AGGREGATE PLANNING

CAPACITY PLANNING AND

FACILITY CONFIGURATION
Number, size and location of facilities
Facility equipment and charters
Supply chain configuration

STRATEGIC

CONSTRAINTS
FEEDBACK

AGGREGATE PLANNING
Workforce Size
Inventory levels
Production rates
FEEDBACK

TACTICAL

CONSTRAINTS

PRODUCTION SCHEDULING
Work center scheduling
Materials requirements planning
Workforce scheduling
FEEDBACK

CONSTRAINTS

PRODUCTION ACTIVITY CONTROL

OR SHOP FLOOR CONTROL
Job status reporting
Input/output control
Priority control

OPERATIONAL

As indicated by the term aggregate, aggregate planning is done at a level of detail in

which a fair amount of aggregation (or lumping together) has occurred. Aggregation
typically occurs across three dimensions:
Products. Rather than dealing with every unique product produced in a facility, one or
more aggregate products are utilized. Often this is a single pseudo-product whose
characteristics (production time, cost, space requirements, etc.) are computed as the
average across all products. When additional precision is required, planning can be done
on the basis of major product families.

Labor. Labor is aggregated by specifying a workforce size rather than by dealing with
individual workers or job classifications. Workforce flexibility helps to make this a
useful approximation. If greater accuracy is required, planning can be on the basis of
work groups or entire shifts.
Time. A typical aggregate plan is based on a planning horizon of 12 months. In it, all
decisions (workforce size, production volume, inventory levels, etc.) are specified on a
monthly basis. To deal with the fact the months have differing numbers of available
production days, some companies plan on the basis of 4-4-5 week months.
Managerial Inputs
Operations
Current machine capacities
Workforce capacities
Future capacity plans

Materials
Supplier capabilities
Storage capacity
Materials availability

Distribution/marketing
Customer needs
Demand forecasts
Competition behavior

Aggregat
e Plan

Accounting and finance

Cost data
Financial condition of firm

Typical Objectives

Minimize costs/maximize profits

Maximize customer service
Minimize inventory investments
Minimize changes in production rates
Minimize changes in workforce levels
Maximize utilization of plant and equipment

Reactive and Aggressive Alternatives

Engineering
New products
Change orders
Machine standards

Human resources
Labor market conditions
Training capacity

Variation in demand rates over the planning horizon is the single greatest challenge in
aggregate planning. Without it, workforces would be stable, production rates constant
and inventories minimal. There are two sets of alternatives for dealing with demand
variation.
Reactive alternatives. These approaches accept demand variation as given and react to
it attempting to keep costs low.
Workforce adjustments
Anticipation inventory
Workforce utilization (overtime/undertime)
Vacation schedules
Subcontractors
Backlogs, backorders and stockouts
Aggressive alternatives. These approaches attempt to moderate demand variation to
achieve production efficiencies and reduce costs.
Complementary products
Promotional campaigns
Creative pricing
The Planning Process

Determine
requirements for
planning horizon.

Identify alternatives,
constraints and costs.

No

Move ahead to next

planning session.

Implement and
update the plan.

Prepare prospective
plan for planning
horizon.

Is the plan
acceptable
?
Yes

Aggregate Plan
REd

April 10, 2006

04:57 PM

WORKFORCE SIZE AND UTILIZATION

MAR
SHIFT: 1
Available Workers
21.0
Hires
3.0
Layoffs
0.0
Regular hours
3348.2
Utilization
92.0%
Overtime hours
0.0
Utilization
N/A

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

JAN

FEB

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

21.0
0.0
0.0
3348.2
92.0%
0.0
N/A

SHIFT: 2
Available Workers
Hires
Layoffs
Regular hours
Utilization
Overtime hours
Utilization

17.9
1.0
0.0
2849.7
91.9%
1068.8
91.9%

17.9
0.0
0.0
2849.7
91.9%
1068.8
91.9%

17.9
0.0
0.0
2849.7
91.9%
624.4
53.7%

17.9
0.0
0.0
2849.7
91.9%
350.3
30.1%

17.9
0.0
0.0
2849.7
91.9%
786.8
67.6%

17.9
0.0
0.0
2849.7
91.9%
1068.8
91.9%

17.9
0.0
0.0
2849.7
91.9%
1068.8
91.9%

17.9
0.0
0.0
2849.7
91.9%
1068.8
91.9%

15.0
0.0
2.9
2389.0
91.9%
896.0
91.9%

13.5
0.0
1.5
2156.3
92.2%
808.7
92.2%

13.5
0.0
0.0
2156.3
92.2%
597.9
68.1%

16.9
1.9
0.0
2696.0
92.1%
1011.2
92.1%

COST SUMMARY - ANNUAL

SHIFT: 1
Regular wage
791,532
Hiring cost
4,500
Layoff cost
0
Overtime cost
0
SHIFT: 2
Regular wage
Hiring cost
Layoff cost
Overtime cost

