For ages, companies have made efforts to maximize profits and reduce unnecessary expenditures. Aggregated planning is one of the essential strategies used by investors to achieve their profit targets. Aggregated planning is the technique of determining the production level in order the management can have a plan for the number of products a firm needs to produce. Aggregated planning aims at helping a firm reduce the costs of operation during the entire planning horizon. It is crucial when a firm needs to satisfy demand and maximize profits (Radwan and Aarabi 2011 n.p). For example, when a firm needs to look ahead, three to eighteen months, to analyze the supply needs it needs to fulfill, aggregated planning is the best option the firm can take. The approach gives a business a very comprehensive view its supply operations and the firm can order its products for the entire planning period. By producing or purchasing the required products in bulk, the firm enjoys huge discounts and avoids shortages (Radwan and Aarabi 2011 n.p).
Aggregated planning requires some necessary input data that every business must analyze when developing this approach. To start with, the firm must produce well-documented information concerning the resources and facilities available for exploitation. This outlines the business’ production capacity and depending on its machinery, workforce, and efficiency of operation Secondly, the firm must predict the demand in units for each period in the planning horizon. Another factor that is considered is the firm’s limits on capital (Brandimarte and Villa 2013 n.p).
One crucial challenge with aggregated planning is that some business operations cannot respond to changes in demand resulted by capacity restrictions. Another problem is smoothing that refers to the extra costs incurred due to the dynamic production and workforce levels from one planning period to another(Brandimarte and Villa 2013 n.p).
Chase strategy
Some companies opt to use the strategy of producing the exact number of products that are demanded in the market. This approach is known as the chase strategy. For instance, a hotel or a restraint can decide to be preparing a meal only when a customer orders it (Soni and Kodali 2011 p.84). This means that such a hotel will end up having its production level matching exactly with the market demand. One of the significant advantages of chase strategy is that it significantly reduces the inventory expenditures. For instance, the money that the hotel could use to buy additional raw materials is eliminated. Some techniques are applied when using chase strategy (Jacobs, and Chase, 2012 n.p.).
First, the company must determine its level of production. This is mostly used by the manufacturing firms. Such a firm consistently produces goods depending on the market’s average demand. Another technique used is the make-to-order strategy. Firms using this type of strategy manufacture goods only after a customer orders it. An excellent example of this type of company is the custom-tailored clothing. Assemble-to-order is another technique of applying the chase strategy. The assemble-to-order approach mostly applies to fast food restaurants where customers direct how they want their food prepared. The last procedure is the make-to-stock strategy and firms utilize this technique by producing goods before customers order. This approach allows the firm to enjoy production efficiency through long production runs. The retail environment is a perfect example of this strategy (Soni and Kodali 2011 p.84).
The practical application of aggregated planning and chase strategy differs in a lot of aspects. Aggregated planning is straightforward to implement provided all the data specifications are met. With perfect analysis, the problems experienced during aggregate planning can be overcome. Contrary to aggregate planning, the implementation of chase strategy is often complicated in practice. These challenges are attributed to the adverse effect on the workforce morale, additional production costs, and varying production level. Scholars advise that chase study should only be applied when inventory costs are high (Soni and Kodali 2011 p.71).
Bibliography
Brandimarte, P. and Villa, A. eds., 2013. Modeling manufacturing systems: from aggregate planning to real-time control. Springer Science & Business Media.
Jacobs, F.R. and Chase, R., 2012. Operations and supply chain management: the core. McGraw-Hill Higher Education.
Radwan, A. and Aarabi, M., 2011. Study of implementing Zachman framework for modeling information systems for manufacturing enterprises aggregate planning. Simulation, 16, p.18.
Jacobs, F.R. and Chase, R., 2012. Operations and supply chain management: the core. McGraw-Hill Higher Education.
Van Weele, A.J., 2010. Purchasing and supply chain management: Analysis, strategy, planning and practice. Cengage Learning EMEA.
Soni, G. and Kodali, R., 2011. The strategic fit between “competitive strategy” and “supply chain strategy” in Indian manufacturing industry: an empirical approach. Measuring business excellence, 15(2), pp.70-89.
