Strategy not tactics drives aggregate planning

The aggregate planning model supposedly shows how manufacturers cope with seasonally biased sales. Unfortunately, industry has failed to embrace any of the sophisticated algorithms that were developed to solve the corresponding resources allocation problem. This paper reveals why such methods have proven so unattractive. Aggregate planning is a chimera. In practice, planners construct the master production schedule directly, in line with a preferred production strategy. A “chase” plan is the most popular choice. When this option proves infeasible, management plumps for another predetermined strategy. The resultant stockpiling brings certain financial risks. However, companies take various measures to reduce their exposure.