Aggregate planning is an intermediate term planning decision.

It is the process of planning the

quantity and timing of output over the intermediate time horizon (3 months to one year).
Within this range, the physical facilities are assumed to –10 be fixed for the planning period.
Therefore, fluctuations in demand must be met by varying labor and inventory schedule.
Aggregate planning seeks the best combination to minimize costs.

Aggregate Planning Strategies

The variables of the production system are labor, materials and capital. More labor effort is
required to generate higher volume of output. Hence, the employment and use of overtime
(OT) are the two relevant variables. Materials help to regulate output. The alternatives
available to the company are inventories, back ordering or subcontracting of items. These
controllable variables constitute pure strategies by which fluctuations in demand and
uncertainties in production activities can be accommodated by using the following steps:
1. Vary the size or the workforce: Output is controlled by hiring or laying off workers in
proportion to changes in demand.
2. Vary the hours worked: Maintain the stable workforce, but permit idle time when there is a
slack and permit overtime (OT) when demand is peak.
3. Vary inventory levels: Demand fluctuations can be met by large amount of inventory.
4. Subcontract: Upward shift in demand from low level. Constant production rates can be met
by using subcontractors to provide extra capacity.

Aggregate Planning Guidelines

The following are the guidelines for aggregate planning:
1. Determine corporate policy regarding controllable variables.
2. Use a good forecast as a basis for planning.
3. Plan in proper units of capacity.
4. Maintain the stable workforce.
5. Maintain needed control over inventories.
6. Maintain flexibility to change.
7. Respond to demand in a controlled manner.
8. Evaluate planning on a regular base.

Scheduling can be defined as “prescribing of when and where each operation necessary to
manufacture the product is to be performed.” It is also defined as “establishing of times at
 which to begin and complete each event or operation comprising a procedure”. The principle
aim of scheduling is to plan the sequence of work so that production can be systematically
arranged towards the end of completion of all products by due date.

Principles of Scheduling
1. The principle of optimum task size: Scheduling tends to achieve maximum efficiency when
the task sizes are small, and all tasks of same order of magnitude.
2. Principle of optimum production plan: The planning should be such that it imposes an equal
load on all plants.
3. Principle of optimum sequence: Scheduling tends to achieve the maximum efficiency when
the work is planned so that work hours are normally used in the same sequence.
Inputs to Scheduling
1. Performance standards: The information regarding the performance standards (standard
times for operations) helps to know the capacity in order to assign required machine hours
to the facility.
2. Units in which loading and scheduling is to be expressed.
3. Effective capacity of the work centre.
4. Demand pattern and extent of flexibility to be provided for rush orders.
5. Overlapping of operations.
6. Individual job schedules.

Scheduling Strategies
Scheduling strategies vary widely among firms and range from ‘no scheduling’ to very
sophisticated approaches. These strategies are grouped into four classes:
1. Detailed scheduling: Detailed scheduling for specific jobs that are arrived from customers is
impracticable in actual manufacturing situation. Changes in orders, equipment breakdown,
and unforeseen events deviate the plans.
2. Cumulative scheduling: Cumulative scheduling of total work load is useful especially for long
range planning of capacity needs. This may load the current period excessively and under
load future periods. It has some means to control the jobs.
3. Cumulative detailed: Cumulative detailed combination is both feasible and practical
approach. If master schedule has fixed and flexible portions.
4. Priority decision rules: Priority decision rules are scheduling guides that are used
independently and in conjunction with one of the above strategies, i.e., first come first
serve. These are useful in reducing Work-In-Process (WIP) inventory.
Types of Scheduling
Types of scheduling can be categorized as forward scheduling and backward scheduling.
 Now-a-days, customers demand products/services with greater durability and reliability
at the most economic price. This forces producers to strictly follow quality procedures
right from design till shipment and installation of the products. So that goal of any
competitive industry is to provide a product or service at the most economical costs,
ensuring full customer satisfaction. This can be achieved through Total Quality
Management (TQM), because, quality is not a technical function, but a systemic process
extending throughout all phases of the business, e.g., marketing, design, development,
engineering, purchasing, production/operations.

 Total quality management (TQM) is the continual process of detecting and reducing or
eliminating errors in manufacturing, streamlining supply chain management, improving
the customer experience, and ensuring that employees are up to speed with training.
 The focus of the process is to improve the quality of an organization's outputs, including
goods and services, through continual improvement of internal practices.
 Total quality management aims to hold all parties involved in the production process
accountable for the overall quality of the final product or service.

Primary Principles of Total Quality Management

 TQM is considered a customer-focused process and aims for continual improvement of
business operations. It strives to ensure all associated employees work toward the
common goals of improving product or service quality, as well as improving the
procedures that are in place for production.

 Special emphasis is put on fact-based decision making, using performance metrics to

monitor progress; high levels of organizational communication are encouraged for the
purpose of maintaining employee involvement and morale.

