Aggregate planning: the tactical production plan
Aggregate planning is the tactical layer of planning: it translates management's direction into volumes by product family, over a horizon of a few months to about a year and a half. Sitting between the big picture and the shop-floor detail, it answers a simple but decisive question: given the expected demand, what must we produce, source and stock — by broad family — to hold service without inflating inventory?
Aggregate planning between S&OP and the master schedule
Aggregate planning belongs to a three-tier planning chain. Above it, the decision process — often called S&OP — aligns management on a single plan; our fiche What is S&OP? details the logic. Aggregate planning is the tactical link: it reasons by product family, not by item, and settles the big balances between demand and capacity. Below it comes the master production schedule (MPS), which drills down to the finished product and the week. Aggregate planning is therefore the bridge between the strategic decision and detailed execution.
How to build an aggregate plan, step by step
Building an aggregate plan follows a constant logic. You start from the aggregated demand forecast by family. You confront it with available capacity — production, sourcing, resources. You simulate scenarios (build stock ahead, smooth the load, adjust lead times) and quantify their consequences. Then you decide: management approves a plan by family, which becomes the reference for the MPS. Aggregate planning does not seek item-level precision; it seeks the right overall balance — the one that avoids both stockouts and overstock at the family level.
When does an SME need it?
An SME benefits from a formal aggregate plan as soon as its capacity decisions — hiring, subcontracting, building seasonal stock — can no longer be made on instinct. This is especially true with marked seasonality or long lead times, where you must decide months ahead. Aggregate planning is a clear illustration of the Two-Layer Model: it belongs to the decision layer (the big trade-offs approved by management), while the MPS and scheduling belong to the execution layer that carries them out.
The common mistake
The most frequent mistake is to skip the tactical level: jumping straight from strategy to production detail, with no aggregate plan. Capacity trade-offs are then made in a rush, item by item, with no overall view. The other trap is to build an aggregate plan at item level: it becomes heavy, unreadable and duplicates the MPS. Aggregate planning must stay at the right grain — the family — to play its steering role.
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Frequently asked questions
What is aggregate planning?
It is the tactical layer of planning, translating strategy into volumes by product family over a few months to about eighteen months, between S&OP and the master schedule.
What is the difference between aggregate planning and the master schedule?
Aggregate planning reasons by product family and settles the big balances; the master schedule drills down to the finished product and the week for execution.
Does an SME need aggregate planning?
Yes, as soon as capacity decisions must be made months ahead, notably with seasonality or long sourcing lead times.