Supply Chain and Logistics Management Made Easy: Methods and Applications for Planning, Operations, Integration, Control and Improvement, and Network Design

Chapter 5. Supply Planning: Meeting Customer Demand

After we’ve made our best estimate of a demand forecast for goods or services and netted it against our current and targeted inventory position to determine our future inventory requirements, it becomes necessary to make sure that we have enough capacity to meet the anticipated demand.

When we think of planning the capacity for a goods or service business, we typically think in terms of three time horizons:

Long range (1-3+ years) – Where we need to add facilities and equipment that have a long lead time.

Medium range (roughly 2 to 12 months), we can add equipment, personnel, and shifts; we can subcontract production and/or we can build or use inventory. This is known as “aggregate planning”. ...