Production planning is a management process used to control the production of goods and services in an organization. Organizations use production planning to produce goods and services according to market demands. Production planning involves developing plans that are used to produce the right amount of goods and services at the right time. In short, this means producing what the market needs at the best price possible.
The purpose of aggregate production planning is to direct the production of goods and services according to demand for these products. The direction is based on aggregated demand data from market research sources, sales forecasts, capacity calculations, material inventories and labor estimates. The objective of aggregate production planning is to produce the demanded products in accordance with organizational goals and strategies. This helps organizations meet their objectives while controlling costs.
Organizations use aggregate production planning in resource planning.
Resources are used in production planning activities such as calculations, modeling, estimations and simulations. These resources help plan managers understand how different decisions affect their plans’ outcomes. Organizational goals are then aligned with resource decisions to produce quality outputs at a profit.
Production planners use aggregate production planning in strategic planning as well. Organizational strategies define goals such as growth, expansion or reduction of business scope. Strategies also define processes such as resource allocation and production planning that affect these plans’ outcomes. Different organizational units then align their decisions with these strategic plans to produce quality products at a profit.