Approaches to aggregate planning


An aggregate plan takes into consideration the overall level of output and the capacity that is required to produce it. There are two basic approaches to estimating the capacity that will be required to produce an aggregation or grouping of a company’s products.

1. Top down approach to aggregate planning involves development of the entire plan by working only at the highest level of consolidation of products. It consolidates the products into an average product and then develops one overall plan. This plan is disaggregated to allocate capacity to product families and individual products.

2. A bottom-up approach or sub-plan consolidation approach, involves development of plans for major products or product families at some lower level, within the product line. These sub-plans are then consolidated to arrive at the aggregate plan, which gives the overall output and the capacity required to produce it.

The bottom-up approach is more widely used. This approach starts with plans for major products or product families and aggregates (sums) the impact that these plans have on the capacity of the company. If the capacity requirements for individual plans appear to sum up to a satisfactory overall use of the company’s resources, the plans are accepted to be implemented strategically. If not, some of the individual plans are revised to improve the overall impact of the aggregate plan. Individual plans are revised until a desirable aggregate plan is evolved.

In top down approach, an overall or aggregate rate of production is developed, which is then allocated to the individual components (i.e., disaggregated).

Top down Aggregate Planning

With this approach, the desirable overall plan is developed for the periods in the planning horizon, with the plan for the first few periods being fairly firm. This approach rests on the assumption that if the proper amount of total capacity is available, the right amount of capacity for all of the parts will be available.

Aggregate plan for a top down approach is performed in terms of a pseudo-product which is a fictitious product that represents the average characteristics of the entire product line to be planned. However, difficulties may arise in Desegregation, if the product mix varies overtime and the different products require different production resources.

Bottom-up Aggregate Planning

This is also called as resource requirement planning (sometimes called rough-cut capacity planning) which is usually used in conjunction with material requirement planning (MRP-1) both capacity and materials must be available for products to be made and hence material plans need to be coordinated with a more detailed production plan.

Rough-cut Capacity Planning

This is done in conjunction with the tentative mater production schedule to test its feasibility in terms of capacity before the Master Production Schedule (MPS) is finalized.

This ensures that a proposed MPS does not inadvertently overload any key department, work centre or machine, making the MPS unworkable. Although the check can be applied to all work centers, it is typically applied only to the critical work centers that are most likely to be bottlenecks. It is a quick and inexpensive way to find and correct gross discrepancies between the capacity requirements of the MPS and the available capacity.