Aggregate Planning in Services
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17Aggregate Planning in Services
Aggregate Planning in Services
Theoretically, the aggregate models of manufacturing industry can be applied
to services also. But practically there are lot of differences between manufacturing
firms and the service firms because of the fact that there is no inventory in
services along with other differences. The differences exist in the basic
objectives, planning process, factors and costs involved in the planning and
the options in aggregate planning. Even within services sector, there are lots
of differences in aggregate planning tactics depending on whether it is a
seasonal demand fluctuation or intra-day fluctuations. The service firms have
come out with innovative techniques like “Yield Management” to overcome
these problems. This paper classifies the existing aggregate planning practices
in the service industry.
© 2004 The ICFAI Univeristy Press. All Rights Reserved.
N V V S Swamy* and S Subramanian**
* Faculty, The ICFAI Business School, Hyderabad.
** Fellowship Student at The ICFAI Institute for Management Teachers, Hyderabad.
Introduction
It is four decades since the concept of aggregate planning started appearing in the
literature. A number of mathematical and empirical models have been developed in
this period. The objective of aggregate planning is to develop an operational plan,
which will effectively utilize the organization’s resources to satisfy expected demand.
This involves decisions regarding output rates, employment levels and changes,
inventory levels and changes, back orders, and subcontracting. Aggregate planning
determines not only the output levels planned but also the appropriate resource input
mix to be used (Pan and Kleiner 1995).
Aggregate planning sometimes may modify the demand side as well by manipulating
price, advertisement and product mix. Planners generally try to avoid focusing on
individual products or services unless, of course, the organization has only one major
product or service. Instead, they focus on overall, or aggregate, capacity. Aggregate
planning is closely related to other corporate decisions involving, for example,
budgeting, personnel, and marketing. The relationship to budgeting is a particularly
strong one. Most budgets are based on assumptions about aggregate output, personnel
levels, inventory levels, purchasing levels, etc. An aggregate plan should thus be the
basis for initial budget development and for budget revisions as conditions warrant.
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The ICFAI Journal of Operations Management, May 200418
The industry started using the concepts of aggregate planning for service operations
as well in late 1970s. But still the academic research in applying the concept of
aggregate planning to services is limited. The reason could be, even in manufacturing
sector, despite the development of many models for aggregate planning, their usage
in the industry is meager because of the mathematical limitations of the models. Hence,
extending the quantitative research for services may not find many takers.
This paper attempts to study and classify the aggregate planning techniques that
are adopted by the service firms in practice.
Operations Planning – An Overview
Planning is essential at each and every level to succeed in business in the highly
competitive environment. Effective Operations Planning is the key to successful
operations in a production/service system. It involves ensuring coordination among
multiple functions, which makes it a complicated task. Traditionally, operations plan
in any manufacturing/service organization is developed through stages, long-range
plan, intermediate range plan, and short-term production schedule.
Long range planning focuses on strategic issues like plant location and capacity
and is generally for a period more than five years. Long-range planning decisions are
taken by the top-level management as they are capital investment decisions.
The second stage of planning is intermediate range planning. As the name suggests
it generally covers 3 to 18 months. But the exact planning period differs from company
to company. During the intermediate range, separate plans are made for groups of
product service bundles with similar value—delivery characteristics or marketing
requirements. Resources are then allocated to the product groups according to these
plans. For example, a hospital could plan in terms of number of operations performed
per month, rather than in terms of number of “Heart operations”, “kidney transplantation
operation” etc. Similarly, accounting and consulting firm would aggregate its personnel
or billable hours by group or division such as auditing, tax accounting and process
consulting. Intermediate-range plans are updated more frequently than the long-range
plan, often on a monthly basis.
Because demand is considered in the aggregate, the intermediate-range planning
task is called as aggregate planning. An Aggregate Plan indicates the ways in which
the existing resources will be used to meet expected levels of demand for product
groups over intermediate range.
Here the process of planning differs between the manufacturing firms and the
service firms. In manufacturing system there is an option of keeping inventory as a
strategy. But this is not possible with the services.
