What is Aggregate Planning?

Legal Definition
Aggregate planning is an operational activity that does an aggregate plan for the production process, in advance of 6 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organization is kept to the minimum over that period.

The quantity of outsourcing, subcontracting of items, overtime of labour, numbers to be hired and fired in each period and the amount of inventory to be held in stock and to be backlogged for each period are decided. All of these activities are done within the framework of the company ethics, policies, and long term commitment to the society, community and the country of operation.

Aggregate planning has certain prerequired inputs which are inevitable. They include:

  • Information about the resources and the facilities available.
  • Demand forecast for the period for which the planning has to be done.
  • Cost of various alternatives and resources. This includes cost of holding inventory, ordering cost, cost of production through various production alternatives like subcontracting, backordering and overtime.
  • Organizational policies regarding the usage of above alternatives.

"Aggregate Planning is concerned with matching supply and demand of output over the medium time range, up to approximately 12 months into the future. The term aggregate implies that the planning is done for a single overall measure of output or, at the most, a few aggregated product categories. The aim of aggregate planning is to set overall output levels in the near to medium future in the face of fluctuating or uncertain demands. Aggregate planning might seek to influence demand as well as supply.
-- Wikipedia
Legal Definition
planning for 3 to 18 months only. Manufacturers use this to reduce mixing input in products.