Production Planning

Techniques

Aggregate production planning ???

An organisation can finalise its Business Plans on the basis of the demand forecasts. If once business plans are ready then they can start over with the backward working from the final sales unit to raw materials required. Thus, quaterly plans are broken down into labour, raw material, working capital etc..

This is the requirement for medium range of period.( 6 to 18 months).

This process of working out on production requirement for the medium ranges is called the Aggregate Production Planning( APP).

It is one of the operational activity crucial to theorganisation as it looks to balance long termstrategic planning with short term production success.The FACTORS that should be kept in mind beforestarting an aggregate planning process :A. A compelete information about the available

production facility and raw materials.B. Organisation policy of labour management , quality

management.. C. Financial planning like the budgetary expenses..

Main inputs For any planning technique to be at its success, there needs to be some inputs. For aggregatePlanning, main inputs are :1. An aggregate demand forecast for a relevant period.2. Evaluating the all available means to manage

outsourcing, subcontracting etc...3. Checking the existing operational status of workforce,

production effeciency etc..

Importance or role of APPAPP plays a significant role in acheiving the objectives of the organisation:1. Achieving financial goals by reducing overall variable

costs.2. Maximising the utilization of overall production facility.3. Provide customer delight by matching demand and

reducing wait time for customers.4. Reduce investment in inventory stocking.5. Able to meet scheduling goals, there by creating a happy

and satisfied worforce.

The following diagram depicts about the aggregateplanning process. This comes under the production planningenvironment whether be in external and internal.

The main objective of APP is to judge the companypolicies and management inputs linked to operation,accounts and finance, human resources to reducethe price and increase revenue and enhancecustomer satisfaction.

EXTERNAL

Production

planning

Demand

Economic condition

External capacity

Raw material

Competiton

Production

Capacity

Workforce

Inventory

Internal

Advantages of APP1. Cost reduction: It is concerned with determining the

quantity and the schedule of production for the immediate future. These plans are intermediate plans for 3 to 18 months..

2. Analysis and strategy: Aggregate planning allow planners to compare projected demand with existing capacity. It helps in developing more accurate market research.

3. Basis for production plans: Aggregate plans combine resources into general categories and don't give a product specific breakdown.

The Strategies !!!!2 main pure strategies available for the planners

A level strategy

A chase strategy

Firm may choose to utilize one of the pure

strategies in isolation or they may go for opting

for a strategy that combines the two...

Level Strategy1. This seeks to produce an aggregate plan that maintains

steady production rate or steady employement level.2. Firm maintains a level of workforce and steady rate of

output when demand is low.3. This strategy allows a firm to maintain a constant level

of output and still meet demand.4. It allows the firm to establish higher inventory level

than currently needed.

Chase Strategy1. A chase strategy implies matching the demand and

capacity period by period .2. It also signifies a great deal of flexibility on firm’s part.3. The basic advantage of opting this strategy is that it

allows inventory to be held to the lowest posiible.

Most firms embracing the just intime production concept utilize a chase strategy approach to aggregate planning.

Mixed / hybrid strategy1. Commonly as the combination of the level and

chase strategy, Mixed strategy achieves to lower the costs of the firm.

2. Build-up inventory ahead of rising demand and use backorders to level extreme peaks. 3. Subcontract production or hire temporary workers to cover short-term peaks. 4. Reassign workers to preventive maintenance..