production planning is done to plan the production. 

As we discussed earlier, aggregate production planning is a tactical decision in supply chain management. Production scheduling is an operational decision. It is important to understand the key differences between the two, with respect to the time horizon and the level of detail in the production plan. 

Bullwhip effect results in poor aggregate production plans that lead to increased safety stocks, reduced customer service due to shortages, increased transportation cost, and inefficient allocation of resources (labor and equipment). By increasing the communication of actual downstream demand and collaboration between trading partners, the bullwhip effect can be minimized. One such collaborative process is known as collaborative planning, forecasting and replenishment (CPFR). Refer to the appendix in Chapter 3 of this book for a detailed description of the bullwhip effect in supply chains. 

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