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Complete Production Planning with Monetization

Aggregate Production Plan is a Production plan that prepares an aggregate plan for the entire production process. This will be done in advance from 1 year to six months to implement the process for the next process. In this entire operation, the total cost of operations are maintained to be minimum and strive to reduce the costs as much as possible. There are number of items to monetize. They are as follows.

1. Subcontracting

2. Outsourcing

3. Overtime of labor

4. Number of persons to be hired

5. Number of persons to be fired

6. Amount of inventory to be stored

7. Amount of inventory removed

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These must be followed only according to the policies of the company.

For an aggregate planner we need to completely give the details of the company so he will try to get the best of the company. They include information of the raw materials available, Forecasting process, Costs of all the raw materials and the products of the company namely ordering cost, tooling cost, manufacturing cost and many more.

Aggregate planners have to follow some aggregate strategies for planning. They are classified into 4 types. They are as follows.

1. Level Plans

2. Chase Plans

3. Hybrid Strategies

4. Complex Strategies

1. Level Plans-

This is a basic and fundamental aggregate strategy which uses a constant number for manufacturing the items of same qualities. Inventories are mostly helpful and not a time taking process.

2. Chase Plans-

This leads to minimize the inventories regarding to finished goods. But it consists of varying work force and demands.

3. Hybrid Strategies-

It leads to building up the inventory of the goods which have a high demand on the market. Workforce must be implemented in high amounts for high production and low amounts for low production.

4. Complex Strategies-

This is same as Hybrid Strategies and is a new one introduced by an analyst. Once the demand of the product gets increased, the work force employed must be high whether the work is in process or our of process.

Problems Related to Aggregate Production Planning

Even though there are many advantages of Aggregate Production Planning, there are some disadvantages of this too. Some of its problems are mentioned below-

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1. The reduction of costs may be done but they may not be effective all the times. They may result in opposite direction or negative direction to the plan.
2. When there is a sudden change in Demand of the product or Work force, Aggregate Production Planning cannot handle the change.
3. The Inventory is a major advantage and also a disadvantage too.
These are some problems associated with Aggregate Production Planing.

There are also some associated costs for Aggregate Production planing

Payroll costs-

For achieving higher work performance, the labor employed must be given sufficient amount of money. If they were paid low amount, the performance reduces. So, if the work to be done is more and the labor is paid more than this, the company get huge profits and also the crew or workers feel satisfied.

2. Costs of Overtime, Second shifts and Subcontracting-

When the workers have to work more than average like overtime, second shifts or subcontracting, they were paid more than the average.

3. Cost of Hiring-

When the demand of the production changes, the hiring capacity also changes. Excess hiring may lead to excess costs.

4. Costs of Excess Inventory-

The inventory stored is considered as excess costs as they have no use at present if the demand of the product if low.

5. Costs of Materials-

The excess supply of materials also lead to loss of the money.

These are some key points to make note of.

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