An aggregate plan provides the road map for business operations; it translates corporate strategy into a plan that can be implemented on the plant floor or on the front-line of service. For companies that sell physical products, this map details the production process. For service-based companies, the aggregate map identifies staffing levels and other resources needed to accommodate customer demand.
Put together a plan
The operations planning process starts at the corporate level with a strategic plan for the company. The overarching corporate strategy guides the aggregate operations plan.
The purpose of the aggregate plan is to match the firm’s capacity with anticipated customer demand to ensure that the company is utilizing its available capacity to best meet anticipated demand. An aggregate plan requires two sets of information:
Strategic capacity plan: A capacity plan emerges from the corporate strategic plan and provides aggregate planners with details on current and future capacity levels.
Forecast of anticipated demand: The demand forecast provides an overview on how much product the facility needs to manufacture in the coming months to satisfy anticipated customer demand.
In their general form, aggregate plans deal with the total demand. They typically don’t focus on individual models or items.
For example, when allocating space in a grocery store, the aggregate plan would indicate a certain amount of space to be used for breakfast cereals, but the plan wouldn’t address how much shelf space each type or brand of cereal gets. In some cases, the plan may allocate a specific amount of space to a particular manufacturer, such as Kellogg’s, but this is usually as specific as it gets.
The end product of aggregate planning is the production plan, which guides the development of a master schedule (MS), which informs detailed schedules for operations.
The master schedule
Based on the production plan, facility personnel (such as a retail store manager) create a detailed schedule to give specific direction on what to do when to employees who are actually doing the work or providing the service.
The master schedule shows the quantity and timing for a specific product to be delivered to customers over a specific period of time, but it doesn’t show how many products actually need to be produced because the demanded products can be provided using inventory in some cases.
The master schedule and inventory levels provide information for the master production schedule, which communicates how many units need to be produced at a given time.
For example, a computer manufacturer’s production plan may show that the company forecasts sales of 1,200 portable computers in September, 1,500 in October, and 1,700 in November. But it doesn’t give any information about what quantity of each model is needed. The master schedule shows how many of each model is needed and when it needs to be produced.
Getting to the specifics of the master schedule can be difficult. Breaking a production plan into the number of specific models to produce isn’t always easy. Because disaggregate forecasts are less accurate than aggregate forecasts, it’s often difficult to predict what actual models the customer will desire. You must take care when developing the forecast.
Because short-term forecasts are typically more accurate than long-term forecasts, the longer you can delay making the line item (model) forecast, the better off everyone will be. When creating a master schedule, follow a structured method.