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Aggregate planning is a long-term approach to business planning that considers all departments of a company to reduce costs and increase efficiency. It involves forecasting supply and demand, controlling demand through tactics such as changing prices, and managing operating costs. It can be active or passive, and is not limited to manufacturing operations.
Aggregate planning is an approach to business planning in which a long-term perspective is taken and the business is viewed as a whole rather than a selection of discrete parts. In a simple example, an automobile manufacturer performing aggregate planning should look 12 to 18 months into the future and consider all company departments rather than focusing on specific models or divisions. This approach can reduce costs and make a company operate more efficiently.
People who develop an aggregate planning strategy start by developing forecasts for future supply and demand. These are coordinated to manage the company’s results. The company can control demand by changing prices, using rain checks, and adopting other tactics to increase or decrease demand over a given period. To ensure supply meets demand needs, supplies are ordered in a timely manner and the company requests that personnel obtain the best prices when purchasing supplies. Negotiating in advance can provide opportunities such as access to discounts and other special benefits.
Operating costs are another factor that people weigh in an aggregate planning strategy. This includes paying employees, dealing with overhead and other costs associated with maintaining a facility. Keeping these costs low with strategic planning can generate more profits. Simple activities like work shifts, for example, can reduce energy demand during peak hours, allowing a factory to operate at a lower cost.
Aggregate planning is not just about manufacturing operations. People who develop a plan consider all levels and departments of a company, from the executives to the accounting department, with the aim of optimizing business activities. The same planning principles that people apply to controlling a company’s supply and demand for products can also be applied within a company; Forecasting demands for office supplies and equipment, for example, lets people plan ahead for ordering and replacing everything from copier toner to office chairs.
People can adopt an active or passive aggregate planning approach. In an active approach, people become more directly involved in controlling supply and demand to meet the needs of the business. Passive approaches involve forecasting and preparing for demand and keeping the company’s production stable. A passive plan tends to be more reactive, with companies doing things like laying off employees and temporarily halting production to meet falling demand, while active plans are proactive and can include moving orders to different time periods and using campaigns. aggressive marketing campaigns to increase interest during periods. normally slow demand.
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