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19Aggregate Planning in Services
Short-Range Planning is for a period covering about three months. It addresses
day-to-day issues of scheduling workers on jobs at assigned workstations.
Aggregate Planning
The Aggregate Planning (AP) plays a key role in translating the strategies of the
business plan into an operational plan for the manufacturing/ services process. For
example, it allows managers to determine that whether they can satisfy budgetary
goals without having to schedule the company’s several product models and scarce
resources. Here the information flows in two directions: From the top down and from
the bottom up.
Aggregate Planning is defined as
“The process for determining the most cost-effective plan to match supply and demand
over the next 12–18 months” (Davis, Aquilano and Chase 2002).
Aggregate Planning is necessary in any operations system because it provides for
• Fully loaded facilities and minimizes overloading and underloading, thus reducing
the operations costs.
• Adequate production/service capacity to meet expected aggregated demand.
• A plan for the orderly and systematic change of production/service capacity to meet
the peaks and valleys of the expected customer demand.
• Getting the most output for the amount of resources available, which is important
in times of scarce resources (Gaither, Frazier 2002).
Need for Aggregate Planning in Services
The customer demand changes constantly and one of the operations manager needs a
plan for the orderly and systematic change in the operations capacity to meet the
peaks and valleys of the expected customer demand. This plan will help the operations
manager to have a control over costs by ensuring maximum possible service with the
available workforce. Thus, comes the role of aggregate planning in services. It is the
key to manage change in service operations because the changing patterns of the
customer demands and the plans for providing manpower resources that adopt to
those changes are fundamental to aggregate planning (Gaither and Frazier 2002).
Peculiar Characteristics of Aggregate Planning in Services
As it has been seen already, the concept of Aggregate Planning can be applied to the
services also. But there are few fundamental differences between the Aggregate Planning
for manufacturing and services.
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The ICFAI Journal of Operations Management, May 200420
Services occur when they are rendered. So, most of the services cannot be stored or
inventoried like the manufactured products and processed commodities. So, the option
of building inventories during the slack demand period and using them during peak
demand is ruled out. On the other hand, service capacity that goes unused is essentially
wasted. Consequently, it becomes important to match these two to be able to match
capacity and the demand (Chase, Aquilano and Jacobs, 1999).
In many services the exact volume of demand is difficult to predict. And in some
services like medical emergency and fire, the demand is highly variable from zero to
peak. But on the other hand, the customers like to have prompt services and move
away if the service is not available in time. These factors place a greater burden on
service providers to anticipate demand. Consequently, the service providers may pay
careful attention to planned capacity levels.
The main input in services is manpower and the manpower availability is called
Capacity (in manufacturing, the physical infrastructure decides the capacity). This
character makes defining capacity a difficult task as the employees doing the job may
differ in their skills. Besides, the types of variety are more pervasive in services than
they are in manufacturing (Stevenson, 1999). This makes it more difficult to establish
simple measures of capacity.
Since manpower is the main input, changing the number of employees will change
the capacity. This means that changing capacity is relatively easier in service firms,
whereas in a manufacturing firm, changing capacity involves huge capital investments.
So, the labor flexibility can be an advantage in services.
The differences between services and manufacturing firms in the aggregate planning
process continue in short range planning also. In manufacturing industry, short range
planning starts with preparing Master Production Schedule (MPS) followed by Rough-
Cut or Resource Planning and “Materials Requirement Planning” (MRP). The final
planning activity is daily or weekly Order Scheduling of jobs to specific machines,
production lines or work centers.
In services, once aggregate staffing level is determined, the focus is on workforce
and customer scheduling during the week or even hour-by-hour during the day.
Workforce schedules are a function of the hours the service is available to the customer,
the particular skills needed at particular times over the relevant time period and so on
(Chase, Aquilano and Jacobs, 1999). Many service jobs have unique time and legal
restrictions affecting scheduling that a typical manufacturing work lacks.
