Aggregate planning is a business technique that assists organizations in determining how to deploy their resources to meet future consumer demand.
This is a method for planning the production of all of a company’s products over time.
It begins with a summary of the essential prerequisites for uninterrupted manufacturing.
Typically, the planning horizon extends between three and twelve months.
The term ‘aggregate’ is derived from the Latin verb ‘aggregate’ which means ‘to add’ It is commonly used in economics and business.
Consequently, aggregate production planning is the process of generating a comprehensive production schedule for all of a company’s products.
Furthermore, Aggregate planning does not distinguish between hues, sizes, and characteristics.
In a mobile device manufacturing company, for instance, aggregate planning takes into account simply the total number of handsets and not the colors of the individual models.
The purpose of aggregate planning in project management
Aggregate planning reduces costs in project planning by specifying how much capacity, such as production time, inventory, and workforce is required to respond to short- to medium-term fluctuations in organizational demand.
Aggregate project plans assist managers in classifying projects based on the number of resources they consume and the contribution they make to their product line.
This provides the management team and stakeholders with visibility into ongoing projects and programs, allowing them to identify any gaps and make timely, informed decisions.
In project management, aggregate planning also serves other functions, including the following:
Efficient time management
The majority of initiatives that are completed successfully are time-bound and are broken down into definite, actionable steps.
Project managers can more accurately estimate the amount of time it will take to complete a project with the assistance of aggregate planning, which also enables them to set aside adequate chunks of time to work on individual aspects of the project while paying special attention to critical paths.
The goal of aggregate planning is to utilize an organization’s resources in such a way that they meet or exceed the anticipated demand.
This helps to cut down on the number of resources that are wasted on particular projects, which can easily result in demand exceeding capacity.
To assist businesses in accomplishing their monetary purposes, reining in any excess spending, and enhancing their bottom line by making the most of the resources and capabilities at their disposal, aggregate planning generates a comprehensive budgeting framework.
An organization’s perspective on the bigger picture can be publicized enormously by the data provided through aggregate planning.
It is easier to make decisions that are data-driven when it is clear what resources and abilities are required to assuage certain ultimata. This enables the organization to make the best of every situation.
The Process of Developing an Aggregate Plan
Before you can construct an aggregate plan, you need to first identify the capacity of your business, which is the number of units that can be manufactured within a given amount of time, and the client demand, which is the number of units that are required.
When you are attempting to develop consistency in your process, the following are some of the things that you should consider:
Strategies for Setting Prices:
When there is less demand for anything, the price should go down to meet the capacity. You may also do the opposite; when there is a lot of demand, you might raise the price.
The demand for your product or service might be affected by the activities you undertake in marketing and promotion.
Put delivery on hold until the demand catches up with the available capacity.
The Generation of New Demand:
Develop an additional demand to complement an already existing one.
You have the option of either firing employees or hiring new ones to satisfy the demand or respond to a lack of it.
Temporary labor, overtime work, or subcontracting are all viable alternatives to consider.
The level strategy and the chase strategy are both examples of different aggregate planning strategies.
The third strategy involves combining the positive aspects of the two previous approaches.
This type of plan is sometimes referred to as a stable plan or a production-smoothing plan.
Its primary objective is to ensure that a company’s output levels and human resources remain stable.
To attain the desired level of demand, it is necessary to make adjustments to the linked components, which may include financial and human resources.
This method not only helps keep human resources up and running, but it also helps keep inventory stocked.
There is also the possibility of falling short of the targets that have been set, which would result in backlogs that would incur much higher expenses for the company.
The level method functions most effectively in circumstances in which the costs of carrying inventory are relatively low.
A just-in-time production plan is another name for this strategy.
The primary goal is to precisely meet the predicted demand through disciplined production.
Sadly, even while the goal of this strategy is to satisfy the market, it almost always results in stressed-out staff, which in turn raises employee turnover.
This tactic works best in circumstances in which the cost of adjusting the production rate is low in comparison to other costs.
When it comes to planning aggregate output, a hybrid strategy involves using a variety of different approaches to arrive at the best possible plan.
A corporation might, for instance, employ a mathematical model to compute the most effective production plan, and then modify that plan based on the input obtained from the company’s real production process.
They will have the accuracy of a level strategy as well as the flexibility of a chase strategy thanks to the combination. The combination gives them the best of both worlds.
The hybrid strategy combines elements of the level strategy with the chase strategy to achieve results that are both superior and more fruitful.
When it comes to aggregate production planning, the hybrid strategy strikes a healthy balance between production rate, hiring/firing, and stock level.
How aggregate planning can result in consistent output
Businesses can better satisfy customer demand and avoid squandering resources when they maintain consistent output.
As a result of the fact that an efficient aggregate plan establishes an equilibrium between demand and capacity, it enables a company to maintain a consistent level of production rather than experiencing abrupt increases or decreases.
Instead of ramping up or rapidly decreasing production based on the current environment, a facility that has an aggregate plan can level out production planning to serve customers throughout the entire period.
This is in contrast to facilities that don’t have aggregate plans.
The impact that aggregate planning has on your team
In addition to increasing the revenues of the company and maintaining a steady level of output, it is essential to engage in aggregate planning to provide your staff with a dependable and consistent place of employment.
Your company’s labor and resource requirements have the potential to fluctuate significantly in the absence of an adequate aggregation plan.
As a direct consequence of this, you can find that you are always firing people and employing new ones.
This causes a deterioration in trust, makes it more challenging to acquire fresh talent and may encourage current employees to look for work elsewhere.
It can also bring about a decline in the quality of work, as it is impossible for people to perform up to their full ability if they are continuously concerned about the possibility that they could lose their jobs.