Total Quality Management principles

Total Quality Management has a number of basic principles which can be converted to the
figure below.
IT IMPACT ON ORGANIZATION DESIGN AND STRUCTURE
1. New IT enables the organization to do more work with fewer people. Eg:- ERP and other
IT systems automatically handle many administrative duties, reducing the need for
clerical staff. System can automatically generate payment estimates and handle other
administrative processes that used to take hours of labour.
2. SMALLER ORGANIZATIONS
3. Internet based businesses exist almost entirely in cyberspace. There is no formal
organization in terms of a building with offices, desks and so forth.

DECENTRALIZED ORGANIZATIONAL STRUCTURES

Technologies that enable people to meet and coordinate online can facilitate
communication and decision making among distributed ,autonomous groups of workers.
 Information that may have previously been available only to top managers at headquarters
can be quickly and easily shared throughout the organization, even across great
geographical distances.
IT enables organizations to reduce layers of management and decentralize decision making.
Managers use the intranet to communicate with one another and to stay aware of
organizational activities and outcomes.
Intranets and other networks can connect people even when their offices, factories, or
stores are scattered around the world.
IT helps to improve coordination and communication within the firm
IMPROVED HORIZONTAL COORDINATION

IMPROVED INTERORGANIZATIONAL RELATIONSHIPS • IT can also improve horizontal

coordination and collaboration with external parties such as suppliers, customers, and partners.
• New IT has increased the power of consumers by giving them electronic access to wealth of
information from thousands of companies just by clicking a mouse. • Consumers also have
direct access to manufactures, altering their perceptions and expectations regarding
convenience, speed and service.

ENHANCED NETWORK STRUCTURES • Technology has enabled creation of the network

organization structure, in which a company subcontracts most of its major functions to
separate companies that are connected electronically to the headquarters organization. • The
speed and ease of electronic communication makes the network structure a viable option for
companies that want to keep costs low but expand activities or market presence.

The advantages/beneficial effects of industrialization/industrial operations are given below:

1. The growth of industries has resulted in large scale production of goods which are
available to the consumer at much cheaper rates. More affordable, more accessible
2. There is saving of time and labor.
3. Industrialization has resulted in a considerable rise in the standard of living of the
people.
4. A number of substitutes in consumer goods are available. The customer get wide variety
of choices.
5. There are means to control and check the colossal wastage of human energy that can be
used otherwise.
6. Industrialization creates new job opportunities, leading to the removal of poverty to a
great extent.
7. Industrialization has also resulted in the development of new modes of transport
making quick export and import possible. The world has become a small place.
Material management is the planning, directing, controlling and co-ordination of all those

activities concerned with material and inventory requirements, from the point of their
inception to their introduction into manufacturing process.

As per De Rose all those functions which start with the procurement of materials and end with
completion of manufacturing are a part of material management.

The importance of material management may be summarized as follows:

1. The material cost content of total cost is kept at a reasonable level. Scientific purchasing

helps in acquiring materials at reasonable prices. Proper storing of materials also helps
in reducing their wastages. These factors help in controlling cost content of products.

2. The cost of indirect materials is kept under check. Sometimes cost of indirect materials

also increases total cost of production because there is no proper control over such
materials.

3. The equipment is properly utilized because there are no break downs due to late supply of
materials.

4. The loss of direct labour is avoided.

5. The wastages of materials at the stage of storage as well as their movement is kept under
control.

. The supply of materials is prompt and late delivery instances are only few.

7. The investments on materials are kept under control as under and over stocking is avoided.

8. Congestion in the stores and at different stages of manufacturing is avoided.

The following functions are assigned for material management:

1. Production and Material Control:

Production manager prepares schedules of production to be carried in future. The

requirements of parts and materials are determined as per production schedules. Production

schedules are prepared on the basis of orders received or anticipated demand for goods. It is

ensured that every type or part of material is made available so that production is carried on
smoothly.

2. Purchasing:

Purchasing department is authorized to make buying arrangements on the basis of requisitions

issued by other departments. This department keeps contracts with suppliers and collects

quotations etc. at regular intervals. The effort by this department is to purchase proper quality

goods at reasonable prices. Purchasing is a managerial activity that goes beyond the simple act

of buying and includes the planning and policy activities covering a wide range of related and
complementary activities.

Non-Production Stores:

Non-production materials like office supplies, perishable tools and maintenance, repair and

operating supplies are maintained as per the needs of the business. These stores may not be

required daily but their availability in stores is essential. The non-availability of such stores may
lead to stoppage of work.

4. Transportation:

The transporting of materials from suppliers is an important function of materials management.

The traffic department is responsible for arranging transportation service. The vehicles may be

purchased for the business or these may be chartered from outside. It all depends upon the

quantity and frequency of buying materials. The purpose is to arrange cheap and quick
transport facilities for incoming materials.
5. Materials Handling:

It is concerned with the movement of materials within a manufacturing establishment and the

cost of handling materials is kept under control. It is also seen that there are no wastages or

losses of materials during their movement. Special equipment’s may be acquired for material
handling.

Receiving:

The receiving department is responsible for the unloading of materials, counting the units,

determining their quality and sending them to stores etc. The purchasing department is also
informed about the receipt of various materials.