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Aggregate Planning Process: Services vs. Manufacturing Strategies

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  • 0:00 What Is Aggregate Planning?
  • 1:14 Planning for Services
  • 2:20 Planning for Manufacturing
  • 3:15 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

Planning for the big picture can be tough for any business, but aggregate planning is essential for meeting demand at minimal costs. In this lesson, we'll further explore aggregate planning for both services and manufacturing.

What Is Aggregate Planning?

If you've ever owned or even worked for a company, you know that generally all aspects of business must be planned out in advance. Production levels must be determined in advance, inventory must be ordered with time for delivery, there must be a plan for reducing backlogs, and targeted sales must be forecasted. We plan out these and other aspects of business during a process called aggregate planning. Aggregate planning is the process of planning that includes developing, evaluating, and maintaining a broad and approximate schedule of the operations of an organization. This schedule usually spans three to eighteen months of business, and the aim is to prepare far enough in advance to fulfill forecasted demand at minimal cost.

There are two main strategies for aggregate planning. The first involves using complex mathematical formulas to predict demand and plan accordingly. The other is trial and error, which is much more informal and inexact. Without aggregate planning, things would be done in a slap-dash manner. The demand would like not be fulfilled, and the business would be at risk of failure. However, aggregate planning works differently for different types of businesses. Let's take a look at how aggregate planning works in manufacturing and for services.

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