Objectives of Aggregate Planning in Services
The many functional areas in an organization that give input to the aggregate plans
typically have conflicting objectives for the use of organizational resources. Four
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21Aggregate Planning in Services
objectives are usually considered during the development of aggregate plan for service
firms, and conflicts among them might have to be resolved.
• Minimize Costs and Maximize Profits: If the customer demand is not affected by
the plan, minimizing costs will also maximize profits.
• Maximize Customer Service: Meeting the customer demand, improving customer
satisfaction with prompt and quality services.
• Minimize Changes in Workforce Levels: Fluctuating workforce levels may cause
lower productivity because new employees typically need time to become fully
productive.
• Maximize Utilization of Available Workforce: Employee salary is the major cost in
service industry. So, keeping manpower idle should be minimized or maximize the
workforce utilization in an useful manner.
The weight given to each objective in the plan involves cost trade-offs and
consideration of non-quantifiable factors. For example, a staffing plan that minimizes
labor costs may not minimize changes in workforce levels or maximize customer service.
Input Requirements of Aggregate Planning
An essential part of the aggregate planning is getting proper input or information
about the service system. The following are the important inputs to be fed to the
planning manager.
Forecasted Demand: The most important input for the aggregate planning process is
the demand for the planning period. All the efforts are aimed at meeting the forecasted
demand with available resources.
Aggregate Plan
Various costs
Company policies
Forecasted Demand
Work force capacity External capacity
External Environment
Chart 1: Inputs to Aggregate Planning
Workforce capacity
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The ICFAI Journal of Operations Management, May 200422
Workforce Capacity: The capacity of the workforce in terms of available man hours
should also be calculated and given to the planning system. If it involves skilled
employees with varying skills, then this process will be a complicated one.
Company Policies: The policies of the company affect planning process to a great extent.
For example, if the policy of the company is not to outsource any requirements, then that
cannot be an option in preparing the plan.
External Capacity: The planner has to consider the availability of the outsourcing
manpower and the constraints and conditions in utilizing them.
External Environment: This includes the practices of the competitors and behavior of
the customers among others.
Various Costs: The costs involved in various options should also be considered. They
are discussed in the next section in detail.
Costs in Aggregate Planning
The costs involved in aggregate planning of services are slightly different from those of
manufacturing firms. Here the concept of inventory cost does not arise for obvious reasons.
The other costs involved in the aggregate planning in service industry are explained
below.
Regular-time costs: These costs mainly include labor costs (regular-time wages paid to
employees plus contributions to benefits such as provident fund, LTC etc.)
Hiring and layoff costs: The newly hired employees need training. The cost of training
depends upon the skill level required for service to be done. This is coupled with
recruitment costs, which will form the hiring costs in aggregate planning. Similarly, the
compensation to be paid during layoffs will also have to be considered.
Overtime costs: Calculation of overtime costs differs to a great extent in service industry,
whereas in manufacturing, it is typically 150% of the regular-time costs.
Outsourcing or subcontracting costs: The cost of outsourcing or subcontracting to
outsiders to provide services on behalf of the firm.
Cost of losing a customer: The probability of losing a customer in case of non-availability
of service at the right time is very high in service industry as the service is produced in
the presence of the customer. The opportunity cost of losing the customer is also considered
in aggregate planning.
Controlling Labor Cost
One of the toughest challenges in service firms while implementing the aggregate plan
is to control the labor cost. The labor cost constitutes a major portion of the total cost in
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23Aggregate Planning in Services
service firms. The general techniques adopted for this purpose are (Heizer and Render,
2000).
• Close control of labor hours to ensure quick response to customer demand.
• On-call labor resource that can be added or deleted to meet unexpected demand.
• Flexibility of individual worker skills to permit reallocation of available labor.
• Flexibility of individual worker in rate of output or hours of work to meet demand.
But application of these techniques may not be possible in all the firms and depends
on the nature of the industry and the business environment.
Aggregate Planning Process
Given the complications in the services industry, along with some advantages like
labor flexibility, makes the aggregate planning process different from that of the
manufacturing firm. The general stages involved in aggregate planning process are
as explained below.
