Aggregate planning in services vs aggregate planning in manufacturing

Aggregate planning is an approach to determine the quantity and timing of production for the intermediate future which is usually between 3 to 18 months. While the strategic goals of manufacturing firms are more focused on production plans, service organizations focus their strategic goals more toward workforce schedules. Both service and manufacturing firms can employ capacity and demand options to generate their aggregate planning strategies.

In order to generate aggregate planning strategies, operations managers review five capacity and three demand options. Capacity options include: changing inventory levels, varying workforce size by hiring or layoffs, varying production rates through over time or idle time, subcontracting, and using part time workers. The demand options include: influencing demand, back ordering during high-demand periods, and counter-seasonal product and service mixing. Operation managers must assess and choose the best option or a combination of options in order to satisfy demand in the intermediate future.

 In manufacturing firms, operations managers usually focus more on capacity options. They may use graphical or mathematical methods to compare the different options. After comparing the options operation managers choose the approach with the least total cost. However it is suggested that operations managers take into account the ethical consequences of each approach as well.

In service sector, demand management takes a more active role as it is often necessary for services to pursue a combination of capacity and demand options. Service organizations also use graphical or mathematical method to determine the most efficient approach. However in service sector, the focus is primarily on work force schedules rather than production plans.      

When generating an aggregate plan, it is the job of operations managers whether in manufacturing or service sector to look through alternatives and select the appropriate approach. Manufacturing firms aim at production plans therefore capacity options have more usage. For service organizations workforce schedules are more important so demand options are equally important. In service sector depending on the industry, operation managers usually consider combinations of capacity and demand options.     

Resource:

Heizer Jay, Render Barry; Operations Management, Prentice Hall: 10^th Edition.