14.12 Key Terms
Key Terms
- Aggregate Planning and Sales and Operations Planning (S&OP) are processes designed to align supply and demand over a medium-term horizon.
- Capacity Planning: assess staffing needs, including full-time employees and potential temporary hires.
- Chase Strategy: adjusts production rates and workforce levels to match demand fluctuations precisely.
- Cross-Training: equips staff with diverse skills to increase flexibility and responsiveness.
- Decision Rule: a formal function that maps observed data or conditions to a specific course of action.
- Demand Forecasting: estimates workload based on seasonal patterns such as tax filing periods or audit cycles.
- External Factors: largely market-driven influences, including changes in customer demand, that are often beyond the firm’s direct control; short-term tactics like promotions or backordering may help but carry risks such as lost sales or dissatisfaction.
- Following Capacity Strategy: increases capacity only after demand has been realized.
- Internal Factors: levers within the firm’s control, including inventory levels, workforce size and skills, production rates, and subcontracting, managed through effective aggregate planning.
- Leading Capacity Strategy: adds capacity in anticipation of demand.
- Level Strategy: maintains a constant production rate and workforce, using inventory to buffer demand variability.
- Linear Decision Rule (LDR): a mathematical approach to aggregate production planning for determining optimal monthly production, workforce, and inventory levels to minimize total operational costs.
- Long-term (Strategic): typically spans 1 to 5 years and guides decisions such as capacity expansion, new product development, and capital investments.
- Management Coefficient Model: a hybrid aggregate-planning approach that integrates quantitative analysis with managerial judgment, acknowledging the value of experience and context.
- Medium-term (Tactical): covers 3 to 18 months and supports aggregate planning and S&OP activities to align production with fluctuating demand.
- Mixed Strategy: combines elements of chase and level strategies, often using overtime, subcontracting, or inventory adjustments.
- Scheduling: allocates tasks to ensure balanced workloads and timely completion of deliverables.
- Short-term (Operational): ranges from daily to six months, helping to schedule production, manage inventory, and coordinate job sequencing and dispatching.
- Tracking Capacity Strategy: incrementally adjusts capacity to match demand trends.
- Yield Management: a specialized form of aggregate planning focused on maximizing revenue through dynamic pricing and strategic capacity allocation, especially for perishable inventory.