Determining demand requirements: The first step in the aggregate planning process
is the determination of demand requirements for each period of the planning horizon
for each kind of service in terms of quantity using forecasting techniques.
Demand aggregation: Total all the individual services forecasts into one aggregate
demand. If the service requirements are not additive, a homogeneous unit of measure
(eg. manhours) must be selected that allows both forecasts to be added and links
aggregate outputs to production capacity. Transform the aggregate demand for each
time period into workers, materials and other elements of service capacity required to
satisfy demand.
Chart 2: Aggregate Planning Process
Demand
Demand
Aggregation
Identifying
Alternatives
Preparing
Acceptable Plan
Implementing
Plan
Updating
Plan
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The ICFAI Journal of Operations Management, May 200424
Identifying alternatives, constraints and costs: The third step is to develop alternative
plans for satisfying the aggregated demand. The alternatives could be demand options
or capacity options. Then, the constraints and costs for each plan should also be
developed. The constraints may represent physical limitations or managerial policies
associated with the aggregate plan. Examples of physical constraints might include
training facilities capable of handling so many new hires at a time, machine capacities
that limit the maximum output or inadequate storage space. Policy constraints include
limitations on the amount of back ordering or the use of subcontracting or overtime, as
well as the minimum inventory levels needed to achieve desired safety stocks (Krajwesk
and Raita 2001). Typically, many plans can satisfy a specific set of constraints. The
planner usually considers several types of costs associated with the plans.
Preparing acceptable plan: The fourth step is to prepare an acceptable aggregate plan.
It is actually an iterative process involving many stages. In every stage, some revisions
and modifications are included to make it suitable for implementation.
Implementing and updating the plan: The final step is implementing and updating the
aggregate plan. Implementation requires the commitment of managers in all functional
areas. The planning committee may recommend changes in the plan during
implementation or updating, to balance conflicting objectives better. Acceptance of the
plan does not necessarily mean that everyone is in total agreement, but it does imply
that everyone will work to achieve it.
Aggregate Planning – Options
Balancing the various objectives to arrive at an acceptable aggregate plan involves
consideration of various alternatives. The two basic types of alternatives or options are
demand and capacity options. They are otherwise called aggressive alternative (Krajewski
and Ritzman 2001) (Demand option) and reactive alternative (Supply options). The
demand option, which is intended to alter the pattern of demand to match the capacity,
is usually handled by marketing department. The other is altering the supply to meet
the demand.
Demand Options
Pricing: The differential pricing is a good option in managing or manipulating the
demand fluctuations. Internet service providers and some cellular operators offer lower
rates in the night times to boost the demand. The important factor here is to the degree
of price elasticity for the product or service. If the price elasticity of the service is more,
the effectiveness of pricing scheme will also be more in influencing demand patterns.
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25Aggregate Planning in Services
Promotion: Market promotional schemes like value-added services, advertising and
other forms of promotion such as displays and direct marketing, can sometimes be
used to push the demand during the slack periods. They ensure that the demand is
more or less in line with capacity all the time. Obviously, timing of these efforts and
knowledge of response patterns will be needed to achieve the desired results.
Segmenting customers: Many service providers, like hospitals, segment their customers
and allot separate time for those segments. For example, fitness centers and gyms
allot separate timings for men, women, children, working personnel etc.
New demand: Service firms nowadays use innovative ideas to tackle the demand
fluctuations. The main thing is creating new demand for their services during slack
demand periods. For example, demand for bus transportation services are more intense
during the morning and late afternoon rush hours but much lighter at other times.
Creating new demands for buses at other times (e.g. trips for clubs, senior citizens)
would make use of excess capacity during the slack times.
Complimentary services: The service providers go for complimentary services along
with their regular service to keep the customers with them at the same time keeping
the demand uniform. For example, hotels go for multiple restaurants and gambling
opportunities to keep the customers’ money with them.
