Module - 5

Capacity Planning

Planning Hierarchies In Operations

Business Plan Marketing Plan Financial Plan

Level 1

Production Plan (rough cut capacity)

Master Production Schedule

Level 2

Material Requirement Plan

Capacity Requirement Plan

Detailed scheduling

Level 3

Shop Floor Control

Aggregate Planning

Introduction
Aggregate planning is an operational activity which does an aggregate plan for the production process, in advance of 2 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organization is kept to the minimum over that period.

Meaning Of Aggregate Planning

It is the process of developing, and maintaining a preliminary, approximate schedule of the overall operations of an organization. Aggregate planning is an attempt to balance capacity and demand in such a way that costs are minimized.

Purpose of aggregate planning

Information on the required level of O/P to be produced, inventory levels to be maintained and backlogs based on the business plan. Capacity under-utilization may lead to wastage of resources. The companys objectives and its policies regarding its employees should be in line with its aggregate plan.

Necessary of Aggregate planning

Its helps in fully load facilities and minimizes over loading and under loading. Make sure enough capacity available to satisfy expected demand. Get the most output for the amount of resources available.

Importance of aggregate plans

It serve as a foundation for future short-range type planning. It helps in balancing capacity and demand in such a way that costs are minimized.

Managerial Importance of Aggregate Plans

Operations Current Machines Capacities Plans for Future Capacities Workforce capacities Current Staffing Levels Materials Suppliers Capabilities Storage Capacity Material Availability Distribution and Marketing Customer Needs Demand Forecasts Competition

Aggregate Plan

Accounting and Finance Cost Data Financial Condition of Firm

Engineering New Products Product Design Changes Machine

Human Resources Labour-Market conditions Training Capacity

Alternatives for managing demand and supply in Aggregate Planning

For managing demand
Differential pricing Advertising and sales promotion Backlogs Development of complimentary product

For managing supply

Inventory based alternative Capacity adjustment alternatives