Discuss the relationship of aggregate planning with master production schedule.

Aggregate planning and the master production schedule (MPS) are two key components of the production planning process within a business organization. While aggregate planning focuses on high-level capacity and resource allocation decisions over a medium-term planning horizon, the master production schedule provides a detailed plan for individual products or end items over a shorter-term planning horizon. Understanding the relationship between aggregate planning and the master production schedule is essential for optimizing production efficiency and meeting customer demand effectively.

1. Aggregate Planning:

   • Aggregate planning is a strategic process that involves determining the overall production levels, resource requirements, and inventory levels for a range of products or services over a specified planning horizon, typically ranging from three to eighteen months.
   • The goal of aggregate planning is to align production capacity with demand while minimizing costs, maximizing utilization of resources, and maintaining a balanced inventory level.
   • Aggregate planning considers factors such as demand forecasts, production capacity, workforce availability, inventory levels, and subcontracting options to develop a feasible production plan that meets business objectives.

2. Master Production Schedule (MPS):

   • The master production schedule is a detailed plan that specifies the quantity and timing of production for individual end items or finished products over a shorter planning horizon, typically spanning one to six months.
   • The MPS translates the output of aggregate planning into specific production schedules for each product or item based on customer orders, demand forecasts, and inventory levels.
   • The MPS provides detailed information regarding production quantities, delivery dates, and resource requirements for each product, enabling efficient scheduling of production activities and allocation of resources.

Relationship between Aggregate Planning and Master Production Schedule:

1. Hierarchical Relationship:

   • Aggregate planning and the master production schedule operate at different levels of detail within the production planning hierarchy.
   • Aggregate planning sets the overall production levels and resource requirements for groups or families of products, while the master production schedule provides specific production schedules for individual products or items within those groups.

2. Alignment of Production Levels:

   • Aggregate planning establishes the overall production levels and resource capacities needed to meet anticipated demand over a medium-term planning horizon.
   • The master production schedule translates the aggregate plan into specific production schedules for each product, ensuring that production levels are aligned with customer demand and available resources.

3. Coordination and Optimization:

   • Aggregate planning and the master production schedule must be coordinated to ensure consistency and optimization across the production planning process.
   • The MPS is derived from the aggregate plan, taking into account capacity constraints, inventory policies, and other factors to develop detailed production schedules that maximize efficiency and minimize costs while meeting customer demand.

4. Continuous Feedback Loop:

   • Aggregate planning and the master production schedule are part of a continuous planning process that involves feedback and adjustments based on changing demand patterns, resource availability, and other factors.
   • Changes in customer orders, production capacity, or inventory levels may require revisions to both the aggregate plan and the master production schedule to maintain alignment and meet business objectives effectively.

In summary, aggregate planning and the master production schedule are integral components of the production planning process, with aggregate planning setting the overall production levels and resource requirements, and the master production schedule providing detailed production schedules for individual products. The relationship between aggregate planning and the master production schedule involves hierarchical alignment, coordination, optimization, and continuous feedback to ensure efficient resource allocation, minimize costs, and meet customer demand effectively.