Chart 3: Aggregate Planning Options
Demand Options
Pricing Promotion Segmentation
New Demand Complimentary services
Reservations
Supply Options
Seasonal Fluctuations
Hire & Layoff Workforce utilization Vacation schedules Subcontracting
Intra-day Fluctuations
Employees scheduling Customer Participation
Part-time employees Adjustable capacity
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The ICFAI Journal of Operations Management, May 200426
Counter seasonal services: If the demand is seasonal, generally the service providers
change the services during the off seasons. For example, Schools allow their facilities
to be used for competitive exams conducted by other institutions on holidays.
Reservations: Many service providers like transport companies, restaurants use
reservations to match future service capacity with future demand. Customers who
request reservations that are already filled often can adjust to other options, thereby
smoothing demand across a broader range of service capacity (Kanna and Newman
2001). Reservations are convenient to both customers and service providers. The
problem will arise when the customers do not show up for their appointments. The
service providers adopt various ways to overcome this problem. The typical ways are
non-refundable service charges and penalties for cancellations.
Supply Options
Given the fact that there is no inventory in services, the main option of changing
inventory levels in managing through manipulating supply goes away. Hence, the
level strategy and the mixed strategy are not applicable to service industry. The only
option is chase strategy, where the supply chases the demand. The options under the
chase strategy for aggregate planning in services can be classified into two segments.
First is aggregate planning for the service industry where the demand fluctuations
are in macro time units or seasonal fluctuations. For example, in a business consultancy
firm, the demand is very high in some months and is very low in some other months.
But the intra-day fluctuations are negligible.
Second is the aggregate planning for the service industry where there are
intra-day fluctuations in the demand. For example, in the restaurants, retail shops,
bars etc. the demand for services fluctuates a lot on a given day.
Managing Supply – Seasonal Fluctuations
For the first type of service firms, the aggregate planning process is similar to that of
the manufacturing firms, except for the inventory constraint. The options for these
firms are as listed below.
Hire and layoff workers: The first one in supply side options is adjusting the workforce
levels by hiring or laying off employees. But this has to be done after considering
many factors like labor intensiveness of the service, skill level required to perform the
job etc. If the skill requirement of the workforce is very high, (for example, in a consultancy
firm) the company cannot go for this option as identifying a talented person when it
gets project will be very tough. On the other hand, a retail shop can easily hire and
train the counter sales personnel and hence can adopt this policy. But in countries like
India, this practice is restricted due to legal constraints.
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27Aggregate Planning in Services
Workforce utilization: An alternative to workforce adjustment is changing the level of
workforce utilization using overtime and undertime. Overtime means that employees
work longer than the regular workday or workweek. A college can ask the faculty
members to take extra classes when it conducts special classes. Similarly, a bank can
ask its employees to work overtime if the number of applications for loans to be processed
is very high. Overtime can be with or without extra payment. It depends on the type of
industry and the rules of the firm. In case, there is extra payment, then it will be an
expensive option. Moreover, workers often don’t want to work a lot of overtime for an
extended period of time, and excessive overtime may result in declining quality and
productivity (Krajewski and Ritzman 2001).
Undertime means that employees don’t work productively for the regular-time
workday or workweek (Krajewski and Ritzman 2001). For example, they don’t work
productively for eight hours per day or for five days a week. Undertime occurs when
labor capacity exceeds a period’s demand requirements and this excess capacity can’t
be or shouldn’t be used productively to build up inventory.
Undertime can either be paid or unpaid. An example of unpaid undertime is when
part-time employees are paid only for the hours or days worked. An example of paid
undertime is when employees are kept on the payroll rather than being laid off. In this
scenario, employees work full day and receive full salary but are not much productive
because of the light workload.
Vacation schedules: The service firms can use vacation schedules to tackle toe demand
fluctuations. The most famous example is that of the educational institutions. During
the summer days, when there is no class work, the teachers are given compulsory
vacation.
Subcontracting: Subcontracting enables planners to acquire temporary capacity.
Subcontractors can be used to overcome short-term manpower shortages, during high
demand periods. For example, they subcontract their work if the manpower requirement
for a particular project exceeds the available limit. Similarly, the education institutions
go for visiting faculty if their in-house faculty strength is not enough for a particular
course period. But, generally, subcontracting is costlier and reduces the control of the
firm over the quality of the service.
