The week 3 of MIS 373 introduced two main
concepts in operations management: Statistical
Process Control (SPC) and aggregate planning. The instructor mostly focused on
explaining how organizations do aggregate planning and basic techniques
companies can use for aggregate planning. Based on what we have learned so far,
the goal of aggregate planning is achieving a production plan that will
effectively utilize the organization’s resources to satisfy overall demand. The
reason why organization should implement aggregate planning is that it impossible
to predict with accuracy the timing and volume of demand for individual items;
aggregate planning can help synchronize flow throughout the supply chain.
Usually, aggregate planners are concerned with two categories: demand quantity
and timing of demand.
In the
real business world, it is important to utilize aggregate planning throughout
operation procedures. The article titled “How Do Inventories Influence
Aggregate Planning?” introduces how aggregate planning is involved in inventory
management. According to the article, aggregate planning is used in map out future
production plans and resource needs for the next couple months. In this case,
inventory level becomes the key factor in aggregate planning, because having a
proper inventory is necessary to meet production level and customer demand.
For any
kind of manufacturing companies, one main purpose of aggregate planning is to
find the balance between having enough inventory on hand, but not too much. The
ideal balance point is one of the most important issues for the company to
consider. Therefore, aggregate planning is important to learn, which helps
organizations to know the accurate balance point. Aggregate planning allows leaders
of the company to know resource needs across the entire organization to ensure
adequate supplies are purchased in the next couple months. It also effectively reduces
operation costs, because aggregate planning helps companies avoid buying more inventory
than they need, which makes for higher costs of storage.
Also,
relationship matters. Relationships with suppliers may influence aggregate
planning significantly. For example, if one firm has strong ties with their
materials suppliers, it can plan with more flexibility in completing inventory
orders as needed. However, it one company has weak relationship with their
suppliers, it may take longer time for them to plan their inventory purchases. Therefore, keeping a good relationship with suppliers can help manufacturing companies
make better aggregate planning.
References:
(1) Srikar Velichety Eller MIS 373 Summer Session 2, 2014 slides, CH 11
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