Aggregate Sales and Operations Planning – Review Notes

Aggregate operations planning involves translating annual and quarterly business plans into broad labor and output plans for the intermediate term of 6 to 18 months. Its objective is to minimize the cost of resources required to meet demand over that period. It takes a broad view of the organization and attempts to match the demand for the firm’s products with its ability to supply these products at a minimum cost.
Long-range planning is done once a year, focusing on a multi-year horizon while medium-range planning covers 6 to 18 months into the future. Short-range plans cover one day to six months in weekly increments. The master production schedule generates the amounts and dates for the production of end products and is fixed in the short run.
Rough-cut capacity planning verifies that the scheduled production is possible given capacity constraints of facilities, equipment, and labor. Materials requirements planning takes the end product requirements from the MPS and breaks them down into their component parts and subassemblies to create a material plan.The final assembly schedule provides the operations required to put the product in its final form. Production activity control focuses on scheduling and shop floor control activities.
Aggregate production planning varies from company to company. Strategies of production planning include maintaining a stable work force working at a constant rate, using a stable work force with variable work hours, or using a chase strategy where workers are hired or laid off as the demand varies. In addition, managers may choose to subcontract some portion of production.

Costs relevant to aggregate production planning include basic production costs to costs associated with changes in the production rate, inventory holding costs, and backordering costs.

To receive funding, operations managers are generally required to submit annual, and sometimes quarterly budget requests.
Aggregate operations planning links the corporate strategic plan and the capacity plans into broad categories of work-force size, inventory quantity, and production levels. It does not do detailed planning.
In the case of aggregate planning based on decision rules, once decision rules for production planning have been selected, it is important for management to maintain them. Historical data and simulations should be used to select an optimal decision rule.
Yield management allocates the right type of capacity to the right type of customer at the right price and time to maximize revenue or yield and it can make demand more predictable which is important to aggregate planning.

Chapter Outline

Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Overview of Sales and Operations Planning Activities
The Aggregate Operations Plan
Production Planning Environment
Relevant Costs
Aggregate Planning Techniques
A Cut-and-Try Example: The C A & J Company
Aggregate Planning Applied to Services: Tucson Parks and Recreation Department
Level Scheduling
Mathematical Techniques
Yield Management
Operating Yield Management Systems

Case: Bradford Manufacturing – Planning Plant Production

Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Additional materials
A good explanation of the background for development of sales and operations planning from aggregate planning of the earlier years was given in a chapter of a thesis.

Originally posted at knol 439

Updated  28 May 2019,  27 March 2015, 10 Dec 2011