Managing Supply – Intra-day Fluctuations
The options of hiring and firing or vacations will not work if the demand fluctuations
are intra-day affairs. So, some special techniques are used to manage the supply to
match the demand. They are as explained below:
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The ICFAI Journal of Operations Management, May 200428
Schedule employees to match demand patterns: The trend in intra-day fluctuations
can be easily sketched in service firms. So, the firm can schedule the availability of its
employees accordingly. For example, a hospital can arrange the shifts of the doctors in
such a way that during the peak Out Patient hours, required numbers are present,
even if there a overlap of shifts.
Customer participation: Some service providers go for self-service to manage the
demand fluctuations. Customers provide their own services when they bag their own
groceries and other shopping items, complete their loan applications prior to meeting
a loan officer and fill their cars with gasoline (not in India). Problems can occur with
this approach when the customers lack sufficient training in procedures or equipment
operation. Customers may also cause problems if they try to cheat the system (driveway
without paying for gas) or causing quality problems (Kanna and Newman 2001). (e.g.,
contaminating bulk foods in the grocery store).
Part-time employees: The service providers go for part-time employees to manage the
demand during the peak demand hours. The retail shops employ students as
part-time employees to tackle customer rush during evening hours.
Adjustable capacity: The service providers use the workforce for main tasks during the
peak hours and during slack hours they use them for other supportive activities. For
example, in restaurants, the workers serve food to the customers during peak hours.
But during slack hours, employees spend time in performing supportive tasks like
cleaning, staging food supplies and condiment dispensers.
Yield Management
Yield management (sometimes also referred to as Revenue Management) is a special
type of aggregate planning concept used in service operations with high-fixed costs
and low-variable costs that attempts to match supply and demand (a chase strategy) to
maximize capacity utilization (Davis, Aquilano and Chase 2002). The examples are
airline industry, hospitality industry etc. Airlines companies in USA were the pioneers
of this concept as they have gone for revenue management maximization after the
deregulation of the aviation industry in 1970s.
Yield management is an umbrella term for a set of strategies that enable capacity-
constrained service industries, selling services of a perishable nature, to realize optimum
revenue from their operations.
The underlying concept of Yield Management is to make available “The right service,
to the right customer, at the right time, at the right price”.
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29Aggregate Planning in Services
As seen already, the concept can be applied only to a few industries where the
fixed costs are high and variable costs are relatively low. This means any increase in
capacity utilization improves the bottom line of the firm. But this condition is necessary
condition but not sufficient condition to adopt the yield management practices. The
other conditions to be fulfilled are
• The service is perishable: Perishability here means that customers do not attach
any value to the service being offered after a specified time period. For eg., once a
flight takes off, the unsold seats are worthless to any one.
• Capacity is limited: No matter how much the owners of a business would like to
increase the capacity (eg., number of seats in a movie hall) during times of peak
demand, the capacity is fixed and cannot be altered without a significant time lag
and investment.
• Market segmentation is achievable: This implies that it is possible to segment
customers on the basis of the time and the prior at which they are ready to buy
these services.
• Products/services can be sold in advance: The customers to these products/services
are such that they are willing to alter their purchase behavior, book or purchase
these products/services prior to the current demand.
The core principle of yield management is that “if the capacity is likely to go empty,
then it should be sold at a discount, but don’t sell it at a discount, if someone will buy
it later at a higher price.Ӡ
Yield management is about marketing mix, cost and price relationships and the
distribution of product. It is a suite of components that, when working in harmony, will
present the best opportunity to maximize returns. Yield management takes a holistic
view of the business, relating costs to prices, establishing what variable costs there
might be, defining the different ratios of the sales mix and setting targets for marketing.
The Process of Yield Management
The basic stages involved in the yield management process are explained below. But
practically, the yield management is more oriented towards results than the process
itself.
First step is to segment the market according to the needs of the customers and
their willingness to pay. It could be based on the time, service level, price etc.
