What is the importance of aggregate planning in the supply chain

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Aggregate planning for the entire supply chain could be an alternative if your manufacturing facility is inefficient and poorly planned. If a manufacturing company wants to increase operational efficiency, it must prioritise aggregate planning in supply chain management (SCM).

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Aggregate planning methods can be useful when trying to predict supply chain needs several months in advance. With this method, you can see the big picture of the materials you will need to produce all the goods that people want to buy.

To receive bulk discounts and avoid shortages, it is best to place orders for the entire planning period. Knowing the ins and outs of aggregate planning and the supply chain is crucial before introducing it into your operations.

Examples of aggregate planning in supply chain management

The following are all examples of aggregate planning in SCM:

  • Good demand prediction
    You'll need to know the demand size for your goods before you can plan when to order supplies. Future demand for your products can be accurately anticipated by utilising historical data. This is in addition to the trends and predictions made by experts in your field. You will need the resources indicated by your forecast. This will tell you how much to produce to satisfy the demand and maintain a constant rate of production.

  • Production of goods and services

    It is proportional to the accessibility of necessary resources (equipment, labour force, efficiency). You may check with your production department to find out how many products could it make within your time range. This might not be adequate to meet the needs of the public. But, making use of available production resources can help you set reasonable product output goals. Consider the possibility of worker and machine absences also.

  • Constraints on available funds

    Investing in something is fine, but you need to remember that your spending plan has limits. Your options may be constrained by your budget in certain situations. Think about the cost of interest for any loans you might need to start up your business. To sum up, save up enough money to cover your future expenses.

The significance of aggregate planning

Achieving the organisation's long-term goals depends in large part on aggregate planning.

  • This leads to a more contented and joyful workforce.

  • Lessen fluctuations in staffing levels.

  • Determines available funds in the near term.

  • Contributes to optimal space utilisation.

  • Accomplishes organisational aims and objectives.

  • Aids in balancing supply and demand.

  • Reduces expenditures related to varied stocks, hence minimising stocking costs.

  • Maximises service to clients by balancing demand and supply, and reduces wait times.

  • Provides higher value to customers.

  • Makes the most of available resources in manufacturing.

  • Utilises the potential of various tools.

  • Keeps production rate fluctuations to a minimum.

  • Reduces a company's overall operating expenses and boosts its bottom line so it may better pursue its objectives.

Strategies to implement aggregate planning

If you are facing a problem with aggregate planning, there are multiple strategies you can adopt. Here are some that can help:

Level strategy

The level method seeks to maintain steady output and headcount. Businesses must have accurate demand estimates to determine whether to ramp up or slow down production. This is in response to seasonal fluctuations in client demand. A level strategy provides staff consistency. One of the disadvantages of a level strategy though is an increase in backlogs and stocks.

Chase tactics

The chasing strategy seeks to dynamically balance supply and demand. The advantages of a chase strategy include having fewer goods on hand and fewer late jobs. The disadvantage is a drop in output, quality, and morale at work.

Using a complicated method

Hybrid strategies aim to strike a middle ground between level and chase tactics.

Before you begin your aggregate strategy

There are a few things to think about before beginning an aggregation plan. Have a look:

  • Knowing the goals of the overall strategy and the fallout if those goals aren't met is a prerequisite.

  • Knowing how many orders make up your aggregate plan, and whether or not those orders will conflict with one another.

  • Determining which demand plans will not interfere with your aggregate strategy.

  • Thinking about whether or not the benefits outweigh the costs of implementing a comprehensive strategy.

The term "aggregate plan" is used to describe a strategy that is broad enough to apply to multiple industries. The change could be little, like introducing a new line of products, or significant, like expanding into an entirely new market.


Are you interested in understanding the basics of operations and supply chain management? Then, Imarticus Learning has just the right supply chain management course in association with IIT Roorkee. With this course, you can learn the basics and take your organisation to the next level. Contact their representative for more details.

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