Aggregate Planning and Globalization Strategies

Aggregate Planning

: The process of developing, analyzing and maintaining a preliminary, approximate schedule of the overall operations of an organization. It contains targeted sales forecasts, production levels, inventory levels and coster backlogs. It is intended to satisfy the demand forecast at a minimum cost and is an attempt to balance capacity and demand in such a way that costs are minimized. Aggregate planning is considered to be intermediate-term (2-18 months) (Short term till 2 months; Long term over 18 months).

Options to Increase Demand


  • Pricing (reduce the price)
  • Promotion (advertise)
  • Back ordering (delivering in different day to increase the price)
  • New demand creation (make costers want for something extra)
  • Hire/lay off
  • Overtime
  • Part time or casual labor
  • Inventory
  • Sub contracting
  • Cross-training


:Level Strategy: The aggregate plan maintains a steady production rate and/or a steady employment level. The firm must raise or lower inventory levels in anticipation of increased or decreased levels of forecast demand. The company can use a backlog or backorder. Chase Strategy: It implies matching demand and capacity period by period. It allows inventory to be held to the lowest level possible.

Reasons to Globalize


  • Improve the Supply Chain: Locating facilities closer to unique resources
  • Reduce Costs: Foreign locations with lower wage rates can lower direct and indirect costs
  • Trade agreements can lower tariffs: Maquiladoras (free trade zone in Mexico); World Trade Organization (WTO); European Union (EU)
  • Improve Operations: Understand differences between how business is handled in other countries
  • Understand Markets: Interacting with foreign customers, suppliers, competition can lead to new opportunities
  • Improve Products: Remain open to free flow of ideas
  • Attract and Retain Global Talent: Offer better employment opportunities
  • Cultural and Ethical Issues: Cultures can be quite different


: Tells the organization where it is going.


: Tells the organization how to get there.

Factors Affecting Mission

: Philosophy and Values; Profitability and Growth; Public Image; Benefit to Society; Customers; Environment.

Strategies for Competitive Advantage


  1. Differentiation – better, or at least different
  2. Cost leadership – cheaper
  3. Response – more responsive

Strategy Development Process


  1. Analyze the Environment
  2. Determine the Corporate Mission
  3. Form a Strategy

Sequencing Jobs

: Operations schedules are short-term plans designed to implement the sales and operations plan. Often, several jobs must be processed at one or more workstations. If schedules are not carefully planned to avoid bottlenecks, waiting lines may develop.

Scheduling Definitions


  • Routine: The operation to be performed, their sequence, the work centers visited the time standards
  • Bottleneck: A resource whose capacity is less than the demand placed on it
  • Slack/Reserve: The time that a job can be delayed & still finish by its due date
  • Queue: A waiting line
  • Job Sequencing Considerations: Techniques rules to allocate the relative priority of jobs at a work center
  • Priority rules: Decision rules to allocate the relative priority of jobs at a work center
  • Local priority rules: Determines priority based only on jobs at that workstation
  • Global priority rules: Also considers the remaining workstations a job must pass through

The Objective Function for a Job Shop Scheduling Problem

: Minimizing the total time when the works are waiting to be done; Minimizing the time elapsed between starting first work and finishing last work; Minimizing total delay; Minimizing the cost of the delay; Minimizing the cost of maintenance of products in stock.


: Computer-based inventory management system designed to assist production managers in scheduling and placing orders for items of dependent demand. MRP provides answers for several questions: What items are required? How many are required? When are they required? MRP breaks down inventory requirements into planning periods so that production can be completed in a timely manner while inventory levels are kept to a minimum. MRP can help production managers plan for capacity needs and allocate production time. Companies must maintain current and accurate bills of materials, part numbers, and inventory record if they are to realize the potential benefits of MRP. MRP systems simultaneously meet three objectives: Ensure that materials are available for production and products are available for delivery to customers; Maintain the lowest possible material and product levels in store; Plan manufacturing activities, delivery schedules and purchasing activities. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well.



  • The bill of materials: A listing of all the raw materials, component parts, subassemblies, and assemblies required to produce one unit of a specific finished product
  • The master schedule: Outlines the anticipated production activities of the plant
  • The inventory records file: Provides an accounting of how much inventory is already on hand or on order

Advantages of MRP

: Helping production managers to minimize inventory levels and the associated carrying costs; Track material requirements; Determine the most economical sizes for orders; Compute quantities needed as safety stock; Allocate production time among various products; Plan for future capacity needs.

Disadvantages of MRP

: Relies upon accurate input information; The systems can be difficult, time consuming, and costly to implement.

Conducting MRP by Hand

: Drawing one table for the finished product (parent) and each component in its structure (child). The following information will be noted in each table: Gross demand; Inventory; Net demand; Planned order Receipts.


: Transmission, by the subject leader, of manufacturing tasks that must be fulfilled by the led subject in order to achieve the targets.

Goals of Launching in Fabrication


  1. Establish standardized costs with raw material and labor per unit of output and total manufacturing products within production programs
  2. Ensure gradual complete information needed by workers for product execution, depending on the requirements of programming sub-activity
  3. Rationalize economic documentation to direct executants
  4. Reduce displacements of direct executants to procure and return documents
  5. Use modern systems of launch in fabrication to ensure the reduction of production cost and increase the efficiency in providing information necessary for the execution and dimensioning production costs



  • The Supply/Material Requisition Form: Ensures launch in fabrication of raw materials
  • The Work Order: Ensures launch in fabrication labor costs
  • The Material Delivery Bill: Product identification document on manufacturing flow
  • The Waybill: A document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods