Aggregate Capacity Planning Lecture # 5 Aggregate Capacity Planning Lecture # 5

Aggregate Capacity Planning Aggregate means in whole, total, or combine but formed of different units Seasonal variations in demands or uneven demands Organizations must asses their capacity needs and costs in order to handle demands Aggregate planning is intermediate range capacity planning that typically covers a time horizon of 3 to 12 months and may extend to 18 months

Aggregate Capacity Planning It is useful for companies with seasonal or other fluctuations in demand or capacity Goal is to achieve a production plan that will effectively utilize the organizations resources to satisfy expected demand Planners must make decisions on output rates, employment levels and changes etc.

Reliability Measure of the ability of a product, service, part, or system to perform its intended function under a prescribed set of conditions. Tells about the chances of success or failure of a product or service E.g. reliability of 90% would mean that the product has 90% probability of functioning as intended and 10% of probability that it will fail

Capacity Capacity refers to the maximum number of output or the upper limit or ceiling on the load that an operating unit can handle Operating Unit: a plant, department, machine, store, room, or worker Strategic Capacity Planning: to achieve a match between the long term supply capabilities of an organization and the predicted level of long term demand

Capacity Over Capacity is producing more than capacity Under Capacity is producing less than capacity Design Capacity is the capacity achieved under ideal situation Effective Capacity is the capacity achieved under real situation

Planning Short Time: up to 3 months Intermediate: From 3 to 12 months and may extend up to 18 months Long Term: More than one year