Also included are the costs associated with making changes in capacity. Increase Production Rates A significant advantage to using aggregate planning is that it maximizes the utilization of production equipment.
In essence, the backorder is a device for moving demand from one period to another, preferably one in which demand is lower, thereby smoothing demand requirements over time.
Aggregate planning allows for contingency measures to be put in place so businesses can better accommodate significant changes in customer orders and production. By postponing delivery on current orders demand is shifted to period when capacity is not fully utilized.
Disadvantage of level strategy is high inventory and increase back logs. Aggregate planning helps in: Achieving financial goals by reducing overall variable cost and improving the bottom line Maximum utilization of the available production facility Provide customer delight by matching demand and reducing wait time for customers Reduce investment in inventory stocking Able to meet scheduling goals there by creating a happy and satisfied work force Aggregate Planning Strategies There are three types of aggregate planning strategies available for organization to choose from.
Reduce Overhead Excess inventory costs businesses a lot of money. Though this strategy helps in maintaining the manpower it also leads to stocking inventory.
A new, but complementary demand is created for a product or service. Long-term decision making should start with the company examining goals and objectives for the time period. If satisfactory plans emerge, select the one that best satisfies objectives. Aggregate planning might seek to influence demand as well as supply. Also included are the costs associated with making changes in capacity. Increase Production Rates A significant advantage to using aggregate planning is that it maximizes the utilization of production equipment. It is an important tool for companies to help in streamlining the immediate production processes by aligning them with the long-term strategic plans and goals of the organization. When restaurant customers have to wait, they are frequently diverted into a complementary but not complimentary service, the bar. In this strategy, organization requires a robust forecast demand as to increase or decrease production in anticipation of lower or higher customer demand. In simple terms, aggregate planning is an attempt to balance capacity and demand in such a way that costs are minimized. Aggregate Planning Strategies The variables of the production system are labor, materials and capital. Intermediate Decisions Intermediate decisions affect the level of employment within the organization. The inventory and production capacity has to be thoroughly understood. By postponing delivery on current orders demand is shifted to period when capacity is not fully utilized. This capacity should match demand, which means it may require the inclusion of overtime or subcontracting.
These equivalent units could be based on value, cost, worker hours, or some similar measure. Determine capacity for each period.
Aggregate planning and s&op
Disadvantage is lower productivity, quality and depressed work force. Maintain the stable workforce. Factors Affecting Aggregate Planning Aggregate planning is an operational activity critical to the organization as it looks to balance long-term strategic planning with short term production success. Identify company, departmental, or union policies that are pertinent. Learn about other project management concepts in the Project Management Glossary. This article includes a list of references , related reading or external links , but its sources remain unclear because it lacks inline citations. In this way no new workers have to be hired, no temporary or casual labor is needed, and no overtime is incurred.
Demand forecast for the period for which the planning has to be done.
based on 25 review