Question

Aggregate planning is greatly concerned with matching anticipated demand with capacity. If the two deviate, in other words, if anticipated demand differs from capacity, management may implement an approach to either alter demand, alter capacity, or a combination of both.

Describe the options focused on altering demand. Then, describe options focused on altering supply.

Answer 1

Aggregate planning basically is for a period that could be from 6 months to 18 months or average of annual production planning to allocate resources , to understand the process capability an accordingly plan the capacity , manpower, etc.

In case of Altering Demand , in case of dropping demand can lead to stock increase, inventory increase and many other problems , but that can be controlled by applying demand driven supply chain, so that is you will start producing when demand arise , for example decide the optimal stock in the warehouse that is for example only 2 days stock is not a problem in warehouse, and than on real time system get the daily demand from the customer and deliver daily instead of weekly or monthly to customer, shift your finished good material to customer warehouse , by this process if oil case demand dropped , you can control the limited increase of inventory and fall of production.tools like JIT, Kanban are the part of managing the supply chain and produce accordingly to just ion time of demand.proper monitoring system of real date can give forecast of material and demand.

If capacity is not as per demand that means supply is low and demand is high , that is even profitable but not much because you are not meeting market demand , i think demand is not in your control and capacity you can expand , so better to expand your capacity as per demand , by making a extra warehouse for raw material , taking capacity on lease and producing goods , delivering JIT to customer in order to reduce finished good storage cost.

I think forecasting is the best way to get demand and capacity planning in order to fully utilising the available resources and meeting the demand too.

i think capacity alteration to decrease is really a risk and wasting resources to be taken carefully , capacity can be increase by effectively utilising equipments , applying preventive maintenance planning, working on distortion , skills enhancement, job rotation and many more factors.increasing capacity with demand by efficiently utilising manpower and resources will be beneficial rather.