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Aggregate Planning & SOP

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by

Angad Gill

on 31 October 2014

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Transcript of Aggregate Planning & SOP

Aggregate Planning & SO(a)P
Sales and Operations Planning is the process of gathering and planning processes between parts of a firm and their supply chain.

Aggregate Planning is the product of Sales and Operations Planning, where a plan is made for an entire line or family of products.

Sales and Operations Planning

Balancing resources and forecast demands
Aligning an organization's competing demands with the supply chain
Linking plans with operations in other areas
Relies on inputs from both within the firm and out in the marketplace.
Process begins with input from the market, and Research Technology
Using this data a firm can make product decisions which will affect later factors in planning. Such as the creation of a product itself based on a need or demand expressed by the market.
The decisions made based on external influence are taken into consideration when making process and capacity decisions
Where a need may be expressed in the market, for a high volume of a product, yet supply chain and resource constraints restrict the volume, decisions can be made to lower the cost of production, the time of production, the product may be altered for better storage, or to simply accommodate the concerns put forth by the supply chain.
Forecast Demands, Supply chain support, inventory, and workforce constraints form an overall Sales and Operations plan. SOP's for multiple products in a category or family of products are combined to form Aggregate Plans.
Aggregate Planning
A plan including forecast levels for product families of finished goods, inventory, shortages, and changes in the workplace.
Comprised of many Sales and Operation Plans.
The Four Generic Features of Effective Aggregate Plans
A logical unit of measure
A forecast of demand for a reasonable planning period
A method to determine relevant costs.
A model to combine forecasts and costs so that the scheduling decisions can be made for the planning period.
The objective of aggregate planning is generally to meet forecast demand while minimizing cost over the planning period
Aggregate plans are useful in more administrative environments as they are used to simplify data and allow for a more easily generalized planning.

In the manufacturing environment, aggregate plans are more harmful because manufacturers need to know data about individual products
Aggregate Planning in the Airline Industry
Aggregate planning in the Airline industry is fairly complex because of the many factors to take into account.
Planes
Flight personnel
Ground personnel
Seasonal demand
Plane capacity
Technological advance
And many others...
Forecast Demand
Forecasting demand in the airline industry is easier than in other industries due to the fact that travel is a service which varies upon seasonal, economic, and political change.
Travel spurred on by economic and political change generally has a time-lag, allowing airlines time to prepare for surplus travel demand, or lack thereof.
*Example* lowering fuel prices could spur on the lowering of prices for air travel, and subsequently raise demand.
Considering Capacity
Airline capacity is important to consider after forecast demand.
Along with this, the airline must also pay close attention to what kind of seats are on a plane.
Airlines must also keep in touch with advances in technology, allowing for larger plane capacity.
Labor Capacity
Airlines have to keep track of demand, and workforce very closely with demand.
As well as this they must manage workers training, compensation for injuries, safety, retirement, and vacations.
Airlines also have to make sure that they are not over-employed for the current, or forecast demand.
Southwest Airlines
Southwest airlines, back during the days of when they were only flying in Texas, originally only carried Boeing 737 planes, due to there compact size, and ability to fill and fly more quickly and effectively than larger capacity planes.
As they expanded to the rest of the nation they bought larger 757 planes, because the 737 was less efficient for farther travel.
The Boeing Company
In 1968, Commercial Airline Group, was the largest portion of The Boeing Company. When it was re-evaluated for it's employment, more than 60% of it's employees were laid off. This as a business decision (occurring between 1968 and 1971) was very smart, cutting down on employment costs.

The backlash caused major unemployment in Seattle, where the company was centered.
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