Organizations need to estimate resource requirements so that they can satisfy market demand for their products. This is relatively easy for organizations which have a single product in their product portfolio. But organizations which have multiple products in their product portfolio require a common measure for identifying resource requirements. This problem can be solved by taking groups of products or product types together, and working out an aggregate output that can be measured in common terms. In an aggregate plan, individual products are combined together as a product group or product type. These aggregate units are not considered separately; instead they help operations managers take decisions regarding workforce and equipment allocations, subcontracting, overtime, etc.
The aggregate plan defines the best combination of workforce level, inventory on hand, and production rate that matches the company's resources to market demand. Once aggregate plans are finalized, they are disaggregated into smaller tasks. Aggregate plans provide a constraint within which, more detailed and specific master schedules for individual products are produced.
By disaggregating operations, managers convert aggregate plans into a detailed master production schedules. A master production schedule contains a statement on the quantity to be produced and the time frame for deliveries. Aggregate plans provide a milestone based on which an organization plans its future course of action. In order to meet the targets in the plan, organizations should have sufficient capacity, which can accommodate the requirements of the plan. Capacity planning looks after this aspect of production planning, so that there are no discrepancies between capacity demanded and capacity required.
We discuss various strategies and approaches to aggregate planning, capacity planning and master production scheduling.
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