AGGREGATE PLANNING AND MASTER SCHEDULING
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Aggregate planning is the process of planning the quantity and timing of output over the intermediate
range (often 3 to 18 months) by adjusting the production rate, employment, inventory, and other
controllable variables. Aggregate planning links long-range and short-range planning activities. It is
“aggregate” in the sense that the planning activities at this early stage are concerned with homogeneous
categories (families) such as gross volumes of products or number of customers served.
Master scheduling follows aggregate planning and expresses the overall plan in terms of the
amounts of specific end items to produce and dates to produce them. It uses information from both
forecasts and orders on hand, and it is the major control (driver) of all production activities. Figure
8.1 illustrates a simplified aggregate plan and master schedule.
VARIABLES USED IN AGGREGATE PLANNING
Aggregate planning is a complex problem largely because of the need to coordinate interacting
variables in order for the firm to respond to the (uncertain) demand in an effective way. Table 8.2
identifies some of the key variables available to planners and the costs associated with them.
AGGREGATE PLANNING STRATEGIES
Several different strategies have been employed to assist in aggregate planning. Three “pure”
strategies are recognized. The pure strategies stem from early models that depicted production
results when only one of the decision variables was permitted to vary all others being held constant.
Three focussed strategies are:
1. Vary production to match demand by changes in employment (Chase demand
strategy): This strategy permits hiring and layoff of workers, use of overtime, and subcontracting
as required in each period. However, inventory build-up is not used.
2. Produce at a constant rate and use inventories. (Level production strategy): This
strategy retains a stable work force producing at a constant output rate. Inventory can be accumulated
to satisfy peak demands. In addition, subcontracting is allowed and back orders can be accepted.
Promotional programmes may also be used to shift demand.
3. Produce with stable workforce but vary the utilization rate (Stable work-force
strategy): This strategy retains a stable work force but permits overtime, part-time, and idle time.
Some versions of this strategy permit back orders, subcontracting, and use of inventories. Although
this strategy uses overtime, it avoids the detrimental effects of layoff.
Master Scheduling Planning Horizon
The time horizon of master scheduling depends upon the type of product, volume of production, and
component lead times. It can be weeks, months, or some combination, but the schedule must normally
extend far enough into the future so that the lead times for all purchased and assembled components
are adequately encompassed.