Modification of Supply - Aggregate Planning

Some of the methods by which we can modify the supply to match the demand are:

a.Hiring and Lay off of Employees: As this policy deals with the employees one must be careful enough while selecting this strategy it is because by hiring labours on temporary basis the hiring charges may go high or some times the workers may not available in time when needed. Or if the manager goes for lay off strategy, he going to invite the troubles from the labor unions at the same time the employee morale may go down. Sometime the company may have to face legal problems due to lay off. Before taking decisions one has to weigh both positive and negative aspects so that the decisions taken will not hurt anybody.

b.Overtime and Under Time: When the changes in supply are manager and temporary overtime and under time are most commonly used. By adopting overtime, we increase the production but overtime costs are to be added to the normal costs. By under time the production may be reduced and under time costs are to be considered here.

c.Use of Part time or Temporary Labor: When the manager has to increase the supply he has to increase the capacity. By employing the temporary or part time labor the manager can do this depending on the type of labor the cost may be slightly higher or lower than the normal labor cost.

d.Subcontracting: In case the another company has some spare capacity and is prepared to hire the capacity the manager can give a part of production as subcontract to that firm. The parent company all the time can send its workers to have a close control over the quality of the product produced. Depending on the hire charges the costs of products produced under subcontracting may slightly the normal costs.