Discuss the information required for aggregate planning

What will be an ideal response?

Answer: An aggregate planner requires the following information:
• Demand forecast F t for each Period t in the planning horizon that extends over T periods
• Production costs
• Labor costs, regular time ($/hour), and overtime costs ($/hour)
• Cost of subcontracting production ($/unit or $/hour)
• Cost of changing capacity; specifically, cost of hiring/laying off workforce ($/worker) and cost of adding or reducing machine capacity ($/machine)
• Labor/machine hours required per unit
• Inventory holding cost ($/unit/period)
• Stockout or backlog cost ($/unit/period)
• Constraints:
• Limits on overtime
• Limits on layoffs
• Limits on capital available
• Limits on stockouts and backlogs
• Constraints from suppliers to the enterprise

This information is used to create an aggregate plan that in turn helps a company make the following determinations:
• Production quantity from regular time, overtime, and subcontracted time: used to determine number of workers and supplier purchase levels.
• Inventory held: used to determine how much warehouse space and working capital is needed.
• Backlog/stockout quantity: used to determine what the customer service levels will be.
• Workforce hired/laid off: used to determine any labor issues that will be encountered.
• Machine capacity increase/decrease: used to determine if new production equipment needs to be purchased or idled.

The quality of an aggregate plan has a significant impact on the profitability of a firm. A poor aggregate plan can result in lost sales and lost profits if the available inventory and capacity are unable to meet demand. A poor aggregate plan may also result in a large amount of excess inventory and capacity, thereby raising costs. Therefore, aggregate planning is a very important tool in helping a supply chain maximize profitability.