In the second step, the planner has to identify the demand pattern of the prepared
customer segments using the past data or using marketing research data in case of
new firms.† Panel Discussion held in Strategym 2002 — the annual business convention of Jamnalal Bajaj
Institute of Management Studies—http://www.jbims.edu/downloads/Yield%20Management.pdf
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The ICFAI Journal of Operations Management, May 200430
Next step is to fixing different prices for the same product based on criteria like
time of booking etc., thereby taking advantage of the customer needs. For instance, a
car-rental company may offer a car on rent for Rs. 800/day if booked a week in advance
and ask for Rs. 1200/day if booked a day in advance.
Here, statistical tools are used to determine price points, their cut-off points and
capacity to be allocated at each price point. After the predictions have been made, it is
important for the managers to know in advance what demand to accept and what to
reject. Managers who are familiar with their organization’s booking and demand
patterns will be more confident in their decision about which reservations to accept or
deny. Again in a rental car company, it is important for the manager to know, if he has
only one car remaining for a future date, whether he can accept an order now or wait
and accept an order later for a higher price. After the price differential strategy is
established, this should be conveyed to the customers convincingly so that there is
greater transparency and greater customer loyalty. The customers should not feel
cheated because of the higher price that they are paying; instead they should get their
money’s worth. This could be done by offering more services and features for the
higher price and also by providing different offerings in the packages made to the
customers. Advertising and promotion thus plays a key role in the success of Yield
Management.
Conclusion
Aggregate planning is an intermediate range planning process for the operations of
the firm. It provides a framework for the manager to prepare the short-range plan.
Aggregate planning process in services is distinct from that of the manufacturing
firms. Though the forecasting of demand and defining capacity is tough for service
firms apart from the fact that there is no inventory, there are some advantages like
labor flexibility in preparing an aggregate plan for service firms. In the last two decades,
the service industry has developed its own options and tactics, to have an effective
aggregate plan.
Techniques like yield management have revolutionized the aggregate planning
concept and have helped a lot for the firms like United Airlines to have visible
improvement in their bottom line. An important point to be noted here is that many of
the aggregate planning options that followed in the industry are developed within the
industry. Despite the fact that services is emerging as the leading segment in the
business circle, there is no specific mathematical model that is exclusive for services
sector. In fact, it is very tough to construct an aggregate planning decision model that
can cover all the nuances of the complex environment in the contemporary service
sector.Reference # 07J-2004-05-02-01
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31Aggregate Planning in Services
References
1. Pan, Lin and Kleiner, Brian H, ‘Aggregate Planning Today’, Work Study, Vol. 44
No.3, 1995, pp. 4-7.
2. Stevenson, William J, ‘Production/Operations Management’, Irwin McGraw Hill,
6th edition 1999 pp 596-629.
3. Kanna, Mark D and Newman Rocky W ‘Integrated Operations Management-
Adding Value for Customers’, Prentice Hall of India (p) Ltd, Indian reprint 2001,
pp 453-475.
4. Chase,Richard B Aquilano, Nicholas J and Jacobs, Robert F, ‘Production and Operations
Management’, Tata McGraw Hill, 8th edition 5th reprint, 2001, pp 553-575.
5. Gaither, Norman and Frazier, Greg, ‘Operations Management’, Thomson South
Western, 9th edition, 2002, pp 492-509.
6. Krajewski, Lee J and Ritzman, Larry P, ‘Operations Management: Strategy &
Analysis’, Prentice Hall; 6th edition 2001 pp 596-628.
7. Davis, Mark Chase, Richard B and Aquilano, Nicholas J, ‘Fundamentals of
Operations Management’, McGraw-Hill Higher Education 4th edition 2002. PPT
Internet.
8. Heizer, Jay and Render, Barry, ‘Principles of Operations Management’, Prentice
Hall, 4th Edition, 2001, PPT Internet.
Form IV
1. Place of publication : Hyderabad
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Address : # 52 , Nagarjuna Hills,
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Address : # 52 , Nagarjuna Hills,
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6. Name and addresses of individuals who own the newspaper and holding more than one
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