726,748
4,350
4,400
192,758

Inventory cost
Total cost

20,218
1,744,506

COST SUMMARY BY MONTH

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

JAN

FEB

SHIFT: 1
Regular wage
Hiring cost
Layoff cost
Overtime cost

65,961
4,500
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

65,961
0
0
0

SHIFT: 2
Regular wage
Hiring cost
Layoff cost
Overtime cost

60,772
2,850
0
18,707

64,368
1,500
0
19,773

64,368
0
0
19,773

64,368
0
0
11,551

64,368
0
0
6,481

64,368
0
0
14,556

64,368
0
0
19,773

64,368
0
0
19,773

64,368
0
0
19,773

53,940
0
2,900
16,576

48,546
0
1,500
14,961

48,546
0
0
11,061

3,759

1,716

1,085

1,085

1,085

2,822

3,241

1,085

1,085

1,085

1,085

1,085

156,549

153,318

151,187

142,965

137,895

147,707

153,343

151,187

151,187

140,462

132,053

126,653

Inventory cost
Total cost

PRODUCTION REPORTS
F001
Beg inventory
Reg Prod Shift 1
OT Prod Shift 1
Reg Prod Shift 2
OT Prod Shift 2
Total production
Demand
End Inventory

MAR
325
0
0
25
895
920
1070
175

APR
175
0
0
216
946
1163
1258
79

MAY
79
0
0
200
946
1147
1176
50

JUN
50
0
0
536
553
1089
1089
50

JUL
50
0
0
771
310
1081
1081
50

AUG
50
0
0
450
696
1147
1066
131

SEP
131
0
0
232
946
1178
1159
151

OCT
151
0
0
237
946
1183
1284
50

NOV
50
0
0
254
946
1200
1200
50

DEC
50
0
0
307
793
1100
1100
50

JAN
50
0
0
287
716
1003
1003
50

FEB
50
0
0
418
529
947
947
50

F002
Beg inventory
Reg Prod Shift 1
OT Prod Shift 1
Reg Prod Shift 2
OT Prod Shift 2
Total production
Demand
End Inventory

MAR
125
2877
0
0
0
2877
2578
424

APR
424
2582
0
0
0
2582
2814
192

MAY
192
2698
0
0
0
2698
2770
120

JUN
120
2669
0
0
0
2669
2669
120

JUL
120
2595
0
0
0
2595
2595
120

AUG
120
2798
0
0
0
2798
2601
317

SEP
317
2842
0
0
0
2842
2794
365

OCT
365
2701
0
0
0
2701
2946
120

NOV
120
2827
0
0
0
2827
2827
120

DEC
120
2744
0
0
0
2744
2744
120

JAN
120
2716
0
0
0
2716
2716
120

FEB
120
2664
0
0
0
2664
2664
120

F003
Beg inventory
Reg Prod Shift 1
OT Prod Shift 1
Reg Prod Shift 2
OT Prod Shift 2
Total production
Demand
End Inventory

MAR
208
4
0
2265
0
2269
2140
337

APR
337
295
0
2212
0
2507
2688
156

MAY
156
180
0
2227
0
2407
2463
100

JUN
100
209
0
1905
0
2114
2114
100

JUL
100
282
0
1680
0
1962
1962
100

AUG
100
82
0
1987
0
2069
1915
254

SEP
254
39
0
2196
0
2235
2198
291

OCT
291
178
0
2192
0
2369
2560
100

NOV
100
53
0
2176
0
2229
2229
100

DEC
100
135
0
1734
0
1869
1869
100

JAN
100
163
0
1555
0
1718
1718
100

FEB
100
214
0
1430
0
1644
1644
100

AGGREGATE PLANNING DATA

DEMAND
F001
F002
F003

MAR
1070
2578
2140

APR
1258
2814
2688

MAY
1176
2770
2463

JUN
1089
2669
2114

JUL
1081
2595
1962

WORKFORCE DATA
Regular wage cost per month
Overtime cost per hour
Maximum monthly regular hours
Maximum monthly overtime hours
Hiring cost
Layoff cost
Initial number of workers
Maximum number of workers
Maximum labor utilization

Shift1
3141
0.00
173.3
0.0
1500
1000
18
21
92%

INVENTORY/PRODUCTIVITY DATA
Holding Cost
Initial
Product
Per Month
Inventory
F001
3.8697
325
F002
4.0152
125
F003
4.1004
208

Shift2
3596
18.50
173.3
65.0
1500
1000
15
21
92%

Minimum
Inventory
50
120
100

Labor Hours
Per Unit
1.1297
1.1621
1.1780

AUG
1066
2601
1915

SEP
1159
2794
2198

OCT
1284
2946
2560

NOV
1200
2827
2229

DEC
1100
2744
1869

JAN
1003
2716
1718

FEB
947
2664
1644