Methods for aggregate planning

The objective of aggregate planning is usually to meet forecast demand while minimizing
cost over planning period. However, other strategic issues may be more important than low
cost. These strategies may be to smooth employment, to drive down inventory levels, or to
meet a high level of service, regardless of cost.

Aggregate Planning Strategies

When generating an aggregate plan, the following questions are answered in order to identify
the optional strategies for developing aggregate plan.

1. Should inventories be used to absorb changes in demand during the planning period?
2. Should changes be accommodated by varying the size of work force?
3. Should part-timers be used, or should overtime and idle time absorb fluctuations?
4. Should subcontractors be used on fluctuating orders so a stable workforce can be
maintained?
5. Should price or other factors be changed to influence demand?

All of these are legitimate planning strategies. They involve the manipulation of inventory,
production rates, labor levels, capacity and other controllable variables.

Plus, in this project, we use graphical methods because graphical techniques are easy to
understand and use. These plans work with a few variables at a time to allow planners to
compare projected demand with existing capacity. They are trial-and-error approaches that do
not guarantee an optimal production plan, but they require only limited computations and can
be performed by us. Following are 5 steps in graphical method.

1. Determine the demand in each period.

2. Determine capacity for regular time, overtime and subcontracting period.
3. Find labor costs, hiring and layoff costs, and inventory holding costs.
4. Consider company policy that may apply to the workers or to stock level.
 5. Develop alternative plans and examine their total costs.

Data collection for aggregate

Month Expected Demand Production Demand per

days day
January 250 20 13
February 1000 18 56
March 1200 22 55
April 850 21 40
May 400 20 20
June 280 18 16
July 100 22 5
August 100 19 5
September 1000 20 50
October 1500 21 71
November 1200 22 55
December 900 20 45
Total 8780 243

Improvement suggestion

Aggregate

For overall management after we ask a few information about their business, we manage to
figure out 2 steps in improving their business plan. This is because the company could not
finish the demand on time. Our possible strategy or plan 1 (level strategy) for the manufacturer
is to maintain a constant workforce throughout the 12-month period. Plan 2 (chase strategy) is
to hire and lay off workers as needed to produce exact monthly requirements.

However, it does not mean that both plans are suitable. The cost need to be considered here.
The lowest cost will be chose as to improve the production rate.

Discussion
As we know aggregate is used to meet forecast demand while minimizing cost over planning
period. Based on the analysis, we need to compare the total cost between Plan 1 and Plan 2.

Cost Plan 1 Plan 2

Inventory carrying 23510.00 0.00
Regular labor 34992.00 26340.00
Overtime labor 0.00 0.00
Hiring 0.00 10993.87
Layoffs 0.00 2323.16
Subcontracting 0.00 0.00
Total cost (RM) 58502 39657.03

From the table above, we could see that Plan 1 has the lower total cost added than Plan 2. So
Plan 1 can be used in order to increase the production rate to satisfy the demand. Plan 1 is to
maintain a constant workforce. Today, the company has only 2 workers, so they need to hire 3
workers in total and maintain it. This is because the demand is not always high. The demand is
high when new semester is opened for university because their regular customers are university
students.
Nur Ilyana Sahira binti Murizan

1. Self-Reflection

Personally, this project helps me a lot in application of the operations management tools to the
real life industry, which is printing services and business. It also makes me more understand
towards what I have learnt in the class. For instance, the inventory analysis and aggregate
planning. By this project also, I have learnt so many things which are learn how to deal with
friends, teammate, strangers and also corporate, learn how to do work based on scheduling, to
give commitment on my responsibility and also to cooperate with the team members well.

2. Self-entrepreneurial

From this project also, I have learnt the value of entrepreneurship. I like this project because it
has improved my social skills. From this project also I learnt something about business from
the owner of the printing services business in which the business is not always about the profit,
we need to think about the quality, customer’s satisfaction, and the workers. For myself, during
the execution of the project, I need to handle and to understand 4 various type of people; my
teammates which then lead to increasing in communication skills. Plus, I learnt a lot about
using the Microsoft excels here. I am sure that this project has given many benefits in term of
self-entrepreneurial.

3. Team working Reflection

In my opinion, throughout this project, all my teammates gave their full excellent commitment
in order to finish this project on time. From the beginning, the task given to each member was
fair and square. All my teammates are very excited with this project. I would love to work with
them again in the future.