Once it is known for sure what is the difference and similarity between ‘productivity’ and ‘production’ and other basic principles, it is time to establish the plans. If you want to create strategies for the production of your business, it is recommended to know what benefits, advantages and disadvantages has an aggregate production plan.
What is aggregate production / planning
Production or aggregate planning refers specifically to a proposal in which production plans are established in shorter periods. In most cases, aggregate planning establishes objectives within periods of less than 18 months.
In fact, aggregate planning is often handled even in periods between 3 and 6 months. It could be said that this type of production focuses on immediate development, something that could be useful to improve production in relatively short periods.
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Aggregate planning is expressed in most cases in production units, in other words, in the number of products that are planned to be made in a given time. In any case, aspects such as working hours and those things typical of production are also considered.
An intrinsic characteristic of this production system is that demand is analyzed and based on it, the plan is established. The goal is to satisfy the product demand and based on this, the pertinent decisions are made. Clearly, to better understand all the information below, it is imperative to know production planning and inventory control.
The benefits and advantages of an aggregate production plan
- The steps to follow will be analyzed in depth: Taking into account aspects such as the company’s total production capacity and demand, action plans will be established. Thanks to this, costs, workers and finally the development of production are taken into account. In conclusion, a good performance is usually obtained when the demand is stable.
- Planning the most suitable production: Analyzing demand has the advantage of better planning of production. Thanks to this planning, the working hours and aspects such as the raw material to be used are established. It is usually efficient for the employee, since they will have the criteria established from the beginning.
- Overhead costs are lowered: Knowing the importance of cost and production theory and employing methods such as aggregate production planning is often beneficial. This method, which is specifically based on demand to establish action plans, results in low costs, since only the personnel and the required raw material will be used.
The Disadvantages of an Aggregate Production Plan
- It may entail extra expenses: It might seem like a contradiction, since we noted earlier that overhead costs are lowered. Even so, if the industry / company is not fully developed, planning can lead to extra expenses. For example: training, infrastructure improvement and other factors to achieve the objectives.
- Somewhat inefficient when demand is not stable: The aggregate production plan directly contemplates the demand for the product. When the demand for a product / service is far from the established parameters, inefficiency is incurred, which could lead to losses, whether the demand is higher or lower. In fact, it is one of the reasons why raw material and production costs increase.
- The nature of the establishment should be analyzed: This is not properly a disadvantage, however, the nature of the business must be taken into account. In variable or complex commercial premises, it can represent a great difficulty for aggregate production plans.
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