3
Matching Supply with Demand: Aggregate Planning
3.1 Overview
In a supply chain, companies must anticipate demand (through demand forecasting) and determine how to meet it. An original equipment manufacturer (OEM) or a supplier must make decisions regarding its production levels in different time periods. Should a company maintain a constant production level, thus holding inventory during the low demand period and keeping a backlog during the high demand period? Or should a company adjust its production level based on the demand, and subcontract some of its production when the demand exceeds its production capacity? These are the type of questions that can be answered through aggregate planning.
Aggregate planning helps companies ...
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