Map
Framework

Aggregate planning strategies

The question it answers

A production manager facing seasonal swings in demand must choose between hiring, overtime, subcontracting and building stock: which mix costs least across the planning periods?

Origin
Chopra, 2019, ch. 8; Slack et al., 2022, ch. 11
Diagram type
Comparison table
Level of analysis
Firm
Topics
Supply chain & operationsCorporate finance
Delivery lorry pulling a chain of linked glass boxes, icon for supply chain

Diagram

Aggregate planning strategies

CriterionChase: follow demandFlexibility: vary hoursLevel: steady outputHybrid
WorkforceVaries with demand (hire, lay off, add or idle machines)Stable, hours worked varyStable, constant output ratePartly adjusted
InventoryLowLow, but lower machine utilisationBuilds and drains with the season, may carry backlogDepends on the mix
Main toolsHiring and firing, adding or idling machinesOvertime, flexible schedulesStockpiling, carrying backlogAll three combined
Fits whenHolding stock is costly and changing capacity is cheapHolding stock is costly, machines have spare capacity and staff accept flexible schedulesHolding and backlog costs are lowMost real cases

When to use it, and when not to

Use it when

Choose the cheapest feasible option after costing each period.

Pitfalls

Pitfall

Applying one pure strategy to every product line. Slack et al. note that a level capacity plan suits neither perishable goods, fast-changing fashion lines nor made-to-order products. Chopra adds that hiring and laying off to follow demand hurts morale and is hard to do at short notice, so planners usually settle on a hybrid.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Chopra, S. (2019) Supply chain management: strategy, planning, and operation (7th global edn). Harlow: Pearson.No DOIpearson.comCited in 4 articles
  2. Slack, N., Brandon-Jones, A. and Burgess, N. (2022) Operations Management (10th edn). Harlow: Pearson.No DOIpearson.comCited in 3 articles