Steps in Aggregate Capacity Planning

  • Determine the demand (i.e., sales forecast) for each product for each time period (i.e., weeks or months or quarters) over the planning horizon (6 to 12 months).
  • Determine the aggregate demand by summing up the demand for individual products.
  • Transform the aggregate demand for each time period into workers, materials, machines required to satisfy aggregate demand.
  • Identify company policies that are pertinent (e.g., policy regarding safety stock maintenance, maintaining stable workforce etc.).
  • Determine unit costs for regular time, overtime, subcontracting, holding inventories, back orders, layoffs etc.
  • Develop alternative resource plans for providing necessary production capacity to support the cumulative aggregate demand and compute the cost of each alternative plan.
  • Select the resource plan from among the alternatives considered that satisfies aggregate demand and best meets the objectives of the firm.
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