Operations Management: An Integrated Approach, 5th Edition

AGGREGATE PLANNING OPTIONS

Companies can choose from two groups of options when formulating an aggregate plan. The first group, demand-based options, includes two reactive options and one proactive option. These are

Demand-based options

A group of options that respond to demand fluctuations through the use of inventory or back orders, or by shifting the demand pattern.

• Reactive options, in which the operations department uses inventories and back orders to react to demand fluctuations.
• The proactive option, in which marketing tries to shift the demand patterns to minimize demand fluctuations.

An example for the proactive option is the early-bird dinners offered by some restaurants. The reduced price for a specific time period encourages customers to dine earlier and spreads the demand out over a longer period of time.

The second group, capacity-based options, changes output capacity to meet demand through the use of overtime, undertime, subcontracting, hires, fires, and part-timers or temps. These options are required when current capacity isn't equal to current demand. Each of these offers relief for fluctuating demand, but each has cost and operational implications for the company. Let's look at each option individually.

Capacity-based options

A group of options that allow the ...