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What are the Characteristics of the Aggregate Planning?

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1. A planning horizon is considered from about 3 to 18 months, with the periodic updating.
2. Aggregate product demand, stated in the common terms is observed.
3. Aggregate resource quantities, stated in the common terms are observed.
4. Influence both the supply and the demand by adjusting the production rates, workforce levels, the inventory levels etc., but the facilities cannot be expanded.

Aggregate planning strategies

1. Active strategy –
• Tries to control the fluctuations, which are in the demand by focusing on the demand management.
• Use the pricing strategies.
• Make use of the methods like the advertising and the promotion.
• Do not meet demand.
• Develop counter – cyclical products.
• Request the customers to back order or advance order.

2. Passive strategy –
• Also called as the reactive strategy.
• Tries to control the fluctuations in demand by focusing on the supply and capacity management.
• Vary size work force by hiring or lay – offs.
• Vary utilization of the labour and also of the equipment through the overtime or the idle time.
• Build or draw from the inventory.
• Sub – contract production.
• Negotiate co – operative arrangements with the other firms.
• Allow the back – logs, back orders and/or stock outs.

3. Mixed strategy –
• Joins or combines the elements of both of the active strategy as well as the passive or the reactive strategy.
• Firms will usually use some combination of the two.

This article has been written by KJ Singh a MBA Graduate from a prestigious Business School In India
Article Published:October 15, 2010
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