Chapter 8
Aggregate Planning
in the Supply Chain
Supply Chain Management
(3rd Edition)
Outline
Role of aggregate planning in a supply chain
The aggregate planning problem
Aggregate planning strategies
Implementing aggregate planning in practice
Role of Aggregate Planning
in a Supply Chain
Imagine a world where all costs and lead times are zero…
However capacity is costly and LT’s are not zero.. How to use
capacity? When to outsource?
Aggregate planning:
– process by which a company determines levels of capacity, production,
subcontracting, inventory, stockouts, and pricing over a specified time
horizon
– goal is to maximize profit
– decisions made at a product family (not SKU) level
– time frame of 3 to 18 months
– how can a firm best use the facilities it has?
Role of Aggregate Planning
in a Supply Chain
Specify operational parameters over the time horizon:
– production rate
– workforce
– overtime
– machine capacity level
– subcontracting
– backlog
– inventory on hand
The aggregate plan allows the supply chain to alter
capacity allocations and change supply contracts.
If a manufacturer increase in production over a given
time period, the supplier, transporter, and warehouser
must be aware of this plan and incorporate the
increase into their own plans.
All supply chain stages should work together on an
aggregate plan that will optimize supply chain
performance
