For many Indian SME manufacturing companies, one of the biggest challenges is maintaining a balance between demand and production. A lack of proper aggregate planning in the supply chain leads to stockouts, overproduction, increased costs, and inefficiencies that directly affect the revenue. Without a strategic approach, it becomes difficult to manage production schedules with market demand, manage resources efficiently, or meet customer expectations. This is where aggregate planning plays an important role, making sure that production processes are optimized to meet demand while controlling costs and maintaining operational efficiency.
In this blog post, we will understand what aggregate planning is, its role in improving supply chain management, key strategies, processes, and the best practices to follow in a manufacturing company.
Understanding Aggregate Planning In Supply Chain
Aggregate planning in supply chain management can be useful when you need an accurate strategy to plan your procurement process in advance. Manufacturing companies can predict the raw materials or goods that are required to produce the final products. The right aggregate planning supply chain also helps you contact the vendor several months before the shortage of raw materials. Aggregate planning helps you maintain sustainable production operations.
What Is Aggregate Planning?
Aggregate planning is the systematic approach to control inventory levels. It is the first step in planning the procurement process, which includes identifying the market demand, selecting the right supplier, and placing the PO (purchase order) at the right time. The main aim of aggregate planning in supply chain is to maintain the manufacturing process with effective resource utilization and cost management.
The Role Of Aggregate Planning In Supply Chain Management
Aggregate plan is helpful in making decisions to procure the raw materials and plan the production based on your market forecast. The main role of aggregate planning in supply chain is to help manufacturers accurately forecast the raw materials to avoid stock-keeping. Using the right inventory management software can allow you to schedule the production and manufacture the product that is actually needed. The aggregate production planning allows you to contact the suppliers before the peak months and procure the raw materials on time. Planning your procurement can mitigate the risk of stockouts or stock overflow in warehouses and reduce the inventory holding cost. You can easily meet your customer demand even in the most demanding months and improve customer satisfaction.
Key Strategies For Effective Aggregate Planning
Here are some effective strategies and methods that will help you predict the upcoming demands and plan the resources and procurement accordingly.
Aggregate Planning Strategies
- Chase Strategy: It aims to adjust production rates to match the market demand. The process of aggregate planning includes lowering the inventory level as per the customer demand.
- Level Strategy: This includes maintaining consistent production while observing the market demand. You need to increase or decrease the production as per the consumer requirement and maintain a consistent workflow.
- Hybrid Strategy: This aggregate planning techniques is the combination of chase and level strategies for optimal results. You need to maintain the required inventory level while consistently producing to match consumer needs.
Methods For Aggregate Planning
Here are the most common and easy methods for aggregate planning that will help you balance supply and demand with minimized costs and improve the overall manufacturing operations.
- Graphical And Charting Methods: It includes a graphical representation to compare the needs through a trial and error approach. The chart and graphics also include the cut-and-try method, which includes manual practice to understand the needs of the workforce, production planning and control, and inventory level.
- Mathematical Models: It includes numerous methods for aggregate planning, such as linear programming, to identify the number of workers and machines to be used for optimal results. It also includes integer programming, global programming, and transportation models to simplify supply management.
- Simulation Models: It is a computer-based technique that helps SME manufacturers demonstrate real-world processes virtually. The technique may include Monte Carlo Simulation, System Dynamics Models, and What-If Analysis.
The Process Of Aggregate Planning
SMEs in the manufacturing industry need to take several steps to have a big-picture of the complete operational management that we have discussed below:
Steps In Aggregate Planning
- Demand Forecasting: Projecting future demand by using historical sales information and data-driven analytics.
- Capacity Planning: Assessing the maximum production capacity across manufacturing facilities by analyzing the equipment functionality, workforce needs, and budget.
- Developing the Plan: Create aggregate planning strategies that are best suitable to your demand forecast and business objectives.
- Implementation And Monitoring: Take an actionable step to execute the plan using project management methods, regularly monitor the metrics, and adjust it if needed.
Aggregate Production Planning In Operations Management
The** importance of aggregate planning **plays a big role in understanding the market demand in advance, and it has several benefits, as discussed below.
- You can automate the production schedule to manufacture the goods with no downtime.
- An effective **aggregate production planning **allows you to better use the resources and manufacturing facilities.
- Planning your resources helps in effective warehouse management and reduces costs in inventory storage.
- You can improve the transportation of goods with aggregate planning in supply chain management.
- It helps reduce downtime for the on-time delivery of finished goods.
Best Practices In Aggregate Planning
You need to develop the right strategy, use effective **advanced planning and scheduling software, **and follow several steps for the best practice.
- Choose the right APS (Advanced Planning and Scheduling) software to automate your aggregate production planning in operations management.
- Build an effective collaboration across sales, production, and supply chain teams to execute your aggregate planning best practices as per the business needs.
- Have a clear picture of orders your plan can fulfill by analyzing the historical data and current information from various departments.
- Keep a close eye on the workforce, machinery, and other equipment to make adjustments if needed.
- Review your plan regularly and conduct changes as per the operational needs and market demand.
Tools And Technologies In Aggregate Planning
Advanced planning and scheduling software has now become an important aspect to match the increased market demand and provide fast order delivery to customers. This software can easily integrate with your existing ERP software or any other business management system. It can provide you with the current and historical data of your manufacturing business and help you make an informed decision to simplify your supply chain operations. The aggregate planning in supply chain examples includes solid demand forecasting, production capacity, and limitation of capital. You can easily plan your procurement life cycle, collaborate with your supplier, and gain the raw materials for effective supply chain management.
Make Effective Aggregate Planning Strategies With TranZact
Aggregate planning in supply chain is important to analyse the market trend and plan your manufacturing operations beforehand. You need to follow the best practices to simplify the procurement of raw materials, schedule production, maintain inventory levels, and many more. TranZact’s advanced planning and scheduling software helps you automate your production process and warehouse management with effective supply chain management. It can be implemented in just 14 days. Try TranZact now to make an effective aggregate plan!
FAQs
1. What is the role of aggregate planning in supply chain management?
The role of aggregate planning in supply chain management includes assessing production capacity, inventory levels, resource utilization, and many more.
2. What are the common strategies used in aggregate production planning?
The common strategies used in aggregate production planning are:
- Chase strategy
- Level strategy
- Hybrid strategy
- Linear Programming
- Simulation Method
- Cost-cutting Method
3. Can you provide examples of aggregate planning in supply chains?
Yes. A few examples of aggregate planning in the supply chain include equipment production for large construction, seasonal goods manufacturing for short duration, automobile manufacturing to meet huge market demands, and increased production for specific sales offers.
4. What are some best practices for effective aggregate planning?
The best practices for effective aggregate planning are:
- Analyze the market trend and demand.
- Accurately plan the production capacity.
- Identify the resource availability.
- Optimize inventory management.
- Collaborate across departments.
- Monitor the progress.
