Aggregate Planning Strategies
There are three types of aggregate planning strategies available for organizations to choose from. They are as follows.
Level Strategy
As the name suggests, the level strategy looks to maintain a steady production rate and workforce level. In this strategy, the organization requires a robust forecast demand to increase or decrease production in anticipation of lower or higher customer demand. The advantage of a level strategy is the steady workforce. The disadvantage of the level strategy is high inventory and increased backlogs.
Chase Strategy
As the name suggests, the chase strategy looks to dynamically match demand with production. The advantage of the chase strategy is lower inventory levels and backlogs. Disadvantages are lower productivity, quality and a depressed workforce.
Hybrid Strategy
As the name suggests, a hybrid strategy looks to balance between level strategy and chase strategy.
Long-Term Decisions
The size of the company will determine the length of your long-term decisions made through the aggregate planning concept. Long-term aggregate planning usually involves a time frame of two to 10 years. Long-term decision-making should start with the company examining goals and objectives for the period.
The term of this decision relates to product and service selection and includes all aspects of production. Long-term aggregate planning includes product and market planning, financial planning and resource planning. Resource planning identifies facilities and personnel needed to accomplish long-term production objectives.
Intermediate Decisions
Intermediate decisions affect the level of employment within the organization. Specifically, through intermediate aggregate planning the organization will examine the output capacity of the workforce. This planning also affects the capacity for short-term decision-making.
Intermediate aggregate planning also covers many additional aspects of the company, including production planning and stipulating output requirements. Further, intermediate aggregate planning looks at the major product groups and quantifies the labour hours needed to manufacture the product groups. Intermediate aggregate planning will typically look at time horizons totalling 12 to 18 months.
Short Term Decisions
Once a company has made long-term and intermediate decisions, it should create its short-term aggregate plan. Short-term aggregate planning decisions include materials planning, capacity requirement planning, final assembly scheduling and production activity control. Short-term decisions help the organization to ensure the end product is manufactured without delay to meet the projected goals of the intermediate and long-term aggregate plans.
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