Aggregate planning is a process that involves determining the overall production and resource capacity needed to meet demand over a specified time horizon. It involves making decisions about the levels of production, inventory, and workforce to ensure that the organisation can meet customer demand while minimizing costs and maximizing efficiency. This process typically involves forecasting demand, evaluating production and inventory levels, and making adjustments to production schedules and workforce levels to meet demand in the most cost-effective manner.
Aggregate planning is a strategic process used by businesses to determine the optimal production levels and resource allocation over a specified time period. It involves forecasting demand, evaluating capacity constraints, and developing a plan to meet customer requirements while minimizing costs and maximizing efficiency.
The purpose of aggregate planning is to balance supply and demand by adjusting production rates, workforce levels, and inventory levels. This helps businesses to avoid shortages or excess inventory, reduce costs associated with hiring and firing employees, and improve overall customer satisfaction.
Aggregate planning takes into account various factors such as production costs, labor availability, market demand, and capacity constraints. It involves making decisions regarding the timing and quantity of production, subcontracting, overtime, and inventory management.
While aggregate planning is not legally mandated, it is an essential process for businesses to effectively manage their operations and meet customer demands. It helps businesses to align their resources and production capabilities with market requirements, thereby ensuring their long-term sustainability and profitability.
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This glossary post was last updated: 29th March 2024.
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