Operations Management: An Integrated Approach, 5th Edition

TYPES OF AGGREGATE PLANS

Level Aggregate Plan

We categorize aggregate plans as level, chase, or hybrid plans. A level aggregate plan maintains a constant workforce and produces the same amount of product in each time period of the plan. Example 13.1 shows how to calculate the number of employees needed to produce a specified output.

Level aggregate plan

A planning approach that produces the same quantity each time period. Inventory and back orders are used to absorb demand fluctuations.

One advantage of a level production plan is workforce stability. Your company sets labor and equipment capacity equal to average demand, rather than hire excess labor or buy additional tools and equipment just to meet peak demand. In addition, the labor force is not subjected to varying work levels during the year, such as periods of layoff or undertime followed by periods of hiring and/or overtime.

EXAMPLE 13.1 Calculating the Number of Employees

Wavetop, Inc. currently has 10 employees, each producing 5 complete units per day, for a total of 50 units every workday. Calculate the number of employees needed in the company's level aggregate plan if the company has an average weekly demand of 500 units and plans on satisfying all of its demand.

• Solution:

If average weekly demand is 500 units and employees work five days per week, we need to produce 100 units per day. Thus, the workforce should be ...